The Organizational Trauma of Layoffs

Prologue: Why I’m Telling You This

I don’t use the word "trauma" lightly.

2025 marks eleven years that I’ve been learning how to recover and properly manage my PTSD. Four years of trauma therapy led into executive coaching, and that eventually brought me to where I am today - a few months away from completing my master’s degree in organizational management and leadership.

I grew up in a house governed by abuse. The man who abused us manipulated pain and fear like a toolset. He believed that control was power. Grace was akin to stupidity. And the rest of us lived in a state of permanent hyper-vigilance.

As an adult, that conditioning didn’t just disappear. It followed me into friendships, partnerships, and eventually into leadership and every room where I was supposed to belong, but didn’t quite know how.

I entered and excelled in the corporate world carrying that history. And the more advanced I became at cross-functional leadership, the more I noticed something chilling: the same trauma patterns I had spent years unlearning are playing out inside companies. Manipulation masks as management. Arbitrary reorgs destabilize gifted teams. Thick silence in executive meetings underscores tension that no one will name for fear of retaliation.

And as I continue to become stronger, more thoughtful, and more educated, I see clearly how trauma doesn’t just live in people. It embeds in systems.

And systems, like people, remember.

Unprecedented Waves of Layoffs in Tech and Media (2022–2024)

The scale of recent layoffs in tech and media has been unprecedented. In the tech sector, 2022 marked the beginning of a massive correction: roughly 165,000 tech employees lost their jobs in 2022, as many high-tech companies reversed pandemic-era hiring sprees. The downsizing only intensified in 2023 – about 262,700 tech workers were laid off in 2023, a surge of 59% compared to the prior year. By some estimates, over 460,000 tech employees globally have been laid off since the start of 2022, an astonishing reversal for an industry that just a year prior had been grappling with talent shortages. And the trend continued into 2024: more than 100,000 tech roles were cut in just the first part of 2024 as firms like Microsoft, Intuit, and Dell slashed their workforces amid economic uncertainty.

The media and news industry likewise experienced historic job losses. In 2023, U.S. media companies announced over 21,000 job cuts – the highest annual total since the 2008–09 recession (excluding the extraordinary pandemic upheaval of 2020). This carnage in media far eclipsed the previous years; for comparison, fewer than 4,000 media jobs were cut in all of 2022 (and a similar low number in 2021). Midway through 2023, media layoffs had already hit record levels, even higher than the worst early months of COVID-19 – by June 2023, 17,436 media jobs had been cut, surpassing the pace of 2020’s cuts. Newsrooms large and small were gutted: for example, BuzzFeed shut down its entire news division, and iconic outlets from CNN to the Los Angeles Times slashed substantial portions of their staff. In short, both industries saw a frequency and magnitude of layoffs not seen in over a decade, amounting to a collective organizational shock.

The Human Toll: Layoffs as Psychological Trauma

Layoffs on this scale inflict profound emotional and psychological trauma on workers. Medical studies rank losing one’s job among the most stressful life events a person can experience – in one study, being laid off ranked seventh among life’s most stressful events, making it more stressful than a divorce or even the death of a close friend. Mental health experts say that, on average, it takes about two years to recover from the psychological trauma of losing a job. In other words, a layoff is not a mere professional setback; for many it is a life-altering blow that can leave lasting psychological scars.

The health impacts of job loss are alarming. Research shows that for otherwise healthy individuals, being involuntarily laid off increases the odds of developing a new serious health condition by 83% within the first 15 to 18 months after the layoff. Stress-related ailments such as hypertension, heart disease, and even arthritis spike in the aftermath of unemployment. The psychological and financial strain also carries grave risks: the trauma of unemployment can increase the risk of suicide by 1.3 to 3 times compared to the average. Displaced workers are twice as likely to fall into depression, four times more likely to abuse substances, and six times more likely to commit violent acts (such as domestic abuse), according to findings cited by Harvard Business Review. Little wonder the U.S. Department of Labor pointedly acknowledges that “being laid off from your job is one of the most traumatic events you can experience in life”. In short, mass layoffs impose a social and mental health cost that is difficult to quantify – a cost borne not just by those let go, but by society in the form of higher health care burdens and community strain.

