Explainers

How to Layoff Employees in a Humane Way

If you can’t avoid layoffs, do it in a manner that respects your employees’ contributions so that even those who leave maintain good-will towards the company.

There’s no two ways about it: leading an organization through a round of layoffs is excruciating. But at NOBL, we believe that even a difficult transition can be executed with empathy and humanity. It requires careful planning, care, and a strong vision for the future, and done right, it can result in a stronger, healthier organization and alumni base.

Principles of humane layoffs

  1. Remember that everyone’s at a different starting point. As a leader, you’ve likely been in conversations about this decision, the implications, and its execution for weeks, while your team will either know nothing (and be blind-sided) or will have heard half-truths (and be anxious). At each step, take a moment to determine your team’s or employee’s point of view.
  2. Expect a full range of emotions. People have the right to feel sad, mad, and everything in between—but if they’re confused, you’ve failed to adequately communicate. Set aside time for careful preparation, then share the news as quickly and thoroughly as possible.
  3. Be human. This is a business decision with very personal consequences. Treat it as such. Deliver the news yourself, and be available as much as possible for what comes next. (Under normal circumstances, we would recommend doing this in person, but COVID-19 means you might have to do it remotely.)
  4. Give them context. Especially if you’re not talking about finances on a regular basis, you need to first explain how the business is doing, and why this decision is necessary.
  5. Put other’s comfort first. As a leader, you need to be vulnerable and honest, but not so vulnerable that your emotions trump others’. We know how challenging finding that balance can be—you want to be authentic without revealing the extent to which you’re also incredibly stressed; to show that you’re sad, without making your disappointment the headline of the day. Role playing and practicing in advance can help.
  6. Give people an opportunity to activate their individual agency. Everyone will process the news differently—some may storm out immediately, while others may need time to process the news. Don’t try to prevent these responses; instead, ensure that your offboarding, restructuring, and lay off processes don’t depend on anyone who is being exited. Use scenario planning to think through potential outcomes, and have back-ups in place.
  7. Don’t be surprised if someone leaks the news. Finally, while we don’t condone this behavior, do expect it. During preparation, companies typically spend a lot of time figuring out how to prevent this, but we think that time is better spent scenario planning as if it’s inevitable.

How to avoid layoffs

It goes without saying that generally, it’s better to avoid layoffs altogether. Make sure that you’re managing your team, and budget, responsibly:

  1. Justify headcount in your company budget each time you open a new position. Leaders should regularly think about and map out the skill sets they’ll need in the next 12 months.
  2. Budget transparently. Create one, view-only budget document to share with leaders across the company, so that you can avoid different versions floating around the organization. Do note that this may require training so that everyone understands the fundamentals of finances.
  3. Set a quarterly check-in to provide updates. Bring everyone together regularly to discuss financials so that potential problems can be addressed early, and so that everyone’s aligned if layoffs do come up.

Of course, these are only useful practices if implemented in advance. If you’re facing budget reductions right now, are you sure you need to layoff employees? Layoffs should be a last resort strategy—first, try exploring other options such as:

  • Delay hiring. Have your leadership layer take a look at finances and headcount, and come up with a plan about how they might delay and re-prioritize hires.
  • Cut salaries/bonuses. Reducing pay may be an option IF talent density is high. If many employees are considered “underperforming,” talented employees will resent it, and look for other options. You also need to be sure that it will meaningfully impact your margins—if leaders make cuts as a way to delay the inevitable, it will only cause more grief.
  • Reset the senior/junior employee ratio. The majority of your payroll likely sits in your management layer. Does your current senior leader to front-line employee ratio make sense? Do note that making massive changes—such as moving from a 40/60 or 30/70 to 5/95 ratio—may require a complete overhaul, especially in terms of firing current executives and a different hiring approach for new leaders.
  • Retrain/reallocate. Determine if you can shift existing employees to other revenue streams or business models.

How to prepare for a layoff

If you’ve already tried all of the above, and a layoff is inevitable, it’s essential to dedicate time for proper planning and comprehensive communications. We understand the need for urgency, but at minimum:

Line up the right partners.

  • Consult with your board. What opinions or ideas do they have on the state of the company? What market intelligence can they provide? You should also take this opportunity to ensure the board is aligned with the culture of the organization. Because board members are removed from the day-to-day work experience, they can be more objective, but if they’re not aligned culturally, their recommendations can go against what’s best for the company’s long-term health.
  • Involve HR and Legal. You’ll need strong partners to ensure compliance and act as a sounding board.
  • Bring in Marketing/PR. The public story around layoffs can make the experience even harder for employees—both those let go, and those remaining. Work with your PR team to develop a communications strategy about how to control the story, and give HR and legal teams an opportunity to shape the narrative.

Kick off an internal taskforce to evaluate options and own the steps of this complex process.

  • Select your taskforce. Determine who should be involved, and clearly define roles and responsibilities up front. Acknowledge that this work will be stressful, so to the best of your abilities, empower this core team with a sense of trust and empowerment.
  • Set up meetings. To avoid speculation, the HR support team should meet in one conference room and dial in the executives and the head of HR. When there is truly a need for everyone in the room, hold it offsite, either very early or very late. If your company has open calendars, don’t name the meetings anything out of the ordinary, like “Emergency Executive Meeting”—instead, try to keep existing meeting names and routines.

Define the details of your layoff strategy and plan.

