Laying people off sucks

The more you care about the people you manage, the more layoffs hurt. You cannot make it painless, but there are ways to make it suck less for everybody involved. What stops us?

When considering layoffs, executives spend a huge amount of time on why it's necessary, how to make sure the organisation recovers, what cuts to make, how it will affect competition and strategy, etc. The people who will be affected, however, get far less consideration. It comes down to 'doing what's right for the business.' People are an afterthought, if they're thought of at all. And then managers have to go out and tell their employees that they're going to be leaving the company.

Like a lot of things in business, we make things harder than they are by removing the humanity in something that's inherently built around humans.

The Accepted Approach

Layoffs are carried out in a way that hasn't changed much in 100 years. There's an accepted approach that few people ever question. Instead, they put their heads down and get on with it, in the hopes that they won't feel awful about what they've done when it's all over. It rarely works.

Noah

I worked as a consultant for a small firm. I was pretty senior, and my role was unique in the company (that doesn't say much, I have been in one-of-a-kind roles for close to 20 years, often in small consultancies). I had spent the last year winning and and delivering highly regarded work. But we hit a dry patch. It happens. I focused on helping others do better work, and getting others onto client work. My billable time, however, stayed low.

Nobody talked about it, and feedback was consistently positive.

One day, I got a call to meet with the CEO and Head of HR. They told me they had to let me go due to cashflow problems. I knew we hadn't been keeping me as busy as I wanted, and I figured at some point we might have to talk about how to change things to keep me busier (redeploy onto other projects, refresh the rusty skills I had that clients were demanding), but those conversations never happened. Instead, I was let go, with no warning. When I asked about other client work, which was in demand, I was told it wasn't suitable for my skills. When I asked about updating my skills, so I could do the work, I was told it wouldn't be possible. Because they'd left it too long, and hadn't involved me, they'd left themselves no realistic options.

I loved working for that company. They built their brand on trusting their people to do the right thing, and treating them well. And I had believed it. I had hired people because I believed it. I'd brought clients on board because I believed it. In the span of 5 minutes, I stopped believing. I also knew I'd never put myself in a position where that could happen to me again. Nor would I ever recommend anybody else work there, without significant prep.

It was made worse by the fact that I'd recently made significant financial commitments, assuming that I had a job. If I'd known things were less stable than I thought, I would have avoided making them until things settled down, or I found something new.

In 5 minutes, they squandered all the good will they'd built up with me over our time together, while also landing me with avoidable financial hardship (I take responsibility for the choices I made, but I made them with incomplete information that ended up being very pertinent).

James*

I worked with a James, a CTO, at an organisation that was struggling with cashflow. Layoffs might be coming in the near future, due to cashflow problems. The company had cashflow problems in the past, and had done a round of layoffs. They had shared the company's cashflow issues with everybody before the previous round of layoffs, so they hadn't been a surprise. This time, the company didn't share. Only the executives knew what was happening.

James and I had been working together for a while. We had discovered that he valued openness, transparency, and human connection, as part of our work together. Everything we had done, up to the point of the upcoming conversation, had reflected those values.

During one of our sessions, James and I were chatting about cashflow and the potential for layoffs. Part of our conversation is replicated below.

James: I'm feeling disproportionately stressed, at the moment. We might have to do a round of layoffs. I've done them before, but this time feels worse. And of course, I haven't told the anybody, because I don't want to cause a panic."

Me [red flags going up]: We've spent a lot of time talking about the value you put on transparency. You've just told me that you haven't spoken with staff about the current issues and the fact they might lose their jobs. What do you notice about those two things?

James: ... It's out of character. I feel stressed because I'm not being transparent, but I don't feel like I can be transparent because we're considering laying off part of the team.

Me: What's stopping you from telling them?

James: I don't know. Nothing, I suppose.

Me: How would you feel if one day, out of the blue, the company told you it was going to be laying you off, with no notice given?

James: Not great. I have a mortgage to pay... I want my employees to make informed decisions about their futures.

Me: OK, so how much can you tell them, without violating any confidentiality requirements you're legally obliged to follow?

James: I'm not certain. But it's definitely more than right now. I'm going to say something.

After our conversation, James confirmed that there were no legal restrictions on what he could say around company cashflow and potential redundancy. James told his staff the situation the company was in. Most of the employees opted to stay. Some had mortgages to pay, and couldn't risk being unemployed. But the vast majority wanted to help the company make things work.

By the time of our next session, James's stress levels had dropped considerably. They hadn't disappeared completely, because the stress of potential layoffs is still pretty significant, but the additional stress caused by the conflict between values and behaviour had disappeared.

Why did James find it so hard to tell staff, despite transparency being important to him? He was captured by the process.

