We’ve recently seen many high-profile layoffs: Pepsico, Goldman Sachs, and HP. Amazon’s plans lay off 20,000 people was a dominant story, and Elon musk’s overnight culture change at Twitter was a political sensation.
But we keep our hands off the panic button for now. According to the U.S. Bureau of Labor Statistics, 2022 layoff rates through October have been nearly flat compared to 2021.
But now we are seeing, besides supply chain issues, an economic downturn that may exceed the 2008 crisis.
Companies find themselves overstaffed, especially online sellers that benefited from pandemic lockdowns and others that investors pushed to grow. Aside from the global economic woes, the business cycle naturally takes its toll on companies that can’t maintain their growth when they reach a certain level of maturity. It may be a lack of an innovative culture, failure to learn how to scale success, or only a natural result of business cycles.
Layoffs are a natural occurrence in business. I’ve experienced two in my career, as an employee, and as an HR manager.
We agree that HR's top priority is making the process smoother and less painful for everyone involved, including those who remain behind, but the business’s top priority is survival, which can depend on how well leaders and managers handle the layoff.
With all that in mind, I’d like to pass on some tips and hard-learned lessons that can help ensure the business’s success, support a soft landing for existing employees, and ease the sense of loss for those who remain.
We recommend planning for a layoff even if you don’t expect one. Not only can planning make things go smoother if you have a layoff, but it can also go a long way toward protecting your business.
Even when things are going well, the business should have a layoff plan as a required item in its risk management portfolio.
HR should get senior leaders together to discuss what could go wrong in the business and formulate a RIF plan, with estimates of severance, benefits, outplacement, and potential damage to reputation, among other potential liabilities. (The liabilities also motivate you to update the plan at least annually.)
It is a facet of your company’s strategic planning, which includes ensuring that the hiring strategy aligns with productivity growth and continued viability.
Employee Transition Services
Decide what services you will offer departing employees. Consider these as a start.
- Outplacement services: a partnership with a career transition firm.
- Separation package: financial benefits to help employees bridge the gap between jobs.
- Redeployment: other roles within the company or other divisions.
- Referrals: other employers who have open positions.
- Benefits extensions beyond those required by law or regulation.
- EAP referral: help with the decisions and turmoil that accompany a job loss or someone to talk to.
Ensure that your ongoing manager training includes skills in having tough conversations with employees.
When your company formulates plans to reduce the workforce, HR swings into action to protect the interests of the firm and the employees.
The management team creates the criteria for selecting which employees will leave the company. You can consider factors like seniority, performance, job classification, or skills. Don’t consider leave status or protected conduct, such as a whistleblower.
How well you align the selection criteria with organizational goals will determine the company’s future success.
Legal and regulatory compliance during a layoff is complex and can vary from state to state in the US. We recommend keeping your attorney close at hand and following guidelines from the Society for Human Resource Management. Rather than regurgitate them here, we suggest searching for “How to Conduct a Layoff or Reduction in Force” on the SHRM website.
The right time to prepare communication is when the company makes the decision. A delay creates an opportunity for destructive rumors, possibly sparked by an overheard conversation or an off-hand remark.
Executive communication must be straightforward and transparent. The slightest whiff of uncertainty or evasion can create doubts. Explain in an empathetic manner the reason for the reduction, acknowledge the pain, and enumerate the support it will provide departing employees.
Create a written statement and provide it to each employee’s manager to discuss with the employee at the time of the notification and exit.
Handling the layoff
Have all the documentation and information about resources ready for the employee when they are notified of the layoff. Spend all the time needed to explain how the company will support the transition and answer their questions.
Help your managers prepare for the exit conversations. Give them the information they need to explain the selection criteria and why the employee was selected. Get them ready to answer the question: “Why me?”
We don’t recommend an all-company meeting or mass gathering to break the news. You should do it in a private conversation with the employee’s manager and another supporting person.
Employees will remember how you treat them. Giving them dignity, respect, and candid communication will help prevent them from using public forums to damage your reputation. Not only that, it will make them receptive should you want to rehire them.
After the layoff
Remaining employees feel a sense of loss when their colleagues depart. Once again, opening candid communication will help them deal with it.
First, acknowledge their feelings. Then, openly communicate the company's financial situation and the plans for future success and how it includes them.
Listen to their concerns and validate their contributions.
Finally, take care of your managers. They also suffer a loss and endure the stress of layoff conversations.
A skill-based job structure can help you plan for more targeted, less painful layoffs. Learn about how you can create it.
How To Prepare Your Job Structure For The Talent Marketplace
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