And it is not only those who lose their jobs who suffer; the survivors of layoffs – the employees left behind in the organization – tend to experience their own form of psychological trauma. A 2023 industry survey of tech employees found that a staggering 77% of workers reported that the constant turmoil and fear of layoffs had deteriorated their mental well-being. The workplace atmosphere during waves of layoffs becomes one of pervasive anxiety. Those who remain employed commonly grapple with survivor’s guilt, as well as fear and uncertainty about their own future. Research summarized in Harvard Business Review notes that employees who stay after a downsizing often experience heightened anxiety, insecurity, low morale, and sadness, which are classic symptoms of post-traumatic stress within an organization. This collective anxiety can linger for months or years, undermining the sense of safety and trust that employees have in their employer.

Viewing layoffs through the lens of organizational trauma helps explain these reactions. Just as individuals can be traumatized by a sudden loss, organizations can be collectively traumatized when large numbers of people are abruptly severed. The sudden loss of colleagues (and often friends) and the breach of the assumed psychological contract between employer and employee create a ripple effect of grief and mistrust. People who remain employed often exhibit symptoms akin to post-traumatic stress: flashbacks to layoff announcements, hyper-vigilance (rumors of another round of cuts spread constantly), and a sense of betrayal and imbalance. This trauma is not something that disappears easily; its psychological half-life can be measured in years. The result is a workforce that is emotionally on edge, which directly affects how the organization functions going forward.

Lingering Organizational Damage: Innovation, Trust and Performance

Mass layoffs may be undertaken in the name of efficiency or cost-cutting, but they often hollow out an organization’s long-term capabilities. Leaders and analysts have increasingly pointed out that layoffs carry many “hidden costs” that can cripple a company’s performance well into the future.

Harvard Business School professor Sandra Sucher, who has studied layoffs for years, warns that companies often overlook the loss of institutional knowledge and expertise that occurs when experienced employees are shown the door. Those employees take with them years (even decades) of know-how, customer relationships, and project history – an intangible asset that simply walks out and may end up benefiting a competitor.

Furthermore, survivors of layoffs frequently experience weakened engagement and loyalty to the company, leading to a less motivated workforce. It’s common to see a spike in voluntary turnover after a layoff, as the most marketable remaining employees – now distrustful of management – start looking for more secure opportunities. Layoffs also tend to choke off innovation, as remaining staff become more risk-averse and stretched thin;

Sucher notes that overall innovation and new product development often suffer in the wake of staff cuts. Crucially, she observes that it can take years for a company to bounce back from these setbacks, if it ever does. In essence, a traumatic downsizing can put an organization into a years-long hangover of lower growth and creativity.

Data backs up these observations. In a 2024 Gartner survey, more than half of employees surveyed after a layoff reported serious declines in morale and trust. Specifically, 57% of employees said morale fell after layoffs, and 53% said their trust in leadership was eroded, with a similar proportion reporting negative impacts on their overall well-being. When over half your workforce becomes disengaged or distrusting, the cultural damage is profound.

Gartner’s research concluded that the short-term cost savings from layoffs are often illusory because they trigger a cascade of longer-term harms: bad publicity that can tarnish the employer brand, loss of knowledge and skills, a weaker culture of engagement, higher subsequent voluntary attrition, and lower innovation – all factors that ultimately hurt profits in the long run. In other words, layoffs create an “organizational drag” that can weigh down a company’s performance for years.

Multiple studies have found that layoffs rarely deliver the financial or productivity benefits that leaders promise. As Stanford Graduate School of Business professor Jeffrey Pfeffer points out, numerous analyses have shown that workforce reductions do not reliably reduce costs – any immediate savings on payroll often evaporate due to severance payouts, the loss of experienced talent, and subsequent hiring of contractors or overtime to fill the gaps. One Gartner analysis noted that the expected cost savings from layoffs are typically offset within three years by unforeseen consequences like lower employee morale, higher turnover, and even loss of customers due to declining service or product quality.