Over time, groups of people develop expectations and assumptions about how things work and how they should work. Plenty of billionaires have been created by exploiting the weaknesses in those assumptions. In this case, the assumption is that layoffs should be hidden until they're inescapable.

The orthodoxy around layoffs is that it’s best to keep them secret as long as possible. When asked, executives give lots of reasons are given, including:

• Not causing a panic

• People won’t work as hard if they know

• Don’t want to trouble people if it ends up unnecessary

• The people we need to survive might leave

• Legal reasons

While partially true, these explanations are mostly nonsense. They're rationalisations that allow them to do what they would prefer to do - the easier, painless thing. In other words, executives don't talk about layoffs because conversations about layoffs involve conflict, and people tend to avoid conflict.

Layoffs hurt. Not just the people being laid off, but the people doing them as well. And it's worse if your values include openness, honesty, or transparency, because the orthodoxy is in direct conflict with your values.

It gets worse. If you’ve run your team(s) based on trust, secretive layoffs can ruin an employee’s experience of your leadership and company. What happens to an employee's view of the company if the last experience they have is being unceremoniously laid off without warning? 

Employee experience goes from first contact to last paycheck. Be consistent.

The Humane Approach

What does it mean to do humane layoffs?

Ellen*

I was coaching Ellen, the CPTO of an international company. Ellen had openness in her DNA. It was part of every conversation and every interaction she had. I learned about the layoffs Ellen was considering during one of our coaching sessions.

Ellen: The company is really struggling at the moment. We're probably going to have to let people go.

Me: Do they know it's coming?

Ellen: Yes, we've talked about it fairly extensively. They know what's happening, why it's happening, what the strategy after layoffs will be, and how big the team will be afterwards. There are still some choices to make about who exactly will remain, but everybody knows it might be them.

Me: How will you decide?

Ellen: The team will talk about what size the team will be after the layoffs, and what the team will need to accomplish. We'll then figure out, together, who the people are who are best suited to weather the challenges and still be able to deliver.

Me: How are you feeling about it?

Ellen: Pretty unhappy, but accepting. I'm putting my name on the list. Given the size we will be after the layoffs are done, I don't think we're going to need a CPTO for a while. Even if the company recovers, the people who are staying can do enough to keep things going in the right direction. They may eventually need a new CPTO, but not for at least a year. And they have to get through the year, first.

Ellen's team had plenty of time to adjust and plan. They'd been involved from the time that problems had become evident, and they knew Ellen wasn't exempting herself from the redundancies. They were necessary for the survival of the company, and several of the executive were leaving with everybody else.

The irony of all of this is that the easiest layoff conversations and experiences were had by Ellen and her company. All the work that was done to avoid telling people just made the other experiences worse. It's true everywhere - if you're honest about where things stand, secrets don't get so big that they hurt to talk about. When people know the company is struggling, they aren't surprised when things have to change.

As soon as you know there's a problem, start talking to people about it. Painting a rosy picture only works until you run out of paint. The surprise hurts as much as the loss of a job, as there's no time to prepare or create a safe exit. And if you build your brand on trust, no-notice layoffs will squander the goodwill of those who leave, and terrify those who remain (What else aren't you telling them? Are they next?)

What's more, being open with people gives you a better chance to prevent the problem you fear.

Layoffs aren't always the answer. Executives can reduce their salaries (a popular starting point in Japan), unprofitable products can be stopped and people redeployed, unprofitable customers can be let go, and people can opt for salary sacrifices. When the conversation starts early, there are far more things that can be tried.

Talk through it with them. Listen to their concerns. Let them make informed decisions about their futures. 

Conclusion

My experience is that when you treat people like adults, they act like adults. They don’t panic. They don’t check out (they often try harder to help avoid the problem). They don’t hold it against you if the problem goes away. 

It's true, you might lose somebody whose personal risk tolerance can’t handle the company potentially going bust. Do it anyway, because:

1.  Cashflow improves when people quit, reducing the number of people you might have to lay off, and

2. Letting them make a decision for themselves is better than surprising them with a layoff they can’t avoid and risking their financial stability

There are no laws against telling employees that your company is struggling. There are no laws against giving plenty of notice that things will have to change if finances don’t improve. 

Don't wait until both cash reserves and cash flow are gone.

• Start talking early

• Share the knowledge of what's coming

• Get them involved in figuring out the solution

• Let them help try to make the layoffs unnecessary

• Ensure the people who are most able to sacrifice are included - nobody should be immune because of their place in the hierarchy

Some of your employees might have nest eggs that allow them to take bigger risks. Others might have a new mortgage, significant debts, family that needs support, or other invisible costs. Since you care about your employees, I suspect you would rather they left by choice to find stability than were surprised with a layoff and risked everything.

Doing the right thing is both simpler and easier than you think.

* Identifying characteristics changed, but otherwise accurately presented