Employee morale will remain negatively impacted by 2023 layoffs in 2024, predicts economist.

In 2023, over 305,000 U.S. workers lost their jobs in a wave of mass layoffs that affected various industries, with tech companies being the first to announce job cuts.

According to Glassdoor's chief economist, Aaron Terrazas, many businesses were forced to make difficult decisions to cut their workforce in early 2023 due to economic uncertainty. However, this resulted in a decline in employee satisfaction and engagement, and placed additional pressure on middle managers, which Terrazas predicts will continue into 2024.

In November 2023, Glassdoor released its 2024 Workplace Trends report, which examined Glassdoor ratings written by employees of over 100 companies that experienced significant layoffs to determine the areas of employee satisfaction, specifically middle managers and lower, that were most affected.

According to Terrazas, companies will attempt to boost employee morale in the upcoming year through various methods, and the impact of this dissatisfaction will be most keenly felt by middle managers.

Executives will employ “carrot stick” employee policies

The report found that the company's overall rating dropped across all aspects of employee satisfaction, including CEO approval and diversity and inclusion, in the first 30 days after a layoff. Although the ratings stabilized for most 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 due to the long-term effects of layoffs on office culture, employee engagement, and work-life balance issues such as burnout.

Boosting employee morale through raising compensation is historically the fastest method, according to Terrazas. However, due to strained corporate budgets, it is unlikely that this technique will be employed.

He says that he believes they will attempt to implement various actions on the fringes of compensation, including carrot stick policies.

Economists typically categorize policies aimed at motivating employee productivity as either incentives (carrots) or penalties (sticks). While carrots, such as increasing salaries or providing office perks like free lunches, can be costly, sticks can negatively impact employee satisfaction.

Employers will focus on carrot sticks rather than relying too heavily on sticks to improve employee satisfaction and engagement, according to Terrazas.

Encouraging employee engagement by recognizing those who participate in community-building activities in the workplace is an example of a carrot stick policy, he argues.

To boost employee satisfaction, managers should ensure that their employees feel heard, particularly frontline or entry-level employees, who need to feel that they have a voice, a stake in the business, and that their senior leaders are listening to them, advises Terrazas.

Middle managers will feel the heat

Terrazas predicts that middle managers will continue to struggle during the next year due to the layoffs.

During times of trouble and cost-cutting, middle managers experienced pressure from both ends of the workplace hierarchy. They were responsible for increasing productivity among junior workers and implementing unpopular corporate policies, such as requiring frontline employees to take on additional responsibilities.

As they implemented cost-cutting measures, they unintentionally became the targets of the same policies, being labeled as "the scapegoats of organizational bloat."

Middle managers are being targeted for cost savings as companies prioritize productivity and cost reduction, while also facing layoff stress as companies seek to streamline their organizational structure.

The trend of flattening organizations is not limited to cost-cutting measures but also extends to the growing demand for a four-day workweek. According to industry analyst Josh Bersin, who spoke to CNBC Make It last month, the benefits of flatter organizations, such as quicker communication and a more dynamic company culture, are essential for a successful transition to a four-day workweek.

Middle managers' job satisfaction ratings have been negatively affected by the stress they experience due to work-life balance issues, according to a report.

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