How to Build Loyalty After Layoffs

Q: How do you build loyalty after a round of layoffs?

A: First, you have to treat people very well on the way out, says Amelia Warren Tyagi, author and co-founder of the Business Talent Group, an executive search firm in Los Angeles. "Everyone in the company is watching this process closely and judging management's conduct," Tyagi says. "Are you giving fair notice? Adequate severance? Articulating without equivocation why these particular employees are being let go? Helping people to understand that these decisions are not arbitrary--or, worse, that they are some kind of personal vendetta--is crucial."

Next, tell those who remain their workload will not increase to cover the loss of staff. "To do otherwise," she says, "is a crushing blow to morale." For example, if you close your Chicago office, make it clear that you won't be aggressively pursuing business in the Chicago area anymore. If you trim the financial department from 10 to eight employees, say that you're also reducing back-office procedures by 20 percent. And then do it.

It's also important to show cost-cutting across the board, especially for upper management. Limit business travel and fly coach. Put the kibosh on lavish holiday parties but hold potlucks for community building. Withhold big bonuses or raises but perhaps hold informal celebratory dinners with your major players. "You must continue to find such ways to invest in the culture," Tyagi says.

Finally, bosses must make it plain to the employees who survived the layoffs that they are the best, and essential to the future. Tyagi suggests meeting individually with the company's superstars and "enlisting them as trusted partners and collaborators in the difficult task of rebuilding or at least holding the line for the company." Conversations like that, she says, "cost nothing but your time and can pay such high dividends."

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This article was originally published in the April 2010 print edition of Entrepreneur with the headline: Here Today....