TCS’s Layoff Gamble Undervalues the Hardest Currency of All: People

Let’s be clear, this isn’t a polemic against layoffs. Businesses must evolve. The issue is not preventing workforce transitions, but preventing thoughtless ones. Just as environmental impact assessments govern physical infrastructure, we need psychological audits for human capital restructuring. Microsoft’s 10,000 layoffs came with an upskilling buffer; TCS’s cuts came with bench-time ultimatums. Rightsizing is not a strategic failure, but treating talent as disposable rather than depreciable is.

TCS had a choice: become a case study in reinvention or a cautionary tale of extraction. It chose the latter. But the lesson for every CEO is this: true transformation doesn’t happen through subtraction, but through activation. The companies that will dominate the next decade aren’t those that cut deepest, but those that think most profoundly about the intersection of human psychology and business evolution. 

There’s a dangerous myth lurking in boardrooms across India’s IT sector: that transformation requires trauma. When TCS CEO K. Krithivasan announced 12,000 job cuts under the banner of "future-readiness," he didn’t just make a strategic decision—he revealed a fundamental misunderstanding of how human and organizational psychology actually work. The truth is, layoffs aren’t just brutal for employees; they’re catastrophic for companies. And the numbers prove it.  

To policymakers and investors: This isn’t touchy-feely activism. It’s portfolio protection. Companies ignoring psychological fallout bleed talent, innovation, and market share. The IT sector contributes 7.3% to India’s GDP. Its nervous system is national infrastructure. Regulate bench policies? Mandate mental health disclosures? Start by valuing emotional capital alongside EBITDA.

True transformation doesn’t start with restructuring charts. It begins when a CEO looks at 12,000 at-risk minds and sees not liabilities but living systems yearning to flourish. That’s not compassion. It’s the ultimate competitive advantage.

Human Wreckage 
Neuroscience tells us that job loss isn’t merely an economic event; it’s a neurological catastrophe. The prefrontal cortex (the seat of "who I am") goes dark. fMRI studies show that professional displacement activates the same brain regions as physical pain, while the sudden loss of status triggers dopamine withdrawal comparable to addiction recovery. What CEOs call "rightsizing," neuroscience calls threat response.

Survivors aren’t spared either. Gallup’s research reveals that survivor’s syndrome, i.e. a toxic mix of guilt, hypervigilance, and eroded trust, slashes post-layoff productivity. Middle managers, the very people who maintain institutional memory and team cohesion, now operate in what organisational psychologists term "chronic threat mode," their cognitive bandwidth hijacked by existential dread rather than innovation. And the top performers start polishing their LinkedIn profiles.

TCS CEO K Krithivasan insists this isn’t AI-driven carnage but "skill mismatch." Semantics don’t matter to the amygdala. When leadership cites "agile operating models" while slashing 2% of global staff, the limbic system hears: "You’re obsolete." Bench policies now demand 225 billable days. It’s a countdown clock strapped to careers. This isn’t restructuring; it’s institutional betrayal, corroding psychological safety faster than any recession.

At TCS, this isn’t abstract science: 12,000 employees didn’t just lose paychecks, they suffered what psychologists call "identity fractures," where professional self-worth shatters overnight. There’s collateral damage as well. Families destabilized by financial terror, children internalizing parental anxiety, and communities bracing for ripple effects. Economists see reduced consumer spending; psychologists see collective nervous system dysregulation. Productivity dips are the least of it; we’re seeding generational anxiety.

False Economy 
Here’s what Krithivasan’s calculus misses: layoffs don’t cut costs, they redistribute them. Every severed employee represents lost mentorship, shattered trust networks, and what behavioral economists call "cognitive debt". The compounding cost of relearning what was discarded. TCS didn’t just eliminate roles; it amputated the neural pathways of institutional intelligence.  

Consider the data:  
-A 2024 SSRN study on US tech firms found that layoffs are associated with decreases in investment and operating performance during layoff quarters, and mixed effects on performance afterward, suggesting that layoffs can harm a firm's innovation capacity and financial health over time.
- It costs 6-9 months of salary to replace a mid-level employee—far exceeding short-term "savings".  
- Teams post-layoffs show 20% weaker collaboration.

This isn’t compassion versus efficiency, it’s myopia versus strategy.  

Neural Capital

Progressive companies grasp a radical truth: psychological infrastructure is the ultimate competitive advantage. Here’s where positive psychology flips the script- This crisis is a leadership laboratory. Resilience isn’t born in comfort; it’s forged in uncertainty. Forward-thinking CEOs grasp that mental health isn’t HR philanthropy; it’s strategic infrastructure. Consider three neural upgrades:

First, Reframe the Narrative. Stop calling it "layoffs." Language shapes neurobiology. Deutsche Bank’s "transition support initiative" reduced PTSD symptoms among exiting staff. When TCS offers "redeployment pathways," it should mean tangible skill bridges, not bureaucratic euphemisms.

Second, Arm Your Survivors. Post-layoff engagement isn’t about pizza parties. It demands psychological PPE. Salesforce’s "resilience hubs", where remaining teams process grief via structured dialogue, cut voluntary attrition. Teach managers to spot languishing: that hollow-eyed stare signaling eroded agency.

Third, Invest in Neural Capital. Upskilling isn’t a perk; it's an antidote to helplessness. Offer VR-based cognitive behavioral therapy during cuts. Psychological support isn’t expense. It’s ROI on human architecture.

The formula is clear:  
1. Reskill Relentlessly – TCS trained 550,000 in AI basics but failed at advanced conversion. True future-proofing means immersive, paid reskilling sabbaticals—not sink-or-swim mandates.  
2. Rewire Survivor Psychology – Peer recognition systems trigger dopamine to counteract threat responses, while "transition circles" preserve social capital.  
3. Measure Neural ROI – For every $1 invested in mental infrastructure, companies see $4 in performance returns. 

After all, you can’t automate wisdom. And you certainly can’t sever your way to innovation. The future belongs to those who don’t trade cortex for codes but to those who understand that neural capital isn’t soft; it’s the hardest currency of all.