Remember when Better.com's CEO Vishal Garg fired 900 employees via Zoom call right before the holidays? Garg's delivery was criticised for being impersonal and lacking empathy, especially given the harsh words he had for the employees' efforts. This sparked a media outcry and calls for better practices in handling layoffs across various industries.
As fate would have it, the layoff debacle only worsened as time went on, with numerous cases of companies handling the process in the most appalling manner. Take for instance, the CEO of Klarna, who resorted to a pre-recorded video message to deliver the news of 700 layoffs to their employees.
Since layoffs have become an unavoidable reality, leaders should strive to avoid causing lasting damage to their employees. People Matters recently caught up with Klub's Head of Learning and Organisational Development, Olivia Mukherjee, to discuss common layoff mistakes and their potential solutions. She shared some tips on the dos and don'ts of layoffs for leaders.
Balancing rationality with empathy
Despite having well-thought-out and rationalised reasons, delivering the news of a layoff to an employee can be a difficult task. The process of informing an employee about their job loss is often overlooked for its complexity and the pain it can cause for all parties involved.
Irrespective of the difficult nature of conveying layoff news to employees, empathy and appreciation can go a long way in making the process more bearable. “A food-aggregator startup founder took the time to write personalised messages to each of the 25 employees who were being laid off. While this approach may be time-consuming, the impact on the affected employees can be immeasurable. It shows them that their employer values them as human beings and that their contributions were appreciated,” shared Olivia Mukherjee.
- Communicating via emails, video calls or phone messages may seem like an efficient approach in this digital age, but they lack the humane element that employees need and deserve at the moment. Showing up prepared and in person for these conversations is crucial.
- Approach the conversation rationally and factually. The closer the working relationship with the employee the more important this becomes. For instance: Instead of focusing on the feeling about bad sales numbers, it is more useful to come prepared with QoQ numbers and their overall impact on the organisation.
- The ability to treat people with dignity even in the face of poor performance isn't just a best practice, it's a vital component of a successful business. When employees feel unfairly treated, word spreads quickly, leading to panic, despair, and low morale. Investing in one’s ability to do this may be a better use of time than spending time cleaning up negative reviews online in the aftermath.
Leadership accountability in layoff conversations
The conversations between managers and employees about layoffs are difficult but necessary, and effective communication is crucial. Leaders should provide specific and transparent reasons for the layoff, rather than generic explanations. Also, being present during the conversation shows that leadership takes responsibility and accountability for the layoff.
- Organisations often provide topical explanations such as funding-winter, high-burn, poor runway and similar rationalisations. However, these are insufficient and detached from the unplanned circumstances that an employee has to deal with suddenly. Leaders have an obligation to lend clarity, be specific and be transparent about the reasons for making someone’s role redundant.
- Since there is no best way to have that conversation, being direct in ripping off the bandaid will pay off in building trust instead of muddling up the message with insincere platitudes. This means the ability to have a robust vocabulary to explain the nuances of redundancy with compassion and forthrightness. The ability to separate the person, from the task, from their behaviour and their role should require some practice on the part of the messenger.
- Being front and centre in communication helps hugely during the transition. Showing up in person communicates that leadership takes both responsibility and accountability for the layoff.
Handling post-layoff survivorship
According to Lazarus and Folkman's (1984) framework, employees who survive layoffs may experience the post-layoff work environment as stressful due to a perceived loss of control and anxiety about being the next one to get fired. This "survivor's guilt" can coincide with the phase after layoffs where organisations need their employees to meet organisational goals. Empathy towards this phenomenon can help prevent negative effects on organisational commitment and performance.
- Frame clear criteria like seniority and fairness in applied procedures and implementation plans.
- Be transparent with the reasons for layoff and explain all the options that were explored before coming to that decision. For example: Were pay cuts considered, was hiring delayed, were the board members consulted etc.
- Emphasise via town halls and smaller audiences that the survivors have agency over their goals and metrics. For example: If someone has bandwidth issues as a result of the layoff, let them negotiate the task and the deadline. Emphasis on how each employee’s performance outcomes are contingent upon instead of independent of their behaviour.
Allow room for emotional processing
Layoff conversations have a tendency to activate the primal responses of fight, flight, or freeze in individuals. As stress hormones like cortisol and adrenaline surge, the capacity for empathy can dwindle. Nonetheless, the skill to remain composed during these discussions is what distinguishes between soothing or intensifying the emotional state of the employee at that time.
- Recognise the space for righteous anger or tears when an employee's safety, finances, security, and self-worth are at stake. Give the employee the time and space to process their emotions and allow follow-up conversations as needed.
- Establish well thought severance packages where employees can utilise the benefits of the corporate insurance plan or other perks.
- A more obvious but less utilised resource is a dedicated psychologist or counsellor with a trained ear and bandwidth to help employees wade through the crisis. A redundancy is hardly ever a final destination for an employee and a trained counsellor should be able to help an employee recognise this.
- Given that emotional welfare and financial stability are interdependent, managers can extend career transition services, build a repository of job openings and employee profiles, and conduct training or upskilling initiatives to facilitate the search for alternative employment opportunities.
HR's role in cultivating psychological safety
The involvement of HR in the layoff procedure typically commences well in advance of the actual event. This entails an ongoing effort throughout the year to introduce systems that promote psychological security and openness in the work environment.
- Approaches such as regular one-on-one meetings, administering eNPS surveys, enabling employees to tackle task-related conflicts, granting access to senior management, and displaying vulnerability during these interactions can be highly effective in proactively addressing negativity.
- It’s also critical that HR leaders learn to look at budgeting exercises as signals and plan to staff accordingly.
- Talent teams and business heads often conflate skill set gaps as staffing gaps. While this is a time-consuming process, HR teams should partner actively with businesses to design, develop and implement competency matrices. This can help immensely in funnelling long-term growth, retention and engagement for existing talent.
Avoid discrimination and build trust
Determining which employees will be retained and which will be let go during a redundancy exercise is a difficult challenge for any leadership team. It is crucial to establish unbiased criteria that can provide direction to the decision-making process, ensuring equity and clarity.
- Using the outdated "last in first out" principle can lead to discriminatory outcomes and foster a culture of distrust among employees.
- A comprehensive matrix for redundancy criterion should take into account factors such as performance which should be a combination of core skills, potential and behaviour, role criticality and diversity that can help mitigate these risks. It can be an important vector for companies to demonstrate their commitment to fairness and respect for employees, while also improving their ability to respond effectively to other external factors.
- When companies don't do this, the criterion for redundancy can not only seem inequitable but also create a sense of panic and helplessness where employees question the rationale for why certain individuals were retained while others were asked to leave.