Knowledge: the hidden cost of layoffs

It is a truth universally acknowledged that layoffs suck. They suck for the people laid off. They suck for the people left behind. Layoffs incur huge emotional and monetary costs. And there’s another, more hidden cost to layoffs: knowledge. You might save on salaries, but you lose a lot of learning.

Consider the metaphor of the “learning organisation.” Does it make sense? There’s no single entity of the “organisation” that can learn. Instead, organisations are made of people. These people are organised into a semi-static structure with the team as the fundamental unit.

When we say an organisation learns, we mean one of two things has happened:

• Its people have learnt: they have developed new knowledge, skills, and abilities to pass on to others.
• Its structure has changed to better suit its environment: teams are added, removed, or altered. Managers are reassigned.

And what happens when you do layoffs?

You lose people and what they’ve learnt.

You disrupt teams, so carefully crafted.

Organisational knowledge lies within its people. Laid-off staff take with them parts of the organisation’s learning. In the short term, managers might save thousands in salaries. But in the long term, the company loses much more in knowledge.