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.

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