Navigating the challenges of corporate layoffs is no small feat. Deciding to reduce the workforce is always a decision made with careful thought and often, regret.
In this article, my goal is to spotlight the best practices and strategies for executing layoffs with maximum empathy, strategic insight, and respect for the people behind the job titles, should they become necessary.
Why Layoffs Happen
Recent layoffs, like the 20% cut at ZipRecruiter impacting 270 employees, Vendr's 25% cut affecting 100 people, and thousands more were let go at Meta, Microsoft, IBM, Yahoo, Goldman Sachs Disney, Netflix, Alphabet, and e-commerce giant, Amazon (to name just a few). The widespread prevalence of this just underscores the ongoing challenges many established, start-up, and tech companies face.
Various external factors, from economic downturns, to a challenging macroeconomic environment and resulting strategic changes, can trigger these difficult decisions. Specifically, a predominant cause for the recent wave of layoffs in tech and software companies is over-hiring that happened during and right after the pandemic.
Companies went on a hiring spree based on increased demand for remote work tools, home entertainment, and other needs that were disproportionately high while people were encouraged to stay home. A typical example of this is Zoom, the virtual meeting app. Their workforce tripled within 24 months when the sudden increase of people working from home created a massive staffing demand. Zoom’s CEO, Eric Yuan admitted that “...we didn’t take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably...” The company parted with 15% of its headcount in the first quarter of 2023.
Similarly, low interest rates during the pandemic created a demand for property, resulting in a hiring boom within the real estate sector. Now that interest rates are high, thousands of real estate agents, mortgage brokers, etc have become redundant.
Constant news of tech layoffs and, more recently, companies in various other sectors announcing downscaling and hiring freezes have the global workforce wondering, “Am I next?” Bear in mind that layoffs don’t just affect the employees directly involved. The downstream effect is evident in the organization's morale, employer reputation, and post-layoff productivity.
Although there’s no such thing as a “pleasant” layoff, the high number of layoffs we’ve seen in 2022 and 2023 made it clear that some are handled better than others. Looking at various examples, we can see that treating people well during a layoff relies on taking four critical steps.
The 4-Step Plan for Managing an Employee-Minded Layoff
Layoffs present a double challenge. For employees, it's a time of worry and uncertainty marking the start of a big life change. For employers, it means managing a tough situation with the least harm to outgoing employees, the remaining team, and the company's overall health.
In the corporate world, RIFs (Reduction in Force) or job cuts are unfortunate (and sometimes unavoidable) realities. However, it's essential to distinguish between poorly handled, damaging layoffs and strategies that, although tough, show respect for people, compassion, and strategic thoughtfulness.
To quote Amazon CEO Andy Jassy’s memo regarding layoffs from last year, “It’s not lost on me or any of the leaders who make these decisions that these aren’t just roles we’re eliminating, but rather, people with emotions, ambitions, and responsibilities whose lives will be impacted.”
When faced with layoffs or job cuts, the prevailing advice is to handle the situation as a difficult but manageable reality that requires strategic planning and a compassionate approach. By following a structured, empathetic approach, organizations can navigate these tough times, limiting the damage to employee morale and the company's reputation.
With that in mind, here are four critical steps to consider in managing a layoff that prioritizes compassion:
Step 1: Commit to Transparency
Earlier this year, Salesforce CEO Marc Benioff was widely criticized for dodging questions employees had about the company’s layoff plans. He said the difficulty was that “We were trying to explain the unexplainable.” While communications regarding the decision to lay off workers are certainly hard, that’s no excuse to evade it. Transparent communication is the lifeblood of trust during challenging times.
Conveying the reasons for layoffs with authenticity and clarity is vital. For instance, a manufacturing company facing production automation might explain to their team how technological advancements have necessitated a restructuring of roles. Providing detailed explanations via a trusted spokesperson and ample notice allows employees to brace themselves for the transition, and helps to foster a more supportive and understanding environment.
A grievance that is sure to arise is how the company decided who to cut and who to keep. Tools like compensation management software can add a layer of transparency and fairness to the process. This type of software, crucial to modern human resources departments, allows for careful planning in compensation disbursement, which represents a substantial chunk of employer costs in the private sector. In the context of a layoff, it can provide valuable insights into the monetary value of specific skills and help track performance-based compensation across various teams.
For example, if a technology firm decides to carry out a layoff due to shifting market demands, it could use compensation management software to ensure fair severance packages based on factors like skill sets and performance. This data-driven approach means the company can communicate objective reasoning for cutting in certain departments to its workers. Thereby, the data can help alleviate feelings of inequity, fostering a sense of fairness amidst a challenging transition.
