How to lead a team decimated by layoffs

It sounds like an obvious business decision: cut headcount, reduce costs, and signal efficiency to the market. When Block CEO Jack Dorsey eliminated more than 4,000 jobs—nearly half the company’s workforce—citing AI-driven efficiency gains, the company’s stock rose more than 20% within hours. Citigroup is executing CEO Jane Fraser’s plan to cut 20,000 roles by the end of 2026. Morgan Stanley recently reduced its workforce by 2,500 positions across its major business divisions, despite posting record revenues in 2025.

The announcements are framed as strategic resets. The market often rewards them.

But the real consequences rarely show up in the stock price. They show up the following Monday morning, when the people still there sit down at their desks and try to figure out what just changed.

What many executives discover is that the organization doesn’t simply continue with fewer people. Work that once moved quickly begins to encounter friction. Teams grow more cautious about acting. Momentum slows.

This pattern isn’t a sign of disengagement. It’s structural. When headcount changes quickly, the informal systems that allowed teams to operate efficiently disappear with the people who carried them. Authority becomes unclear, risk tolerance drops, and people wait for signals before acting.

The organization is left operating with less context, less coordination, and less slack in the system—while leadership still expects full-speed performance.

Through our work advising and coaching senior leaders—Kathryn as an executive and team coach and Jenny as an executive advisor and leadership development expert—we’ve seen this dynamic repeat through restructurings, mergers, and strategic pivots. Layoffs don’t just remove people. They also remove the informal networks, unwritten decision rules, and the institutional memory that help work move forward. What remains is a workforce operating with less psychological and operational fuel—while leadership still expects full-speed performance.

Restoring momentum requires more than reassurance. Here are five actions leaders can take to help teams regain traction.

1. Name the Loss

Most leaders try to move quickly past the pain after layoffs. They schedule an all-hands, announce the new org chart, and immediate pivot to the next set of priorities. But moving on too quickly often backfires.

When Citi CEO Jane Fraser told employees, “We are not graded on effort. We are judged on our results,” the business message was clear. But for those remaining, the emotional subtext—grief, guilt, fear—had nowhere to land. People who just watched colleagues lose jobs at a company posting record revenues often experience survivors’ guilt alongside deep uncertainty about what comes next.

Acknowledging that reality does not require performative optimism. It means creating space for honest conversation. Leaders demonstrate appropriate vulnerability help teams process what happened and begin rebuilding trust.

Within 48 hours of a layoff announcement, hold a small-group conversation (no more than 15 people) with remaining team members. Come prepared to listen rather than present. Two questions can open the conversation:

1) What are you most worried about right now?

2) What do you need from me?

Capture themes and reflect them back through town halls and written updates so employees see their concerns shaping leadership’s response.

Acknowledging the loss doesn’t slow recovery. It clears the emotional static that prevents teams from moving forward.

2. Reset Decision Ownership

One of the least visible consequences of layoffs is how quickly decision ownership becomes blurred.

When teams shrink, responsibilities rarely disappear—they are redistributed quickly and often informally. Projects lose clear owners. Decisions begin climbing the chain of command. People become less certain about who is empowered to act.

The leaders who shorten the distance between questions and answers move quickly to re-establish decision clarity by answering three questions for every major workstream:

• Who owns the decision?
• Who should contribute input?
• Who is responsible for execution once the decision is made?

After layoffs, teams rarely slow down because they have lost capability alone. More often, they slow down because the organization’s decision architecture has quietly shifted—and no one has rebuilt it.

3. Rebuild the Psychological Contract

After the initial shock passes, many teams enter a second phase: recalibration. Employees begin reassessing their relationship with the organization, and what they owe it in return. The implicit agreement that once shaped how people approached their work—how much effort to invest, how much risk to take, how secure the future feels—has shifted.

In one recent survey of layoff survivors, 65% said they’d made a costly mistake or felt hesitant to act at work after layoffs due to lack of training, and nearly half reported a drop in morale and engagement. People often become more cautious in meetings, less willing to challenge ideas, and more focused on protecting their own role than helping the broader team succeed.

Some companies are experimenting with ways to preserve that contract even as technology reshapes roles. JPMorgan Chase offers one model for rebuilding that contract. Rather than eliminating workers displaced by AI, JPMorgan Chase CEO Jamie Dimon has said the firm redeploys them into other roles with retraining, relocation assistance, and income support. “We have displaced people from AI,” Dimon noted, “and we offer them other jobs.” Signals like this shape how employees interpret the organization’s commitment to them.

Rebuilding trust requires more than reassurance. Leaders must demonstrate through consistent decisions and clear communication that initiative and judgment are still valued—and that employees will be supported when they exercise them.

Without that reset, employees often remain in a holding pattern, waiting for the next change rather than investing fully in the work ahead.

4. Narrow Priorities to What Actually Matters

When teams suddenly shrink, expectations rarely do. The strategy may remain the same, but the organization’s capacity to execute it rarely does.

When priorities remain unchanged while resources decline, teams face a different problem: too many demands competing for limited attention. Instead of moving faster, people spend more time trying to determine where to focus. The result isn’t acceleration—it’s paralysis disguised as busyness.

Restoring momentum requires strategic simplification. That means identifying what truly matters in the next phase of the organization’s work and being explicit about what can wait. Projects that once seemed essential may need to pause. Initiatives that were previously “nice to have” may no longer fit the organization’s capacity.

Hold a priority reset session within two weeks of any significant headcount reduction. Ask: If we could only accomplish three things this quarter, what would they be? Then make those three things visible, repeated, and properly resourced.

Clarity about priorities reduces hesitation. When people understand where to focus, they are far more likely to move forward with confidence.

5. Deliver a Visible Win

After major workforce changes, teams often enter a holding pattern. People hesitate to move forward while they wait to see whether more disruption is coming.

The leaders who help teams regain momentum don’t rely on messaging alone. They create an early, visible win—resolving a long-standing operational issue, delivering a delayed milestone, or launching a small improvement that had previously stalled. It doesn’t need to be large to matter.

Small wins matter because they reset the story teams tell themselves about what’s possible. Instead of focusing on what was lost, people begin to see that the organization can still move forward. Confidence doesn’t return through reassurance alone. It returns when people see momentum being restored.

Layoffs may reset strategy and costs. They also quietly disrupt how work actually gets done—and in the current wave of AI-driven workforce reductions, that disruption is happening at a scale and speed that most organizations are not built to absorb.

The executives who navigate this moment well are not simply pushing for results. They are also rebuilding the conditions that allow performance to return: clear authority, rebuilt trust, narrowed priorities, and visible proof that forward motion is possible.

The stock price reflects the announcement. What follows is a leadership problem—and it requires a leadership solution.