Laying off employees. Though it’s sometimes unavoidable, it’s one of the most difficult and painful tasks in any manager’s life — and in any company’s history. How should a manager decide whom to
lay off? How should he or she deliver the news to affected employees? What impact will the layoff have on employees who remain with the company?
Managers are right to be worried: A poorly handled layoff can create big problems. For one thing, it can hurt a company’s reputation. And that makes it harder to attract and retain talented employees in
the future. It can also destroy trust and morale among those who survive the layoff. For all these reasons, managers must be certain to handle layoffs correctly. The most effective managers do this by excelling in three areas:
First, they use the right criteria to decide whom to lay off
Second, they communicate the decision skillfully to affected employees
And third, they secure survivors’ commitment to the company following a layoff
But how do these skills play out in practice? Let’s look at the first one: using the right criteria
while deciding whom to lay off. Managers who excel in this area avoid the common error of making
across-the-board cuts; for example, laying off the most junior 10% of the people on their team. Instead, they identify work that is no longer essential to their department’s ability to continue operating. And they lay off the people who perform that work.
They also avoid using the layoff as an opportunity to let go of employees with performance or behavior problems. They recognize that a layoff and a dismissal are two very different things and must be handled separately.
Consider Jonas, a marketing manager who has just learned that his company will be initiating a layoff to cut costs. When deciding which employees in his department to lay off, Jonas thinks about the work his direct reports do. He distinguishes between job activities that are necessary for his department to function, and those that aren’t.
For example, two employees, Bette and Tyler, perform graphic design work, which the company does not need to handle in-house in order to develop effective marketing campaigns. Both Bette and Tyler are highly skilled and well liked in the department. Yet Jonas decides that he could help the company cut costs by laying them off and outsourcing graphic design work on a project-by-project basis. In fact, Tyler has recently expressed interest in “going freelance” to take on a wider variety of assignments. Jonas realizes that Tyler may be open to doing graphic design for the company on a contractual basis.
Jonas also briefly considers laying off Michael, a market researcher, because of his recent problems with meeting deadlines. But he decides to treat this employee’s underperformance separately from the layoff. He determines to coach Michael to address the problem, and then to dismiss him only if coaching doesn’t help.
Now let’s consider the second area in which a manager must excel in handling a layoff:
communicating the decision correctly to affected employees. Respect for the person’s dignity,
appreciation for his or her contribution, and supportiveness are all keys to conveying this difficult news effectively.
For instance, Jonas meets with Bette, one of the graphic designers, in his office to tell her about his decision. He explains that the layoff is necessary to ensure the company’s survival, and that Bette is being laid off because the company wants to focus the workforce on core competencies that must be performed in-house. He reassures her that the layoff has nothing to do with her performance or behavior on the job. And he expresses his appreciation for her contribution to the team. Bette is upset by the news, and Jonas gives her time to absorb what’s happening. When she has collected herself emotionally, he encourages her to start thinking about her future. He asks how he can help her navigate through this transition. He also explains the outplacement services that the company will make available. Then he walks her through the severance package that the company is providing. Finally, he offers to write a letter of recommendation when she interviews at other organizations. Bette is saddened to lose her job and nervous about her future. But thanks to Jonas’s skillful handling of the conversation, she remains confident in her abilities — which will be important as she begins
searching for her next job. Knowing about the outplacement services further eases her fears about finding a new job. That evening, when she tells friends and family members about being laid off, she feels no need to bad-mouth Jonas or the company.
We’ve now come to the third area in which managers must excel in handling a layoff: securing
survivors’ commitment to the company afterward. Again, helping employees deal with the
emotional pain of the layoff and encouraging them to start thinking about the future are crucial. With these goals in mind, Jonas meets with his remaining team members the day after the layoff. He acknowledges the pain of the situation, explains why the layoff was necessary, and addresses their questions and concerns.
After the meeting, Jonas moves to stabilize his top performers so they don’t defect to competing firms. He meets with them individually, expresses his confidence in their talents, and asks for their commitment. To persuade them to start thinking about the future, he elicits their ideas for strengthening the team going forward.
Later that week, Jonas meets again with his entire team to describe the company’s plan for moving forward after the layoff. He spells out what will change — such as new processes for managing
outsourced graphic design projects. And he explains what will not change — for example, the
company’s commitment to top-notch customer service and innovative thinking.
It’s still a difficult time for everyone, and Jonas’s direct reports miss their former colleagues. But because he has secured his remaining employees’ commitment, his team soon moves ahead with the changes needed to restore the company’s health.