The Devastating Effect of Layoffs on a Customer-Centric Culture

This article first appeared on LinkedIn 

Everyone wants to know how to build a culture of customer-centricity, but few understand the critical factor is employees.

When I recently surveyed my LinkedIn connections and followers asking what topics they find most useful and interesting, one was the runaway winner: how to build a customer-centric culture.

In the time since that poll ran, the business headlines have been dominated by something that does great damage to any organization’s customer-centricity: layoffs. This may seem surprising, because layoffs directly affect employees, not customers. But your customers won’t feel much love if your employees don’t feel loved and cared for by their leaders.

A customer-centric culture is one in which employees know they can fully commit to solving customer problems and innovating new ways to turn customers into promoters. That depends on trust, a trust that leadership will keep them safe—will have their backs.

Layoffs degrade that trust. They tempt even sensible survivors to stop playing for the team and play for themselves instead. With that change in mindset, inspiration to serve others vanishes and the goal of a customer-centric culture dissipates into a mirage.

Not all layoffs can be avoided. Some industries repeatedly deal with inherent cyclicality through layoffs, and in those, new hires understand layoffs come with the territory. Layoffs are unavoidable in other situations, such as when the competitive landscape changes in jarring and unpredictable ways that can threaten a firm’s viability.

Then firms must be right-sized, or the entire corporate community will collapse. Layoffs should never, however, be implemented to meet near-term earnings targets or productivity metrics or to appease short-term investors.

Trumpeting modest layoffs (of say, 5% or less) as public pronouncements appeases short-term investors at the expense of employee morale and customer love. 

This degree of workforce adjustment could easily be achieved through performance management and natural turnover. Raising them to a PR pronouncement communicates that leaders still believe the investor stakeholder is supreme, and their commitment to balance stakeholders and love for customers and employees was more masquerade than mission.

Layoffs should always be a last resort, but when leaders can’t avoid layoffs, they can signal their commitment to caring for their teams by forgoing personal bonuses until the displaced employees have found good jobs elsewhere. Many companies honored on lists of top places to work have recently announced layoffs. It might be appropriate to make these firms ineligible for inclusion on any such prestigious list for the next three years, lest the credibility of the lists be impugned.

Reader question: Should companies be ineligible for best places to work lists for two to three years after layoffs? Should an asterisk be placed next to honorees that subsequently implement layoffs? Please share your thoughts in the comments.

In our research for hashtag#WinningOnPurpose, we discovered that creating a customer-centric culture is the only path to sustainable, competitor-beating success. Leaders need to start by acknowledging where the culture stands today—and how much progress is required to become truly customer-centric. Then they’ll know if small but steady incremental upgrades will suffice, or whether a full-fledged transformation is necessary. Firms that have jumped on the recent layoff bandwagon should presume a transformation will be required to refocus their culture of loving customers.

Customer love highlight

In the wake of Southwest Airlines’ widespread holiday flight cancellations, I posted my thoughts on the best way Southwest could begin to "earn" back its customer love, starting with monitoring its employees' Net Promoter Score (eNPS). Employees are the brand ambassadors, and they’re the ones who can earn back that customer love (or not).

Geoff Langos offered a story in the comments on my post that exquisitely illustrated the impact of great employee brand ambassadors.

“We rented a small SUV from Enterprise to drive from Virginia Beach to Ohio and Pittsburgh,” Geoff wrote. Things started off well, he explained, when the group was upgraded to a full-size SUV at no cost. Then storms made driving through the mountains treacherous and the group had to stay an extra day to let more of the storm pass. Enterprise said no problem, no extra charge. It was so cold, the group had the defrosters on full blast and the front windshield cracked. “When we returned the vehicle and saw the windshield they asked if everyone was ok before asking how it happened,” Geoff wrote. And, once again, no charge. The end result: “They have a Net Promoter for life!”

In my experience, Enterprise Rent-A-Car consistently racks up exceptional NPS. These are the employees who have built the customer-centric culture that earns those ratings. Thanks, Geoff, for sharing a powerful story of customer love.

Winning on Purpose: The Unbeatable Strategy of Loving Customers, is now on sale.