“I think it’s time you start looking for another job.” And with that, the platform on which someone built their professional identity and personal security is ripped away. The natural question is, “What did this person do wrong?” But what happens when the answer is, “Nothing”? When they have done nothing to justify the blow they’ve been dealt? As difficult as wrongful dismissal is for the employee, it has repercussions that extend far beyond the individual.

No Negative Feedback and Yearly Increases: You’re Fired?

I know a woman who worked as an internal recruiter within a large company. She was always professional and competent. She did her job, and she did it well – as far as she knew. No one ever said or wrote a negative word about her, and she even received pay increases every year. Wouldn’t that lead you to believe you were performing at least at par? Makes sense to me.

What doesn’t is that they fired her one day. Out of the blue. With a phone call. Come on! Short aside: Even if you have cause to fire someone, have the integrity to do it in a respectful way. (I know, “respectfully” firing someone seems like an oxymoron, but do what you can). This company lacked the basic decency to do even that. This can be a dangerous mistake. Why?

People Will Hear About It

Often, companies try to keep wrongful dismissals like this hush-hush. They give the former employee a severance package, and send him on his way with a promise to shut up and not sue. The person may not take legal action, but that doesn’t mean that damage hasn’t been done.

Nothing – nothing – remains a secret in companies, at least not for long. Even if people aren’t 100% sure, there will be grumblings and rumors.

When people within the organization get wind of a wrongful dismissal, they immediately – and understandably – think, “That could happen to me.” Their employers plant a seed: “They let Bob go and nothing was wrong with his performance. Maybe I should start looking for another job.”

I know if I were in this situation, I’d start to make inquiries and have conversations so I wouldn’t be caught unaware. And what happens when I’m looking for another job? I’m not as motivated at work. I want to get out of there. I don’t trust that I’ll have a job next month, and I certainly don’t trust my employer.

Performance Will Suffer

Even if people do not look for other employment opportunities, engagement suffers – and along with it, performance and profits.

In a study of 50 global companies, Towers Watson examined the operating margins for companies with “low engagement,” “high traditional engagement,” (defined as those with traditional incentive/motivation programs) and “highest sustainable engagement” (defined as those who go beyond traditional and get to their core of employee needs). Their findings:

• Low: under 10%
• High traditional: 14%
• Sustainable: 27%.

Happy Employees = Happy Bottom Line. Employees who fear that they could be fired anytime for no reason = what do you think? It’s not rocket science here.

Wasted Time, Money, and Energy

Let’s go back to the company in this example: they’ve fired this woman, and now they have to burn time and resources looking for a replacement. They have to screen, interview, onboard, and train. This is all just a big waste: the employee was doing her job well.

The waste extends to other employees who may find themselves in similar situations. Maybe their managers don’t give feedback. The manager spends all day burning energy being irritated with direct-reports for not doing a good job. Meanwhile, the employees spend all day burning energy feeling annoyed –and perhaps scared – that there’s no feedback coming in.

This can lead not only to poor performance; it can result in all sorts of health issues as well. It doesn’t matter how much you exercise or how many heads of broccoli you eat. If you’re stressed at work, it does its damage to your body, not to mention your mind. (And guess what effect this has on productivity and profitability?)

Terminating an employee has ripple effects throughout an organization, all the way down to the bottom line. If you’re going to fire someone, you’d better make sure you have a legitimate reason, and you’d better make sure a pink slip isn’t the first they’re hearing about it. Anything else is bad business and ethically bankrupt.