Layoffs can also backfire financially by harming productivity: remaining employees often feel overburdened and insecure, which dents their productivity and creativity at exactly the time the company needs everyone to step up. Indeed, Pfeffer and other experts have debunked several layoff myths: job cuts do not usually boost stock prices, they do not improve productivity, and they fail to address the underlying issues (such as poor strategy or lost market share) that often cause performance shortfalls. At best, layoffs are a short-term fix; at worst, they set the stage for long-term competitive decline. As one HR commentary summarized, “ultimately, the expert concluded that layoffs are essentially a poor decision.”

One particularly insidious effect of layoff-driven trauma is the collapse of trust and teamwork within the organization. A key casualty of mass layoffs is the psychological contract – the implicit trust that employees have in their leaders and in the stability of their workplace. When that trust is broken, employees become less willing to go above and beyond, to collaborate, or to take risks. In tech companies known for innovation, this can be devastating.

A report in Fast Company described how employees who survive layoffs often become disengaged, suffering a drop in morale that leads to reduced innovation and lower quality of work output. Instead of feeling like energized owners of the company mission, people feel like expendable costs on a balance sheet. This shift can create a culture of silence and fear: fewer people speak up with creative ideas or candid feedback (why stick your neck out if you might be next on the chopping block?). Leadership too can grow more disconnected – in the turmoil of repeated layoffs, managers often retreat to “brass tacks” and stop inspiring their teams, exacerbating the engagement problem. All told, the organizational trauma of layoffs leaves a company less resilient and adaptable. It’s akin to a body that has suffered a major injury – the company might survive, but it moves more gingerly, and some of its former agility and spirit is permanently lost.

Why Layoffs Became Normal Despite Their High Cost

Given the evidence that repeated layoffs often do more harm than good, it’s reasonable to ask: Why have layoffs become so normalized in corporate practice, especially in tech and media? Experts suggest a few interlocking reasons. One is Wall Street’s short-term reward system: mass layoffs, in the eyes of financial markets, demonstrate that management is doing something to cut costs, often leading to a short-lived stock bounce. This dynamic has been noted for decades.

As Newsweek famously observed as far back as the 1990s, “Once upon a time, it was a mark of shame to fire your workers en masse… Today, the more people a company fires, the more Wall Street loves it, and the higher its stock price goes.”. In other words, a CEO who announces layoffs may be rewarded by investors (at least in the immediate term), creating a powerful incentive to view layoffs as a fast way to impress the Street. This has turned layoffs from a last-resort measure into a routine tool for managing earnings. Corporate boards and C-suites have, over time, internalized the idea that cutting headcount is a normal response to an earnings miss or an economic wobble.

Another factor is what Pfeffer describes as “social contagion” in corporate behavior. When some high-profile firms start cutting jobs, others tend to imitate them, sometimes mindlessly, as if catching a trend or virus. During 2022–2023, as giants like Meta, Google, and Disney announced layoffs, a herd mentality set in across Silicon Valley and the media sector: if everyone else is trimming, we should too. Pfeffer notes that companies often copy layoffs because other companies are doing it, not necessarily because it’s the best solution for their specific situation. This copycat behavior contributed to the waves of cuts – layoffs became almost a badge of prudent management in uncertain times, even when firms remained profitable. Unfortunately, this contagion ignores the organization-specific damage discussed earlier. It’s a form of corporate peer pressure that has normalized a drastic action.

Additionally, many business leaders hold entrenched beliefs (myths) about layoffs that are hard to shake. Chief Financial Officers might calculate the immediate savings of reducing payroll without fully appreciating the “organizational drag” and talent drain that follow. Traditional accounting practices don’t effectively measure the cost of lost morale or lost innovation, so those factors are left out of ROI calculations. There is also a certain desensitization at play – after decades of restructuring being common, layoffs have been reframed in sanitized terms like “RIFs” (reductions in force) or “right-sizing,” which can obscure the human toll. In tough economic periods, executives may feel layoffs are the surest way to cut costs quickly, even if it means eating the seed corn of future growth. And if competitors are cutting, a CEO might worry that not cutting could make them look bloated or complacent by comparison.

