The People You Keep Are Watching

What the layoffs of 2026 are really teaching your best employees, and why most leaders have the audience backwards

In the first ten days of May 2026, American companies cut more than thirty-seven thousand jobs. Spirit Airlines shut its doors and let go of all fourteen thousand of its people. PayPal cut a fifth of its workforce. Cloudflare and Coinbase cut hundreds more. And nearly every announcement pointed at the same culprit, the one everyone is arguing about right now: artificial intelligence.

I am going to make an argument that sounds strange coming from someone who spends half his life inside AI. The machine is not the story. Whether an algorithm can do the job is an interesting question, but it is not the one that will decide these companies' next five years. That question is being answered somewhere else entirely. It is being answered in the hallways, the group chats, and the quiet car rides home of the people who did not get cut.

Because here is what almost every leader gets backwards about a layoff. You think the audience is the people you are letting go. It isn't. The real audience, the one that will decide whether your company thrives or slowly bleeds out over the next two years, is the people you keep. And right now, in thousands of organizations, your very best people are watching how you handle this and running a silent calculation. If that is how they treat people here when it gets hard, then what am I, really, to this place.

Whatever they decide in that moment, they rarely say out loud. They just start to hold back.

Researchers have studied the people who remain after a layoff for decades, and they have a name for what happens to them. Survivor syndrome. You would expect the survivors to feel relief, maybe even a burst of gratitude and productivity. The opposite is what shows up. Trust drops. Engagement drops. Discretionary effort, the extra that no job description can require, quietly evaporates. And the people most likely to walk in the year after a layoff are often your strongest performers, precisely because they are the ones with somewhere else to go. You cut to get lean, and you accidentally taught your best people to keep a bag packed.

That is not softness. It is the most practical thing in the world, and it is where leadership meets its hardest test.

I spend my career mapping how organizations actually work underneath the org chart. Every company runs on a hidden layer I call the Meaning Code, the silent ledger every employee reads without ever being handed it, the one that answers the only question that truly matters to them: what does it actually take to be safe and to belong here. Most of the time that code stays invisible. A layoff drags it into the open. In one decision, and in the way you deliver it, you answer the safety question for everyone in the building, out loud, at full volume. No memo about resilience and no all-hands about the exciting road ahead can talk over it. People do not believe what you say in a crisis. They believe what you do.

And that is where most of the damage actually lives. Not in the cut itself, which people can often understand, but in the gap between what you said and what you did. The company that called itself a family and then let people discover they had been laid off from a badge that stopped working at six in the morning did not just lose jobs. It taught every survivor that the word family was marketing. The wound is rarely the layoff. The wound is the incoherence.

There is a physical layer to this too. A layoff is a threat event, and a human nervous system reads threat fast. When people feel unsafe, their bodies flood with cortisol, their focus narrows to self-protection, and the parts of the brain that do creativity, generosity, and complex problem-solving go quiet. Multiply that across a workforce and you get the cruel irony at the center of most downsizing. Leaders cut costs to free up room for innovation, and the cut itself drops the whole organization into a defensive crouch that makes innovation nearly impossible. You cannot build the future in a building full of people bracing for the next hit.

And it comes apart in a predictable order, the same one I have watched in every organization I have helped through a crisis. Communication goes first. Rumors outrun the truth, and leaders retreat behind careful language. Then trust in leadership goes. Then the structure itself starts to wobble, as the people who quietly held everything together update their resumes. Communication, then leadership, then structure. A botched layoff does not just remove people. It kicks out the first leg of that triangle on purpose.

Which brings me to the fact that should change how every executive thinks about this. Study after study that has followed companies through downsizing has found the same uncomfortable result. Most of them are not more profitable a few years later. Read that again. The savings that looked so clean on the spreadsheet often never fully arrive. Why. Because the model only counted the salaries you removed. It never counted the thirty percent of discretionary effort you quietly lost from the ninety percent who stayed. You can see the cost you cut. You cannot see the trust you spent to cut it, and trust was the thing actually producing the performance. Efficiency paid for in trust is not efficiency. It is a loan, and the interest is brutal.

So if you are a leader facing hard choices, and many of you are, here is what actually separates the companies that come through stronger from the ones that never recover.

Know who your real audience is before you write a single word. It is the people who will still be here on Monday. Every decision about how you handle the departures should be made with them in your mind, because they are watching far more closely than they will ever admit.

Close the gap between your words and your behavior. If you cannot honestly be a family, stop saying it, and be something better, which is honest and human. People can forgive a hard decision made with integrity. They will not forgive being managed by a slogan.

Put a human being in the room. No one should learn their role is gone from a dead badge or a mass email sent at dawn. It costs a leader something to look people in the eye and tell them the truth with care. Pay it. The survivors are watching that exit like a preview of their own.

Treat the people leaving with dignity, all the way out the door. How you treat someone on their worst day, when they can no longer do a single thing for you, is the clearest signal of what you actually value. Your remaining team reads that signal like scripture.

Then restore safety on purpose. A shaken organization needs its leaders to over-communicate, to name the threat honestly, and to make the near future predictable again. You are not only managing a business. You are helping a nervous system come off high alert so that people can think, and create, and commit again.

And measure the right thing afterward. Do not just report the cost you saved to the board. Watch belonging, watch trust, and watch whether your best people are quietly leaving. That is the real bill, and it comes due later.

Let me show you the difference. A company I'll call Northwind ran its cut for the spreadsheet. Fast, legally clean, delivered by email, leaders nowhere to be found. It hit its cost target and looked like a win for exactly one quarter. Then the people they most needed to keep began leaving on their own, one after another, and the ones who stayed stopped taking risks. Eighteen months later they had cut their costs and their future in the same stroke.

Contrast that with a company I'll call Cedar. Same brutal math, a real reduction they could not avoid. But their CEO did it differently. She told the truth early, including the parts that made her look bad. She and her leaders delivered the news in person, by name, and made sure everyone leaving walked out with real support and their dignity intact. Then she spent the next ninety days not talking about strategy but rebuilding safety, in the open, over and over. It was slower. It was harder. And her strongest people stayed, and leaned in, because they had just watched, in the worst possible moment, that this was a place that would treat them like human beings even when it was expensive to.

Same layoff. Opposite future. The entire difference was leadership.

They will tell you a machine did this. That the market did it, that AI did it, that it was all just forces beyond anyone's control. But no algorithm decided how you would tell a fifteen-year employee goodbye. No market chose whether your leaders would be in the room or hiding behind an email. And no technology will determine what the people who stayed learn this month about their own worth. That was leadership. It always was.

A layoff is the loudest sentence your culture will ever speak. Before you say it, be very sure you know who is listening. It is the people you are counting on to build whatever comes next.

I would love to talk to you about how we can partner with you.

Sources: American Bazaar: US layoffs in the first 10 days of May 2026, Wikipedia: 2026 United States corporate mass layoffs