In essence, the integration of empathy with strategic planning and advanced tools can contribute to a more humane and effective layoff management process.
Step 2: Craft a Strategic Plan
An effective layoff strategy demands thoughtful planning and execution to ensure fairness and transparency. Its core should revolve around maintaining human dignity while dealing with the pragmatism of business requirements.
A prime example is a media organization on the brink of digitization. Their approach would be to base the layoff decisions on clear-cut, objective criteria such as skill sets, employee performance, and tenure. This strategy can help reduce feelings of personal targeting and perceived unfairness, establishing a sense of objectivity in the process.
1,400 Google employees offered somewhat of a crash course in humane layoffs when they wrote an open letter to CEO, Sundar Pichai. The letter offers insight into what employees consider reasonable termination concessions. It asked, for example, that laid-off workers were given preference in future hires, and that decisions of who to cut were free from discrimination.
A preliminary step in a humane layoff strategy could be to schedule a private meeting with employees during normal business hours, giving due regard to their personal time. This dignified setting allows leaders to personally communicate the unfortunate news, demonstrating respect for the individuals involved.
Timing, just like the method of delivery, matters greatly. Surprising employees with an unexpected phone call or sending them a text on a Sunday night (for example) is jarring and disrespectful. It's important to remember that using impersonal channels like email or text to announce layoffs is strongly discouraged due to their insensitive nature. Last year’s mass layoffs at Twitter were dubbed a “Crash course in how NOT to manage a layoff” specifically because chief executive, Elon Musk’s communications around the RIFs were handled so poorly.
Some employees were “notified” of their termination when they were simply unable to access their Slack and emails, as reported by Insider. The goal should always be to communicate such impactful decisions in person, affirming the value of the employee beyond the professional relationship. With remote employees, the next best thing to an in-person meeting would be a video call.
Step 3: Deliver Financial Support
Offering support to affected employees is not just about easing their transition— it's also about reflecting your organization's values.
Consider a tech startup offering a generous severance package, including extended health benefits. But they don't stop there— they also provide support for job placement, turning a difficult situation into an opportunity for growth.
As an example of this. Spotify’s recent 2% reduction in force affected 200 employees. When CEO Sahar Elhabashi’s memo went out, communications with these people and efforts to help them out were already in place. To quote the CEO’s memo, “Those impacted by this change have already received an invite for a 1:1 conversation today with a member of our HR team, and we are focused on ensuring that each step in this process is taken with the utmost empathy and respect. The company will support these individuals with generous severance packages, including extended Healthcare coverage and immediate access to outplacement support.”
The reality is that a lot of companies decide to make cuts for the sake of cost-cutting. The outlay of financially supporting employees who are let go may seem counterintuitive, but is necessary. It is one instance where thinking like a CFO is not enough, and where HR’s human-focused input is of the utmost consideration. Going above and beyond what is legally required in terms of support outlined by state laws or employee contracts is an investment in your employer brand. Imagine for a moment the resentment of an employee who is thrown into a period of financial difficulty because of a layoff.
But letting staff go with a sense of dignity means providing more than just financial support.
Step 4: Offer Counseling Services and More
Layoffs cause a significant emotional toll, and providing counseling services is one way companies can “walk the talk” when it comes to their commitment to empathy.
For example, a tech company faced with downsizing could offer a stipend for psychological and career counseling. This thoughtful provision assists employees in managing the emotional aftermath of job loss while equipping them with tools for a successful career transition.
Considered one of the more empathetic examples of recent layoffs, Microsoft announced it would give ongoing support to dismissed employees in layoff announcements released during the first quarter of 2023.
To quote CEO Satya Nadella’ memo, “We are committed to ensuring all those whose roles are eliminated have our full support during these transitions. U.S.-benefit-eligible employees will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination, regardless of whether such notice is legally required. Benefits for employees outside the U.S. will align with the employment laws in each country.”
The tech giant is set to let go of 5% of its global workforce by the third quarter of the year.
Investing in outplacement services is another compassionate and practical way to support employees during these transitions. Outplacement agencies specialize in guiding individuals through the intricacies of a career change. They give laid-off employees the tools, guidance, and psychological support they need to navigate job loss and pivot toward new opportunities. Companies that need extra guidance to help their employees move on and find new roles can also consider putting employees in touch with a reputable career coach.
These services aren't just about offering a safety net; they're about empowering individuals to redefine their professional paths. And it's not only the employees who benefit. Companies that provide outplacement support can gain a positive image and reputation, demonstrating their commitment to their staff’s well-being even amidst difficult times.
