Working Under the Fear of Layoffs: How chronic insecurity rewires teams, dulls creativity, and erodes trust

The Invisible Drag

I got laid off earlier in 2025 before landing my current job. Not because I did bad work. Not because I missed deadlines, or insulted anyone's mother. I got laid off because someone in a conference room I'd never been in decided that my role wasn't "core to our strategic priorities going forward."

Here's the other thing nobody tells you: what I experienced wasn't special. It wasn't unique to me or my company or my situation. According to layoffs.fyi, in 2025 alone, 113,623 tech employees have been laid off across 223 companies. That's just tech. That's just the ones being tracked. That's just this year.

No one says it out loud, but everyone knows what's coming.

You can feel it in the way people type in Slack now. Everything has seven more qualifiers than it needs. Messages that used to say "I think we should try X" now say "Just flagging that we might want to potentially consider exploring whether X could be worth discussing, but obviously defer to your judgment here." The enthusiasm has been word-saladed to death.

Check any shared calendar. Notice how the 1:1s with leadership are suddenly color-coded differently? Notice how everyone's suddenly very interested in documenting their contributions? The shared drive is filling up with folders titled "Q4_Impact_Summary_Final_v3_ACTUALLY_FINAL." People are building paper trails like they're preparing for litigation, which, in a sense, they are.

The coffee chats have gotten weird too. Someone asks "how are you doing?" and there's this half-second pause where you both know the real answer is "terrified and updating my resume" but instead you say "busy!" with an exclamation point you don't feel. Everyone's performing okayness while quietly checking if their LinkedIn profile is up to date.

Here's the thing nobody tells you about working under the constant threat of layoffs: fear isn't just emotional background noise. It's not something you feel and then get back to work. Fear is a full-system distortion that fundamentally changes how people think, learn, and relate to each other. It rewires the whole operation from the inside out. And by the time leadership notices something's wrong, the damage is already structural.

Your Brain on Terror

Let's talk about what's happening in your skull right now if you're reading this from inside a company doing "right-sizing" or "strategic realignment" or "reorg" or whatever euphemism is in vogue.

Your prefrontal cortex, the part of your brain responsible for strategic thinking, planning, and making rational decisions, has essentially left the building. It's gone to Cabo🏝️🍹⛱️. It's not coming to the office anymore. Control has been handed over to your amygdala, which is great at one thing: keeping you alive when there's a tiger nearby. The problem is that your amygdala thinks your manager is a tiger. It thinks that Tuesday's town hall is a tiger. It thinks the entire concept of quarterly planning is a very slow-moving tiger that somehow learned PowerPoint.

When you're in chronic threat mode, your executive function drops. Your attention span shrinks. Your ability to reason creatively goes somewhere to die. This isn't motivational speaker nonsense, this is measurable. Studies on job insecurity show direct, reliable negative effects on task performance and health outcomes. Not mixed results. Not "it depends." Just straight downward slopes on every graph that matters.

People working under sustained job insecurity exhibit reduced problem-solving ability and more cognitive rigidity. Which makes sense if you think about it: when your brain is busy calculating the odds of keeping your health insurance, it has less capacity to consider whether your product roadmap makes sense or whether that new feature is solving a real problem.

The Cognitive Collapse

Here's what fear does to thinking: it makes you stupid in very specific ways.

Not stupid like you forget how to do research, or you suddenly can't read a spreadsheet. Stupid like you lose the ability to see beyond the immediate, obvious path. Teams living under threat become myopic. They chase safe work. They pursue projects that look productive but require no actual bets. They pick the things that are easy to measure and easy to defend and absolutely guaranteed not to require explaining why something didn't work.

Decision-making shifts from "what's the right call" to "what's the most defensible call." These are not the same thing. The most defensible call is usually the one everyone else is also making, which means it's probably already too late for it to matter. But at least you won't be alone when it fails.

Your attention narrows. You stop sampling information. You seek confirmation rather than contradiction. You suppress dissent because dissent is a luxury of people who aren't worried about their mortgages. The team dynamic shifts from "let's figure this out together" to "let's not be the one who said the wrong thing in a meeting that got screen-recorded."