Crucially, the normalization of layoffs persists despite acknowledgment by many leaders that the practice is usually counterproductive. Pfeffer has argued that layoffs are often “a confession of poor management” – essentially an admission that leadership failed to plan ahead or innovate out of problems, resorting instead to the blunt instrument of job cuts. In the recent tech layoff wave, analysts pointed out that many companies over-hired during the boom, and then overreacted by shedding talent en masse, even in areas critical for future innovation. Layoffs became the go-to play in the corporate playbook, perhaps because they are relatively fast and visible actions, even if they don’t truly solve underlying issues like strategy missteps or declining product market fit. As one Gartner expert put it, many firms taking a short-term view “fail to see the negative effects of their actions until it’s too late”.

In effect, the broad acceptance of layoffs as a management norm is a case of organizational inertia and short-term thinking winning out over long-term wisdom.

The Executives Are Not Okay Either

Let’s not pretend this only happens at the team level.

Trauma climbs.

In the past few years, C-suites across media and tech have absorbed more shock than they know how to metabolize: economic upheaval, mass layoffs, shifting mandates, failed pivots and transformations, and relentless pressure from boards, markets, and media. And many leaders, instead of processing that pressure, are now projecting it.

You’ve seen it: the shift in tone. The resurgence of hard-nosed, top-down leadership. Executives declaring that “the era of nice is over,” pushing RTO mandates, revoking flexibility, doubling down on control. But let’s call it what it is: a trauma response. An attempt to restore order after a season of chaos, not by healing, but by hardening, and creating corporate generational trauma at the top levels.

I don’t think most of these leaders are malicious. I think they’re scared. I think they’re trying to normalize the damage, frame it as discipline, and call it culture. This pattern mirrors how many individuals cope with their own unresolved pain: by compartmentalizing it, rationalizing it, or rebranding it as discipline. But unprocessed experiences, especially at the top, have ripple effects throughout a company.

Fear at the top creates fear everywhere else. And the nervous systems of organizations are always downstream from leadership. If leaders are locked in self-protection mode, so is everyone else. Creativity flattens. Collaboration crumbles. Systems grind.

Leaders who are willing to name the harm, own their part in it, and lead from clarity create the conditions for real recovery for themselves and their organizations.

Healing the Wounds and Rethinking the Approach

If there is a silver lining to the painful lesson of 2022–2024, it’s that more voices in business are now calling for rethinking the use of mass layoffs. The concept of organizational trauma encourages companies to recognize that layoffs should be treated not as a routine cost-cut tool, but as a last resort equivalent to performing surgery on the organization – something to be done only with great care, proper after-care, and when all other options have been exhausted. Some companies and even countries have started exploring alternatives: reduced hours or pay, hiring freezes, re-skilling employees for new roles, or natural attrition, rather than reflexive pink slips. The goal is to avoid inflicting trauma that later undermines the very goals the layoffs were meant to achieve (efficiency, productivity, profitability).

For organizations that have gone through layoffs, experts emphasize the importance of acknowledging the trauma and actively working to rebuild trust and morale. This means leaders communicating transparently, providing authentic support to those let go, and engaging deeply with remaining employees to show that they are valued and safe. A Gartner report advises managers to “use actions over words” to re-engage survivors – for instance, by investing in their development, involving them in planning the path forward, and demonstrating empathy in day-to-day interactions.

Rebuilding an organization post-layoff is a recovery process: it requires regaining employees’ trust, restoring a sense of purpose and stability, and realigning everyone around a hopeful vision for the future.

Sources:

• Harvard Business Review – on the hidden costs of layoffs and long-term impacts on engagement and innovation.

• Gartner (2023–2024 surveys and analysis) – on post-layoff declines in morale, trust, and well-being; long-run harm to knowledge retention, turnover, and innovation.

• Fast Company, Axios, Forbes – reporting data on the number of tech and media layoffs (2022–2024) and industry trends.

• Society for Human Resource Management (SHRM) and academic sources via Los Angeles Times and HBR – on the psychological and health toll of layoffs, including increased rates of depression, illness, and suicide following job loss.

• Thought leaders like Jeffrey Pfeffer (Stanford GSB) – on why layoffs are often a counterproductive, copycat behavior and a sign of larger management failures.

• Industry case examples (2022–2024) – illustrating the cultural fallout (“survivor guilt,” loss of trust) and calling for more compassionate, strategic approaches in handling workforce changes.