In tough economic times, companies often lay off employees to save money. But, does this hurt their reputation? A new study by researchers from KLU, Tilburg University, and KU Leuven looks into this and gives clear advice on how to communicate layoffs.
The study found that when companies announce layoffs, their brand strength typically drops by about 18%. However, this decline isn’t permanent. Brand strength tends to recover after around seven weeks. This research shows the tricky balance between saving money in the short term and protecting a company’s reputation in the long run during economic crises.
“This negative effect is strongly influenced by the corporate communications that take place in parallel,” the researchers explain. “If, on the other hand, companies send out a lot of PR and CSR messages in parallel with the layoff, this average damage to the brand can be significantly contained.”
Importance of comms
What sets PR and CSR efforts apart from marketing actions? The research sheds light on this distinction. Consumers tend to view marketing and social media campaigns as more entertaining but less reliable. Moreover, they are seen as being costly, particularly when it comes to layoffs.
In contrast, PR and CSR initiatives are perceived as reliable and informative, provided they are genuinely beneficial to society and not just a superficial attempt to appear environmentally friendly, also known as “greenwashing.”
“This may sound surprising, but a company’s marketing department should be involved in planning measures such as layoffs from the very beginning,” the researchers explain. “After all, image losses have a direct negative financial impact via falling sales or a low willingness to pay.”
To mitigate the harm to a company’s reputation during a mass layoff, it’s essential to coordinate marketing, PR, and CSR efforts alongside the announcement. Employing a well-planned, long-term communication strategy in tandem with the layoff announcement is a sensible approach. This not only helps manage the immediate image concerns but also safeguards the company from enduring reputation issues.
