Layoffs can be an unfortunate reality for businesses forced to adapt to unfavorable market conditions. But at a time when the importance of empathy in the workplace is most critical for leaders, some companies are electing to do the opposite; from entire departments being laid off in a Slack message to hybrid policies being replaced with “hardcore” return-to-office plans.

Coupled with the stories of layoffs in Big Tech, impacting 70,000 workers this year, these reports sent shockwaves across the global economy. And not because they foreshadowed a recession of apocalyptic scale. The surgical approach these companies took to reducing headcount, characterized by short-notice communications and shaky rationale, confused workers and made company leaders appear untrustworthy.

Their approach signals that one of the modern workplace’s widest skill gaps, empathy, needs addressing now more than ever.

Slashing wellness benefits and DEI programs during economic downturns might save money in the short-term, but ultimately will end up costing more in the long run.

Weathering tough times with compassion

A growing body of evidence supports the importance of empathy in the workplace. Empathetic leadership is crucial to a company maintaining high levels of engagement, retention, innovation, and productivity. In the absence of this kind of leadership, workers tend to look for employment elsewhere. 73% of employees are considering leaving their jobs for other positions. Of those, 74% would consider accepting a pay-cut for the right role. This suggests that their search is motivated by factors like growth opportunities, exciting work, flexibility in their schedules, and cultures that support well-being and belonging, in addition to better pay.

Our current market climate and employee needs begs the question: how can employers deliver on a winning employee experience that makes people want to stay? It starts with compassion and trust.

A 2023 Workhuman Workforce Trends report found that almost half of workers today feel undervalued. And over half of workers believe their organization’s leadership would lie to employees if it would benefit the business. At a time when there’s stress and uncertainty around job security, how companies navigate cutbacks and layoffs will determine employee trust in leadership going forward.

Fortunately, empathy is a skill leaders can learn. Making a conscious effort to build empathetic leadership among executive teams and people leaders is a great start toward building lasting trust. Here are steps you can take:

Focus on employee experience and retention

There is a real risk for businesses that undervalue the importance of empathy in the workplace. When the pendulum of the labor market swings back in employees’ favor, they will likely leave for companies that held on to their ESG and DEI commitments. 

Companies charting out their employee engagement strategies for the remainder of 2023 should be advised: now is not the time to walk back commitments to employee experience and DEI, especially without consulting your employees first or providing adequate transition support. It could be your costliest mistake. Research by SHRM suggests that for each employee who quits, the cost to the company could be 50% – 250% of that person’s salary.  

Even if you’re not anticipating having to make cuts this year, you can still take steps to encourage an open, honest dialogue with employees who are feeling anxious about economic headwinds.

Listen to your people 

Decisions that impact your employees day-to-day lives should generally be arrived at collectively, with their input considered. 

Earlier this month, Disney mandated a 4-day in-office policy that met considerable pushback from employees. Employees issued a petition that the new policy is “likely to cause long-term harm to the company” and will “lead to forced resignations.” The petition received over 2,300 signatures, many of them from working parents. One employee told the Washington Post that workers were feeling “betrayed.”  “Workers feel like they did a really good job of demonstrating trust and showing up during the pandemic,” he said. “Coming back to the office through a mandate seems punitive, and it certainly isn’t something most workers were consulted on.”

This blow to morale and company trust could have been mitigated had Disney’s leaders been transparent (i.e. provided data-informed rationale for the change) or taken actions that showed empathy and a commitment to collaborative problem-solving.

Most recently we’ve seen this kind of empathetic leadership attempted at Zoom: Following an announcement of a 15% staff cut, Zoom CEO Eric Yuan pledged to take a 98% pay cut and forgo his bonus. Intel CEO Pat Gelsinger did something similar to offset layoffs (albeit at less of a personal cost). Do these small tokens of solidarity compensate for the thousands of jobs lost? No. But they show leadership is invested in preserving its workers’ good-will and trust in leadership.

Continue to invest in tools for empathy education

Despite significant evidence that DEI is considered a top priority by key stakeholders, a recent report showed that when companies need to cut costs, HR and DEI programs are among the first to go. Categorizing these necessary HR functions as “nice to have” rather than “need to have” only calls company leaders’ empathy into question.

How company leaders understand (or don’t understand) the importance of empathy in the workplace sets the standard for an entire organization. Leveraging the perspective-taking power of immersive technologies is one proven way to ensure your people have the resources they need to become effective, empathetic leaders. 

When learning is paired with opportunities for open and honest discussion, you ensure that grievances don’t go unspoken. When employees see leaders making an effort on this front, they are more likely to see them as trustworthy.

One of our learners shares, “More conversations around DEI are happening and people seem to be genuinely excited to keep the conversations and actions going. It’s evident that it’s important to the organization, which is awesome.” When employees see their leadership is committed to building a people-centered culture, retention soars. More than half of our learners express that they are more likely to stay at their company because of Praxis Labs training. 

The importance of empathetic leadership in the workplace

We can never know for certain whether tough times are coming. But we can better prepare ourselves for when they do. Empathetic workplaces that encourage open and honest conversation, active listening, and cultures of learning and growth, are the best positioned to stay resilient during turbulent times.