Layoff lowdown: what companies get right and wrong
Layoffs. It’s a topic that’s been plaguing numerous industries and dominating the news cycle. Yet despite some signs of cooling, the U.S. labor market remains extraordinarily strong. In January, the Labor Department reported that there were 10.5 million job openings at the end of November, unchanged from October, far more than the number of unemployed Americans seeking work. The data points to a national labor market that posted a near-historic low of 1.4 million layoffs, or less than 1% of the workforce. So while unfortunately there’s more layoffs ahead – it’s not indicative of the strength of the job market – it’s because layoffs tend to peak in January. Historically, the first month of the year is a time when most companies perform restructuring evaluations.
Looking back on 2022, some of the country’s largest employers, including Walmart, Amazon and Google, have cut thousands of jobs citing ‘global uncertainty, dwindling ad revenue, rising inflation and pandemic over hiring’. Tech firms continue to experience heavy job losses and wide-stretching hiring freezes. Now that we’ve entered 2023, many are continuing to hop on the layoff train. Goldman Sachs is focused on finding places to cut expenses and lowering headcount, CEO David Solomon recently shared (at the Credit Suisse Financial Services Forum, Wall Street Journal reporting). Salesforce has announced that it’s cutting some 10% of its workforce, impacting more than 7,000 employees, while it will also shutter offices in “certain” markets.
Apparently (and maybe unsurprisingly) the U.S. is one of the worst places in the world to get laid off. A global analysis conducted by Pennsylvania-based employment services platform Lensa gave a rating to each country or region based on a combined ranking calculated from various factors. Unemployment rates, notice periods for redundancy, severance pay, and laws governing what employers must do to make things easier for laid-off workers were all considered.
“The United States enacts a fast and impersonal approach to firing,” the report stated. “Employees typically have short meetings with an HR manager to explain why they’ve been fired, and are often given just a few hours or days to pack up and leave.”
The difference between necessary company restructuring versus reactive firings? Simple. Companies conduct layoffs to either achieve short-term cost cuts or long-term strategic change. The motivation behind the move typically determines whether an organization’s bottom line and reputation flounder or flourish following the bad news.
When faced with a difficult downsizing predicament, some companies get the troubling task more right than others. So what kind of traits do “good” layoffs consistently have in common?
Make a (sincere) public apology
Beyond downsizing, the goal of any layoff is to treat employees with dignity and respect throughout the process. Through open and honest communication with those laid off and with those who survive and assume the remaining job responsibilities, companies can expect to get the respect they give. When making a company apology, researchers have identified three essential elements for restoring lost trust:
- Acknowledge harm and say you are sorry for it
- Explain why you acted as you did
- Make an offer of repair that genuinely helps the person you harmed
Digital payments provider Stripe offered up one example of an effective, humane way to deliver bad news that’s being heralded by HR professionals as an example of how a company can take ownership of its actions.
One of Stripe’s CEOs sent an email to employees explaining the situation which led to the announcement that it’s laying off 14% of its staff. The memo stated, in part: “We, the founders, made this decision. We overhired for the world we’re in, and it pains us to be unable to deliver the experience that we hoped that those impacted would have at Stripe.”
Many Twitter users went online to praise Stripe for its “quite generous” layoff package.
One user declared that Stripe set a “standard when it comes to layoff,” and another wrote “their leadership lead with compassion” joining a parade of others commending both the authenticity of the company message and the quality of the severance packages offered.
Provide a pathway for those you’re letting go
While there’s no perfect way to go about a layoff, successful companies tend to be as respectful as possible and do whatever they can to help those who are being let go by softening the blow. In addition to sincere and empathetic messaging, it’s important for companies to clearly outline the core details surrounding the exit plan for departing employees to eliminate confusion during an extremely emotional time. How a company will handle severance pay, bonus payments, PTO payouts, healthcare continuation, RSU vesting, and future career support is critical to create a smooth transition during a high-stress period. By setting up individual one-on-one conversations between departing employees and management teams, companies can give people the breathing room they need to process this life altering development.
Taking another page out of Stripe’s book, the company created “alumni.stripe.com” email addresses for laid-off employees to connect departing employees with hiring companies as well as a new discounted tier for those who would like to start their own businesses and use Stripe’s products. The announcements were met with overwhelming support, and offer a glimpse into an empathetic move that scores points with remaining employees, former employees, and public opinion.
And remember that regional ranking? By contrast to the U.S., the two countries that ranked as the best to be laid off in — Sierra Leone and Egypt — can teach businesses a thing or two about the protection companies offer up (or deny) employees stateside.
In Sierra Leone, employees are guaranteed at least a 13-week notice period before being laid off, and employees with a 10-year tenure can secure an up to 132-week severance pay package. Egypt offers 4.3 weeks guaranteed severance pay for workers with only one year of tenure. That guarantee rises to 54.2 weeks for employees with a decade or more of tenure. Obviously these options aren’t feasible for all U.S. business structures, but if 2023 represents anything to the business world – it’s taking the time necessary to reexamine existing work culture and make valuable improvements.
Support remaining staffers
At the very least, companies that engage in mass layoffs should be aware of the distress experienced by their remaining employees and respond accordingly.
The psychological impacts of “surviving” a mass layoff cannot be overstated. The reality is that employees who dodge the chopping block are left with a mix of complicated emotions that can impact their mental and physical wellbeing for many months or even years. The findings from studies that have examined the effects of large-scale layoffs on survivors’ health consistently find evidence of small yet significant adverse health effects ranging from substance abuse issues to the development of depressive behaviors. Layoffs are likely to heighten these employees’ general sense of uncertainty and anxiety.
Just observing the layoff of fellow coworkers may result in their being saddled with increased workloads or a different set of work tasks. Management has a responsibility to individual team members to have transparent communication in a post-layoff environment. Space should be made available to remaining staffers who need to process the news and rebuild trust and confidence in their employer. Managers should also make a concerted effort to review new expectations with their teams to avoid burnout as work and projects are reallocated and redistributed. By taking the time and effort to make remaining staffers feel comfortable and valuable, teams can move forward together and rededicate themselves to a new company objective.
Photo from The Jopwell Collection