By offering outplacement services, companies are giving much more than a career counseling stipend. The comprehensive support includes:
- Personalized career coaching
- Resume and LinkedIn profile optimization
- Interview and job search strategy training, and
- Emotional and psychological support
This thoughtful provision helps employees manage the emotional aftermath of job loss, gives them a successful career transition, and communicates your corporate values in a tangible way.
Dealing with Layoff Anxiety Among Workers
The ripple effects of layoffs run deep, touching not only those directly impacted but the entire organization. For many employees, job loss equates to losing a cherished routine and facing an abrupt end to their daily commitments. Coupled with the shock is a sense of loss, akin to grieving, as they part with a job that was integral to their life. This common sense of dread and loss has given cause for an HR term called layoff Anxiety.
What is Layoff Anxiety?
Layoff anxiety is the stress and apprehension associated with losing your job, especially during economic downturns or organizational restructuring. It can manifest as restlessness, difficulty concentrating, and even physical symptoms like headaches or stomach issues.
Undeniably, the economic repercussions of layoffs, such as the sudden loss of a regular income, can pose significant challenges, particularly for those with families depending on them. Most notably, layoff anxiety manifests in workers who are directly impacted (laid off), as well as the workers who remain after a RIF. The mere announcement of layoffs can cause anxiety in the remaining workforce.
This unease may (and often does) lead to declining productivity, eroding morale, and even increased turnover. As workers lose faith in their job security at the company, they start looking for employment elsewhere. Basically, the impact of layoffs goes beyond immediate job loss, affecting individual lives deeply and influencing the broader health of the organization.
Minimizing Layoff Anxiety
To alleviate severe anxiety, it's vital for leaders to tackle concerns candidly, respond to queries truthfully, and uphold steady communication.
Promoting open dialogue can make employees feel heard and respected, even amid turbulence. Regular briefings about the company's status and future plans can reassure employees, signaling that active steps are being taken toward stability. And, to put it simply, let your remaining employees know why they are still there, and that you value them immensely.
Here, improving the employee experience plays a crucial role in managing the aftermath of layoffs. It's worth noting that a positive employee experience does more than just benefit the workforce— it can significantly enhance overall company performance. Small gestures of employee recognition, such as appreciating a job well done on a company communication platform, can go a long way in enhancing the employee experience. This, in turn, can foster a resilient company culture that can better navigate difficult transitions like layoffs.
The Reasoning Behind Different Layoff Strategies
The prevalent workforce reductions we saw in 2022, and that are continuing in 2023 have shown various ways in which technology companies and, more recently, employers in other sectors approach layoffs.
Some CEOs, such as Mark Zuckerberg of tech giant Meta, have systematically reduced their company’s workforce. Meta, in particular, has been very candid about their three-part RIF that marks the company’s “Year of Efficiency”. Ride-hailing app Lyft parted with 1,072 employees who represented 26% of its corporate workforce in April, a shock decision from the company’s new CEO, David Risher, after it had already reduced headcount in November of 2022.
Although many other companies in the tech industry, as well as entertainment giant, Disney, had a third round of layoffs, there are those who subscribe to a first and second round of layoffs, and others who get it all done in one go.
Job listing website Indeed cut approximately 2,200 employees, representing almost 15% of its total workforce, in March. According to CEO Chris Hyams, The layoffs were made “...from nearly every team, function, level and region.”
The decision between conducting one round of layoffs versus multiple rounds often depends on the severity of the company's financial situation and the predictability of its future. A single round of layoffs may be suitable for a company that has a clear understanding of its financial state and the extent of the cost savings needed. This approach can minimize disruption and allow the company to start rebuilding more quickly.
However, multiple rounds of layoffs might be chosen if the company's future is uncertain. This approach allows the company to react to changing circumstances, but it can also prolong anxiety and uncertainty among employees.
A benefit of gradual downscaling offers the company is that it hedges itself against hasty decision-making to a certain extent. As an example, Salesforce, the parent company of Slack, cut around 10% of Slack’s workforce at the start of the year. With a need to expand into AI, the popular collaboration tool is now hiring the same workers back.
Managing Communication Around a Layoff
Guiding the conversation around a layoff is pivotal to preserving trust and managing the company's reputation. This means thoughtfully preparing the layoff message, explaining the reasons behind the layoffs, detailing how individuals were selected, and outlining the support the company will provide to those affected.
Between social media channels and employer review platforms like Glassdoor and LinkedIn, word about layoffs can spread swiftly, and not always favorably. Many companies find themselves in what has been referred to as a “Glassdoor crises mode” after conducting layoffs, and then further jeopardize their employer brand by trying to manipulate employee scores.
While it is reasonable that employees may feel some resentment after job cuts are made, open and authentic communication can minimize public backlash. How employers handle feedback from a layoff is critical. Taking these concerns seriously and addressing them promptly can help shape the narrative.