Creativity drops because novel ideas are, by definition, risky. And risk is the first thing to die in a fearful culture. Why would you propose the weird idea when the safe idea is right there, already tested, already approved by six people, already guaranteed not to get you noticed in the bad way?

Research on fear and innovation is brutal. Teams under threat generate fewer ideas. They show less divergent thinking. They perform worse on creative tasks. This shouldn't surprise anyone. Creativity requires a certain amount of psychological freedom. You need to be able to think "what if we tried something totally different?" without immediately thinking "and then I'll be fired."

Fear doesn't make you more focused. It makes you more narrow. And narrow thinking in a changing market is just slow-motion failure with better documentation.

The Social Collapse

But wait, it gets worse.

Fear doesn't just ruin thinking. It ruins people together.

Trust collapses. Your colleagues aren't your colleagues anymore. They're competitors for a shrinking number of chairs when the music stops. That person you used to brainstorm with? Now you're wondering if they're taking credit for your ideas in their 1:1s. That person who used to give you honest feedback? Now they're being suspiciously positive about everything because nobody wants to be the person who told you your idea was bad right before you got laid off and sued the company.

Information sharing drops off a cliff. Why would you share what you know when what you know might be the only thing keeping you employed? Knowledge hoarding goes up. People start treating internal documentation like state secrets. The company wiki becomes a graveyard of outdated pages because nobody wants to write down the thing that makes them replaceable.

Psychological safety evaporates. People stop raising issues. They stop surfacing risks. Someone notices that the new feature is going to break the legacy system but they don't say anything because drawing attention to problems feels like volunteering for the firing squad. So the feature ships, the system breaks, and everyone acts surprised while privately thinking "yeah, I knew that would happen."

The research on this is depressing. Fear suppresses what academics call "voice behavior," which is a sterile way of saying people shut up. They stop pointing out errors. They stop suggesting improvements. They stop asking the dumb questions that sometimes turn out to be the only smart questions in the room.

And here's the real kick: this doesn't end when the layoffs end.

Studies on post-layoff survivors show reduced morale, reduced commitment, and reduced productivity that persists for months or years. Survivor syndrome is real and measurable. People who kept their jobs show chronic vigilance and disengagement that hangs around like a bad smell. Productivity drops by up to 20 percent. Twenty percent! You cut 10 percent of your headcount to save money and you lose 20 percent of your productivity from the people who stayed. That's math even McKinsey should be able to figure out.

The Organizational Spiral

Here's where it gets structural.

When teams are scared, leaders get scared too. And scared leaders do what scared leaders always do: they centralize control. They start micromanaging. They block risk. They demand more approvals for smaller decisions. They create more processes to create more certainty in a situation that is fundamentally uncertain.

This leads to exactly the behaviors you'd expect. More sign-offs. More meetings to prepare for meetings. More decks to explain the decks. Fewer experiments because experiments might fail and failure is not on the menu this quarter. More bureaucracy because bureaucracy feels like control and control feels like safety even though it's neither.

Learning stops. Nobody's trying new things because trying new things is how you end up on the "not core to our strategic focus" list. Exploration gets replaced with exploitation. Innovation gets replaced with optimization. The whole organization becomes a giant machine for doing exactly what it did last quarter, just slightly more efficiently, forever.

The company becomes brittle. It locks into a single strategy. It stops adapting. And then when the market shifts, which it always does, the company can't respond because all the muscles required for responding have atrophied. You built an organization optimized for predictability in a world that refuses to be predictable.

Threat rigidity theory has been studying this pattern for decades. When organizations face threats, they reduce information flow. They restrict decision-making to the top. They shorten time horizons. They chase near-term certainty at the cost of long-term adaptability. It's a survival reflex that works great for surviving the next five minutes and terribly for surviving the next five years.

The Long Tail

Even when the layoffs end and leadership declares that we're "back to normal," the behavioral residue remains.

People still overcomply. They still under-speak. They still expect the next cut. They've learned that safety is a temporary condition and that the best strategy is to keep your head down and your resume updated. That learning doesn't just evaporate because someone sent an all-hands email saying "we're done right-sizing, we promise, for real this time, no take-backs."

