Researchers measure the effects of mass employee layoffs on a brand

The results show that after layoffs are announced, brand strength drops by an average of 18%. It only recovers after about seven weeks. 

“This negative effect is strongly influenced by the corporate communications that take place in parallel,” says Alexander Himme, an Associate Professor at KLU. He warns that advertising and social media amplify the negative effect.

“If, on the other hand, companies send out many PR and CSR messages in parallel with the layoff, this average damage to the brand can be significantly contained,” Himme explains. 

An above-average positive brand image also proved to be a helpful buffer against brand damage caused by the announcement of mass layoffs.

Consumers differentiate between advertising and PR

How do PR or CSR measures differ from marketing measures? The researchers’ study shows that consumers rate marketing and social media activities as more entertaining, less trustworthy and, above all, cost-intensive.

“This is then perceived very negatively in the case of layoff announcements,” says Himme. PR or CSR measures, on the other hand, are considered trustworthy and informative – as long as they are not pure ‘greenwashing’ and, for example, society benefits from the measures.

Tip: Involve marketing professionals early on

“This may sound surprising, but a company’s marketing department should be involved in planning measures such as layoffs from the very beginning,” Himme says. “After all, image losses have a direct negative financial impact via falling sales or a low willingness to pay.”

The damage to a company’s brand can be limited by managing marketing, PR and CSR measures in parallel with the announcement of a mass layoff. 

“A long-term, coordinated communications strategy makes perfect sense here and protects the company from further image problems,” advises Himme.

The study, titled ‘How firm communication affects the impact of layoff announcements on brand strength over time’ is published in the peer-reviewed International Journal of Research in Marketing. You can find out more here.