Layoffs are Horrible
Layoffs are sometimes necessary, but never good. Here is how to approach them if you must.
Layoffs are one of the most traumatic things a company can go through. While a layoff might be the right decision, it hurts both the employees who leave and the employees that stay. As a leader, there is little you can do to ease the pain of a layoff but there is a lot you can do to ensure everyone is treated with respect.
When you have decided to do a layoff, there are some things the company will need from you:
Confidence. You need to commit to the layoff and be absolutely certain it is the right decision. When you communicate with the team both during and after, there cannot be any question you made the right decision. You should regret the fact that it was necessary, but be clear that it was necessary. At the same time, you need to be confident in the future of the business if you expect the team to be confident in it as well.
Transparency. The employees remaining at the company need to understand why it was necessary. Layoffs reduce cost, but what does that mean? How does the layoff affect the company’s strategy? Will you do less? Will you still hire new people? You need to lay out the impact of the layoff and how it puts the company in a stronger position than before. This is not the time for secrets.
Empathy. You need to acknowledge the emotions that everyone feels. You are not responsible for their emotions, but if you fail to acknowledge that layoffs are painful, scary and stressful then your team will begin to question your leadership. Acknowledge and accept that there are emotions and they will affect everyone. The more you can give the employees a voice for those emotions, and listen to their words, the better.
Respect is not making the ex-employees feel bad about themselves or their performance by insisting you only fired the “under-performers”. Respect is thanking people for their hard work and giving them the best opportunity possible for the next step in their career. Providing references, job placement services and financial support are all ways to respect employees fired in a layoff.
Even with all of that, the employees who are fired in the layoff are going to take it hard. When someone is laid off, the company is telling that person that they are not a top performer and not core to the business. No one can take that kind of news without it hurting, and that pain can last for a long time. The best you can do is to thank them for their work and be as generous as possible with their severance package.
Many companies try to be as cold and distant in layoffs as possible to avoid legal liability on advice of their lawyers. This is a decision you make as a leader, since you can decide the tradeoff between liability and empathy. In my experience, the best strategy is to be very fast with the decision, execution and communication of a layoff but express empathy to everyone for that short period of time even if it opens up liability.
The Biggest Mistake
The most common, and biggest, mistake that leaders make is that they fire too few people in a layoff. I absolutely understand. You have worked hard to hire this great team, and you don’t want to let them go. The pain of doing the layoff hangs over you, and you build a model where you lay off the absolute minimum number of people possible.
This is a mistake, because there is something worse than a layoff: doing two layoffs.
If you don’t cut enough costs, and need to do another layoff in the near future, your company morale will likely not recover. Employees can understand a layoff, especially if you are transparent into why and what it means for the company, but a second layoff feels like a betrayal. It makes all employees question the prospects of the company and whether they can trust you as a leader. There is little you can say after a second layoff to rebuild trust.
The impact of doing a second (or more) layoff is so severe that you need to avoid it at all costs. As a result, you need to cut more jobs than you think to ensure it definitely won’t happen again. This makes the layoff more painful, since you are cutting deeper than you think necessary, but it’s absolutely essential.
What happens next?
The days following a layoff are critical. You need to ensure the remaining team continues to execute and that you start rebuilding morale and trust. The more often you communicate and show evidence that the company is healthy the better.
Many of the employees that stay will talk to the employees who were laid off, and they will continue to do so into the future. That means the layoff will be top of mind much longer than you would expect, at least as long as it takes for the ex-employees to find new jobs. If you can support those ex-employees in their job search it will mean a lot to them as well as your remaining team.
Every company that gets to a significant scale has had layoffs. They are an inevitable part of growing a business, and while they are painful they can be necessary. By focusing on the people behind the jobs, you can show an empathy that is far too rare in business. Even better, if you can set an example of how to do layoffs in a respectful way, you might ease the pain of future companies who follow your example.
After all, we are all people first and employees second.