In a layoff scenario, the process of "off-boarding" employees deserves careful attention and should form part of the company’s restructuring plan. Parting ways with team members is never easy, but doing so with empathy, tact, and clear explanations can soften the blow. An open line of communication, even after the layoff, can help employees navigate this challenging period and attest to the company's commitment to its workforce, past and present.
This human-centered approach can go a long way in preserving relationships and maintaining the company's reputation during a challenging time.
Companies and Layoffs: Two Sides of the Coin
Layoffs often shape the trajectory of a company's future in unpredictable ways. For some organizations, layoffs may indeed represent a sinkhole, leading them toward a steep decline and, ultimately, closure. On the flip side, there are those companies that, in the aftermath of layoffs, emerge stronger, streamlined, and more robust.
The divergent paths these companies take can often be traced back to the original premise for the layoffs, the execution of the layoff management, and the strategic choices made thereafter. There are cases where a company, following a round of layoffs, still goes bankrupt. This would suggest that the organization's issues lay elsewhere: failing sales, a poor understanding of market dynamics, weak leadership, inefficient processes, or even bloated overhead costs. As an example, job cuts in cryptocurrency made news in the first quarter as these trading platforms, such as Coinbase faced the so-called crypto winter— a result of massive post-bubble losses. Experts say there is little evidence that they will recover from this. As the sector gets more and more regulated and value predictions become increasingly uncertain, many crypto firms and currencies may perish whether the company reduces headcount or not.
In these cases, layoffs can serve as a smokescreen, distracting from the root cause of the company's problems. Too often, companies fall into the trap of viewing layoffs as the remedy for poor performance or bad decision-making when a re-engineering of their sales strategy or an overhead cost reduction plan might be more appropriate.
Yet, it's also crucial to note that there are cases where a company emerges from layoffs leaner and more competitive. These are typically instances where the organization not only managed the layoff process thoughtfully and empathetically but also succeeded in identifying and addressing other critical strategic and operational challenges.
It is here that the choice between contract staffing and permanent staffing begins to factor in. Companies can leverage contract staffing to scale up or down swiftly in response to market dynamics, thereby avoiding the potential fallout of layoffs. On the other hand, permanent staffing fosters stability and long-term commitment but may necessitate layoffs during trying times.
One should approach the subject of layoffs with a holistic perspective, understanding that they are a tool, not a cure-all. Their effectiveness as part of a broader strategic response will vary based on the unique circumstances and underlying issues each company faces. Regardless of how well this is handled, expect workplace morale to take a dive.
Navigating the Aftermath: Maintaining Trust and Boosting Morale Post-Layoff
In the wake of a layoff, the emotional landscape within a company can be diverse and complex.
There can be palpable relief for some, gnawing anxiety for others, and in some cases, simmering resentment. Addressing this emotional medley with sincerity and openness is not merely advisable, but vital to the health of the organization.
Navigating these tumultuous waters starts with acknowledging the loss. One could draw upon the example of a leading software firm that held open forums after a round of layoffs. These forums allowed employees to voice their concerns, process their emotions and gain collective closure, illustrating the power of empathetic validation in a challenging time.
The path to rebuilding trust and morale is paved with consistent and caring communication. It is essential to reiterate the organization's commitment to the well-being of its employees. This can manifest as a series of open discussions about company budgets and job security, or regular written updates to maintain transparency and assuage fears about future layoffs.
To rekindle engagement among employees, team-building exercises can play an instrumental role. Moreover, implementing non-monetary incentives can serve as powerful morale boosters. These incentives, such as professional development opportunities or public recognition, focus on the emotional and psychological satisfaction of employees, thus making them feel valued and appreciated.
Moreover, it's crucial to acknowledge that the remaining employees might be grappling with an increased workload post-layoff. Offering support in this scenario, such as bringing on contingent workers or implementing flexible work hours, as a prominent healthcare provider did, can alleviate some of this stress.
Dealing with the aftermath of a layoff requires strategic, empathetic leadership. This is a reality now faced by companies like ZipRecruiter who, according to Bloomberg, cut 20% of its staff in June 2023, and Vendr who just reduced its headcount by a quarter. By embracing this challenge with transparency, these companies have the opportunity to turn a crisis into a catalyst for growth, fostering organizational and individual resilience.
In these turbulent times, companies must foster a supportive environment for both the remaining and departing employees, balancing morale, trust, and productivity. Moreover, this period can serve as a chance for introspection and recalibration, enabling organizations to streamline strategies and operations. While the road ahead is challenging, with empathy and strategic thinking, organizations can not only endure but emerge stronger, paving the way for sustainable future success.