Every day we wake up to the sad news of another company announcing massive reductions to its workforce, the OECD expects 80 million people to lose their jobs by the end of the year.
Downsizing is never fun, and it is always conducted as a quick resort for cost reductions. However, while it may have a short-term positive impact on the company’s cash flow, its long term consequences can be catastrophic.
Studies show that companies that made layoffs are twice as likely to file for bankruptcy, a 1% layoff lead to up to 31% voluntary turnover in the next year, and also that firms with layoffs of 10% saw share price plunge by an average of 38%. On the people side, a study has shown that laid-off employees have an 83% higher chance of developing a new health condition in the year after their termination. Surviving employees show 74% in productivity, a 41% decline in job satisfaction and a 36% decline in organizational commitment
At Nokia, we had one significant value, which is “Very Human.” We believed that our people are our greatest asset and that we have a responsibility as a company towards our employees and our communities. We informed all the employees a year ahead about the downsizing and asked everyone to start thinking about their future plans. Our mindsets were determined to see this as a bright opportunity to create new futures. We wanted to keep our people motivated until the very last day of their jobs and give them something to look forward to after leaving.
The Bridge program had started from day one at Nokia and was developed into 5 tracks, departing employees can choose from when they were laid off. All the tracks aimed to make sure the departing employees have plans for their next step, the minute they leave Nokia. The program tracks included, a “Create your own path,”
“learn something new,” “find a new job within Nokia,” “find a new job outside Nokia,” and “Start New Business AKA The Bridge Incubator.”
For the Bridge incubator program, we tried to provide the employees with something more than the money, so we started creating an entrepreneurial environment. We transformed one of our spaces into an incubator, inviting Startupbootcamp to move in, providing a more vibrant entrepreneurial atmosphere. We had EIRs, investors, and mentors coming over all the time and hosting workshops. We also hired Ex- VCs to help people develop their business plans. We encouraged different employees to come together and develop a new business together, and they could achieve up to a €100K to build the company. We also offered commercial use of any non-core Nokia patents. I am very proud to say that we had around 1000 new businesses coming out of this program, third of them were really high tech growth startups, and Nokia even ended up having commercial deals with some of them.
The Bridge program’s positive impact was extended to the local community, it supported the thrive of the Finnish entrepreneurial ecosystem, lots of strong startups came out of this program. The Nokia program alumni are still connected up until this day, still working on developing new ideas and helping each other find new jobs, a lot of ex-employees are still meeting once a year.
On the company side, with only a 4% investment from the total redundancy budget invested in the Bridge incubator program, Nokia managed to achieve a significant return on investment. This also helped keep the employees working hard until their last day; we didn’t see the usual drop in productivity following layoffs; on the contrary, employees at the sites that were targeted for downsizing achieved €3.4 billion in new-product revenues, one-third of new-product sales — the same proportion they had brought in before.
My two cents for companies going through massive redundancies now, leaving employees don’t care much if the severance pay is 25% higher or lower, they care more about getting support to create a path to a positive future and knowing their next step. You should think more about how you can help your leaving people to help themselves.
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