This inertia kills creativity long after the official all-clear. Teams that went through layoffs two years ago are still playing it safe. They're still choosing the obvious project over the interesting one. They're still waiting for permission instead of asking for forgiveness. The fear has become structural, embedded in norms and habits and unspoken rules about what's acceptable.

You can see it in meetings. Someone proposes something ambitious and there's this collective flinch, this muscle memory of "remember what happened last time someone proposed something ambitious?" The organization has learned to be afraid of its own ideas.

The research on survivor syndrome shows this clearly. The psychological impact of layoffs persists for years unless actively dismantled. "Actively dismantled" is doing a lot of work in that sentence. You can't fix this with a pizza party. You can't fix this with a town hall where leadership says "we value innovation" while standing in front of a slide showing declining headcount. You have to actually change the incentive structure and the behavioral norms and the consequence patterns that made fear rational in the first place.

The Real Cost

Here's what nobody puts in the spreadsheet when they're modeling the savings from a 10 percent reduction in workforce: the cost of fear.

The real cost of layoffs isn't the severance packages or the hit to morale or even the knowledge that walks out the door. The real cost is the collective fear that rewrites how everyone who's left thinks about their work. It's the experiments that don't happen. The ideas that don't get voiced. The risks that don't get taken. The information that doesn't get shared. The trust that doesn't get built.

Fear doesn't just make people quieter. It makes them smaller. They shrink their ambitions. They shrink their thinking. They shrink their sense of what's possible. And when everyone is smaller, the organization stops learning. It stops adapting. It becomes a machine for executing last year's strategy, incrementally better, until suddenly the market has moved and last year's strategy is worthless.

A team living under threat cannot innovate. It can only comply. It can follow the process, hit the metrics, ship the features that were already on the roadmap. It cannot do the thing that actually matters in a changing market: figure out what's next.

You want to know why your company is losing to competitors who move faster? It's not because they have better engineers or bigger budgets. It's because their engineers aren't spending half their cognitive capacity calculating layoff probabilities. It's because their product managers can propose weird ideas without wondering if this is the idea that gets them fired. It's because their teams share information instead of hoarding it like dragons on tiny piles of gold.

What Gets Measured Gets Feared

If you're a leader reading this and thinking "wow, we should do something about this," here's your diagnostic checklist:

How's your psychological safety? Actually measure it. Use the Edmondson items or the Project Aristotle framework or whatever, but get a number. Then track it. If it's going down while your layoff rumors are going up, congratulations, you've discovered cause and effect.

What's your speak-up rate? How many people raised concerns in your last retrospective? How many people pointed out risks in your last planning meeting? If the answer is "not many" or "the same three people who always talk," you have a fear problem.

How many experiments are you running per quarter? And by experiments I mean actual bets, not A/B tests on button colors. If the number has gone down, that's your fear showing up in your velocity.

What's your decision cycle time? Has it gotten longer? Are more people required to approve smaller things? That's fear calcifying into process.

Check your knowledge-hiding proxy metrics. How often do teams look at each other's documentation? How robust is your review coverage across teams? If information flow is dropping, fear is rising.

Look at your retention and internal mobility numbers. Are people leaving? Are people trying to move teams internally? High exit intent and high knowledge hoarding correlate strongly with job insecurity. These aren't separate problems. They're symptoms of the same disease.

The Cost of Certainty

Fear trades real options for the illusion of certainty. That trade looks safe. It feels prudent. It shows up in quarterly earnings as "disciplined cost management."

It's not safe. It's expensive. The cost just shows up later, in the form of missed opportunities and slower adaptation and competitors who moved while you were frozen. By the time you notice, the gap is too big to close.

Fear doesn't just make people quieter. It makes them smaller. And when everyone is smaller, the organization stops learning.

You wanted to save 10 percent on headcount. You might have spent 50 percent on creativity.

That's not a trade. That's just loss.

🎯 Fear doesn’t just make teams quieter. It makes them smaller.

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