The Covid-19 pandemic has been typified by tremendous uncertainty in terms of the jobs and health of those dear to us.  It’s a period that has demanded an increased amount of care and compassion from our employers and our bosses to ensure that we get through the tumultuous period in one piece.

A recent working paper from Stanford highlights this growth in compassionate leadership at a time when over 22 million jobs have vanished in the United States alone.  The authors highlight that while the pandemic has affected us all, not all employers have responded in the same way.

They say that while many employers were forced to reduce their payroll, there were those who were able to use their financial strength to avoid either pay cuts or layoffs.  Indeed, some were even able to pay for invaluable perks, such as additional childcare or sick leave.

To lay off or not to lay off

The paper highlights that while many companies have been hard hit by the pandemic, and that these firms were obviously more likely to lay staff off than those who weren’t affected, there were nonetheless important differences in response from even those firms that were hit hard.

For instance, firms with strong cash reserves were around half as likely to lay off employees than their financially weaker peers.  While this was important, the study also found that a commitment to treating workers well was just as important.  Indeed, if firms with a weak commitment to worker welfare had a strong balance sheet, they were just as likely to lay off staff as firms with weak finances.

Before the pandemic, such firms would often invest more in things like employee training and welfare, which during the pandemic typically resulted in workers being rehired or retrained rather than let go.

“There’s been a big movement toward stakeholder values, and what we see playing out here is that it truly matters for some companies,” the researchers say. “Some firms have made real commitments to treat their workers well. They aren’t just making statements because it seems to feel good.”

Worker welfare

Of the hundreds of companies the researchers looked at, they were especially keen to understand the pay and workforce expansion of workers on the frontline, and any reductions via either furloughs or layoffs in the face of significant declines in customer demand.

Of the companies analyzed, around 28% announced layoffs and furloughs, whereas 25% increased pay for workers.  While the availability of cash played a big role in what route the companies took, so too were the policies towards employees before the pandemic.

Of course, the paper doesn’t examine whether these strategies were actually right for the companies involved or not, as it’s quite possible that laying off staff was actually the right move.  Nonetheless, it’s also quite likely that treating employees well will deliver strong returns for companies in the long term.

“I’m hopeful that these types of firms will be able to reward not only their employees, but also their shareholders,” one of the authors concludes. “I think companies can perform well while also doing well for society.”