Be Careful with Layoffs

Before top management makes decisions about layoffs, they should conduct a comprehensive economic and cultural assessment. The need to demonstrate desiciveness far too often outweighs the costs of the subsequent rebuilding efforts. 

By Thomas Hanssen, CEO at CfL, September 2025. This opinion piece was originally published in Finans, 15. September 2025

In less than a year, Denmark’s number one popular stock has lost more than half its value, and the new CEO, Mike Doustdar, has announced the largest round of layoffs ever — not just in the company, but reportedly also in Denmark. This naturally sparks analyses and bold headlines, but Novo Nordisk is not alone.

In the public sector, the Danish Energy Agency and the Ministry of Environment of Denmark have already announced layoffs as a consequence of budget cuts, and more are likely to follow.

I am not an ideological supporter of a large public sector——quite the opposite, in fact—but given today’s challenges with the green transition and DEI, it seems paradoxical that this is precisely where layoffs are the first course of action.

Loss of decision-making power

Adapt the organization to current market conditions. 

That's what it says on page one of the top executives’ handbook — the one they reach for when expectations aren’t met, optimism has been too high, or the pressure from shareholders, competitors, or politicians becomes overwhelming.

We tend to build organizations quickly, often with built-in redundancy — great, if you will. Layoffs can therefore be necessary, but are they always the right move?

The problem is that layoff processes have a paralyzing effect.

When uncertainty spreads, employees become reluctant to take initiative, and leaders hesitate to take responsibility because the future is unclear.

The culture becomes marked by inertia and fear, and the organization loses its ability to both deliver and develop. Talented employees start looking for other opportunities, and what was meant as an adjustment can ultimately become a weakening.

What about the Culture?

Most crises have historically proven to be short-lived. Even major recessions in Denmark have been milder and shorter than feared — and on the other side, growth and new opportunities await.

That is precisely why it is paradoxical that, in times of crisis, we so readily accept layoffs as the obvious solution.

When we downsize, we focus solely on the immediate savings — but what about the loss of culture, hope, and belief in the company’s overall purpose?

Culture is often referred to as a soft factor, but in practice, it is hard currency. When its suffers, the trust in leadership weakens, and employees become less willing to take responsibility. Collaboration and engagement decline, because fear undermines the trust needed for innovation and efficiency.

The Long-Term Economy

It takes time and requires investments to rebuild culture, so let me sum up the long-term consequences in four points:

• Recruitment: New employees require advertising, headhunting, and interview rounds, during which leaders are distracted from their core tasks.
• Onboarding: It takes time and resources to introduce new hires to tasks, systems, and culture.
• Delayed profitability: No one delivers full value from day one; there is a ramp-up period with lower productivity.
• Loss of organizational memory: Experience and knowledge disappear with the employees who leave the organization.

When you factor in these costs, the calculation becomes far less attractive than it first appeared.

Instead of cutting back, I encourage using a crisis as an opportunity for renewal — for example, by investing in new markets, products, and especially in reskilling employees to meet future demands. It takes courage, but it is a unique chance to rethink the business.

And if layoffs are unavoidable, they should be carried out with care. Proper terminations, fair severance agreements, and open communication are not just good ethics — they are also an investment in the company’s future reputation.