2023 was a year of layoffs. Over 305,000 U.S. workers were laid off over the year in a series of mass layoffs that started most notably with tech companies, but then spread across industries.
“Many businesses had to make tough decisions to reduce their headcounts, especially with the economic uncertainty of early 2023,” Aaron Terrazas, chief economist at Glassdoor, tells CNBC Make It. But with the mass layoffs came a drop in employee satisfaction and engagement, and increasing pressure put on middle managers, that Terrazas predicts will persist into 2024.
The Glassdoor 2024 Workplace Trends report, published in November 2023, analyzed Glassdoor ratings written by employees of over 100 companies that went through major layoffs to figure out what aspects of employee satisfaction, middle manager and lower, were suffering the most.
Here is what Terrazas suspects companies will do to increase employee morale in the year ahead, and how this employee dissatisfaction will be felt most by middle managers.
Executives will employ “carrot stick” employee policies
The first 30 days after a layoff saw an overall company rating drop across all aspects of employee satisfaction, from CEO approval to diversity and inclusion, the report found. And although the ratings stabilize for most of these categories over time, Glassdoor found that culture & value, and work-life balance ratings continued to drop, even 5 months after the layoffs. This may be because the effects of layoffs on office culture, employee engagement and work-life balance issues such as burnout are felt more in the long term.
Raising compensation is historically the quickest way to boost employee morale, Terrazas says. But corporate budgets are strained so it is unlikely that we will see this method used, he argues.
“I think they’re going to try to do a lot of the other things on the margins of compensation,” he says. One such action being carrot stick policies.
Economists traditionally distinguish policies aimed at enforcing employee engagement and performance as carrots (incentives) or sticks (penalties). Carrots, such as raising compensation or offering perks such as free lunch in the office, are costly, but sticks can have a bad effect on employee satisfaction.
Seeing that employee satisfaction and engagement are both suffering, Terrazas says employers will “be reluctant to lean too heavily on the sticks.” Seeing both options as undesirable, he believes they will instead focus on carrot sticks, aka a mix of incentives and penalties that work by giving carrots only to more engaged employees.
Recognizing employees who are more involved in community-building activities in the workplace to encourage employee engagement is an example of a carrot stick policy, he says.
Managers should also make their employees feel heard if they want to increase employee satisfaction, Terrazas advises. “Particularly for frontline or entry-level employees, feeling like they have a voice, a stake in the business and that even their senior most leaders are listening to them is critical.”
Middle managers will feel the heat
The layoffs were a tough period for middle managers, and they are unlikely to become any more comfortable in the next year, Terrazas says.
Middle managers felt pressure from both ends of the workplace hierarchy during these times of trouble and cost-cutting: They were tasked with pushing junior workers for productivity gains and enforcing unpopular corporate policies regarding downsizing such as having to ask their frontline employees to do more.
While having to enforce these cost-cutting policies, they also became the victims of the same policies as “the scapegoats of organizational bloat.”
“With companies focusing on productivity and where they can cut costs, middle managers were a natural target for those cost savings,” Terrazas says. “They are facing layoff stress themselves as companies seek to flatten their organizations.”
Flattening organizations is a growing trend not just with cost-cutting concerns but also with the increasing push for a four-day workweek. The benefits of flatter organizations, such as faster communication and a more dynamic company environment, are crucial for a successful switch to a four-day workweek, industry analyst Josh Bersin told CNBC Make It last month.
The stress this is causing for middle managers reflects in their job satisfaction ratings. For large companies in general, work-life balance ratings saw a particularly sharp drop among middle managers, the report found.
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