  • Establish criteria and the new org chart. Without a strategy, you’ll end up making decisions based on popularity (and bias)—just when people need to understand and see that this isn’t personal. Once you’ve determined criteria, decide who is staying and who is leaving, and develop an updated org chart, with roles and reporting lines in place. Furthermore, be sure to work with your HR and legal teams to comply with established state and federal policies, and ensure you’re not discriminating against a particular class of people.
  • Don’t conflate under-performers with those you’re laying off. Ideally, your company will have already established a strong performance review process, so that you don’t get to the point of layoffs while still having a backlog of poor performers to deal with. Unfortunately, doing two rounds of layoffs can make the lasting impact even worse for employees who stay— even if one round is performance based, and should have existed outside of this process.
  • Identify your four audiences. When designing your communications, remember that you will be speaking to different audiences with different needs: those who will be let go; those who remain with the company; the leaders who will navigate the company through the process; and of course, the board, who needs to be alerted to a high-level, more financially driven narrative, and be aware of possible liabilities and threats to sue.
  • Create your communications plan. Develop a change and communication timeline with key milestones highlighted, including leadership sessions, All- Hands communication, 1:1 conversations, and more. Make sure that you establish a clear vision for the way forward—how will the company change and adapt?—and consistently refer to that message. Use our Acceptance Planning tool to help your leaders anticipate questions and reactions.
  • Discuss how you’ll support and empower any employees departing the organization, including severance packages, referrals, and job fairs. The most common severance package components (in the US) include two weeks or more of pay for each year that an employee worked, and continuation of benefits for a period of time.
  • Develop a logistics plan for the “day of.” Create a run-of-show—including the flow of conversations, with who does what—and an extensive FAQ document to prep leaders to answer questions. HR should have a plan in place to process needs of any departing employees (for example, pre-ordered boxes so that people have a way to carry out their belongings if they wish as soon as they hear the news). Also, be sure to review what accounts and access need to be shut off.

Support outplacement. Outplacement is a rapidly growing component of a severance agreement that is intended to help employees find work following a layoff or job loss. Go the extra mile to help your staff by working to get them into new roles outside your company.

  • You can pay for a company to fulfill this service and help your former employees find new roles.
  • Companies like SoundCloud and Uber have gotten creative by having former employees opt-in to a public spreadsheet where their information was made public and could be accessed by companies and recruiters hiring talent.
  • Set aside time to write testimonials on their LinkedIn accounts.
  • Ask team members up and down the org to go out of their way to make introductions within their networks.
  • Work with the board and investors to find other portfolio companies that have open jobs.

Map out the layoff timeline

Once you’ve designed your plan, these next steps should move in quick succession. The longer the timeline draws out, the more anxiety it creates, and the greater the impact on productivity.

  • First, inform and equip your leaders. Once the taskforce has evaluated options and come up with a strategic plan, you’ll need to clue in other people leaders. Meet with them in person to go through why you’re taking these actions, and allow plenty of time for them to ask questions. Again, emphasize that layoffs are not a performance evaluation.
  • Show alignment. Your company needs to see that you’re operating as a unified leadership layer, and that you’ve worked together to make these key decisions about the future of the organization. Give leaders an extensive FAQ document so that they’re aligned in how they answer questions.
  • Announce the news. Typically, layoffs are announced through an All-Hands, as well as conversations with managers. (The order of of these two events may vary company by company, but should take place immediately after the other. Do what’s best for your people, not what’s more comfortable for you as a leader.) Direct managers should be the ones to deliver the news in 1:1s, so work with legal counsel and HR to train them with the right language and tools.
  • Follow up. Host AMAs for folks who are impacted and not impacted (with facilitation) after the initial round of communication has been shared. Be honest—people can handle almost anything, as long as they’re told the truth.
  • Plan for after. It takes about a year for a culture to bounce back from a layoff, how will you support your remaining people immediately following and months after the layoff? After those laid-off leave, loop back around to the story you told at the last All Hands: reiterate your message about what this will look like on the other side, and hold small meetings to address ongoing questions. Give people time to come to terms with the new normal. In the meantime, figure out your retention plan for “stars” that you want to keep on (but who might be afraid to stay).

What to say to your team

  • Take accountability. Layoffs are ultimately due to the leadership team—they’re responsible for the company. Own up to prior mistakes and allow the past to be part of the narrative about the future. Demonstrate to the team how you’ve learned from past decisions, how they’ve impacted your decision making this time around, and what you’re proactively doing to ensure you’re creating a space of psychological safety for your team through this period.
  • Share your vision with conviction. In order to execute a smooth transition, you need to have a clear vision in place for the future of the company. This is an opportunity to paint a picture for employees and provide folks with a chance to opt into the future vision.
  • Bring others into your thinking. Remember that the why behind your decisions won’t be apparent to everyone: start from the top and explain how decisions were made, and the opportunities these decisions open for the organization.

Remember, it’s expected to find this process uncomfortable and even overwhelming, but as leaders, our role is to make difficult decisions and help our team navigate challenges.

Watch NOBL’s CEO Lucy Chung and Managing Director of LA Jane Garza, along with Yair Riemer, President of Career Transition Services at CareerArc, discuss this topic in-depth, along with practical tools for leaders. And if you need a partner to help your team rebuild, NOBL can help—get in touch.

Additional sources

Published April 6, 2020