As leaders continued to struggle to retain and attract workers amid the Great Resignation, the focus switched to layoffs and cost-cutting as concerns about a potential recession grew. Globally, more than 42,000 workers have lost their jobs, with some blaming it on the pandemic, others on hiring too many people during growth periods.
When a company opts for downsizing, it experiences some temporary or immediate advantages. This includes boosting profits, avoiding bankruptcy, re-organisation, and sometimes getting rid of disengaged employees. However, due to the current rate of terminations, firms are experiencing issues such as reduced skilled workers, low morale, dismay, stress, guilt, or even envy among their employees.
Additionally, layoffs can affect existing employees' satisfaction and commitment, resulting in lower performance. This calls for HR managers to effectively manage the impact of layoffs on people. To deliberate on firing fever and on a fairer approach to termination, People Matters, under its Big Question series, spoke to Raman S R, Chief People Officer, Log9 Materials and Sumit Sabharwal, CEO, TeamLease HRtech, in an exclusive LinkedIn Live session.
What led to the layoff menace?
Many leaders predicted that the boom in digital services during the recent years would be long-lasting and highly effective. Looking at the current scenario, we know one could not have been wrong enough as the slowdown and structural shift in consumer preference have come as a disappointing realisation.
“The layoff menace is the result of a bit of overconfidence among leadership about the future potential as well as consumer behaviour. When e-commerce exploded during the pandemic, it attracted investors’ attention. The moment the pandemic ended, the consumers’ behaviour shifted and tech companies are now facing a crisis. To cut costs, people expenses, which are one of the highest expenses that you have in the OPEX, were reduced. Hence, layoffs became the norm,” explained Raman S R.
On the other hand, amid the market volatility, inaction is not an option for business leaders. However, the employees should also seek to strengthen their abilities and skills to pivot in the face of external market changes, suggested Sumit Sabharwal, CEO, TeamLease HRtech. “People who have not been able to come up on the learning curve and haven’t upgraded themselves with respect to the technologies (advances in AI, blockchain, 5G, biotechnology, and countless other innovations) and the work patterns, are the ones facing most termination,” he said.
4As to prepare for a layoff
Many HR leaders tried cinching the strings as tight as possible, but layoffs seem inevitable in several companies. Making the tough transition need not be an unpleasant bolt from the blue for employees. Hence, Raman S R shared a 4A approach for compassionate layoffs.
Anticipate: Companies need to frequently evaluate their business processes. Keep reviewing the overall unit and individual performance of employees so that the firm is aligned with investors’ expectations.
Acknowledge: Once the problem or trend of slowdown is identified, address the situation proactively.
Align: Without alignment, managing uncertainty can become very tricky. Alignment is a way leaders can arrange the elements of their company to work together to achieve business objectives.
Assist: Assist the employees by being clear about your expectations for the beginning. Communicate it throughout the multiple rounds of interviews. Eventually, when people are laid off, they understand where the employer was coming from.
Handling layoffs with empathy
Employees around the globe have been witnessing little to no empathy during layoffs. Consider the firings by one of India’s top edtech companies. The workers claimed that the business used unethical tactics to compel them to sign a pre-written letter of resignation. On top of that, the company also recruited bouncers to deal with any awkward situations that might arise when employees were abruptly forced to leave the premises.
Amazon’s workforce also reacted harshly to the decision of termination. "I don't even know if I want to work for this company anymore. This is a horrendous way to treat people," said a senior manager. "The truth of the matter is that if the company was more transparent, we wouldn't have this. Now you have most of the population wondering if they are next," told another.
As HR managers, the job is not just delivering the sad news, but to make sure that the people are handled with utmost care. The TeamLease CEO used the Kübler Ross change curve to explain the same in the workplace. “A change creates a lot of extreme emotions, for example, denial, frustration, or anger, which can negatively impact the mental health of people in the long run. So, it's very important to give people time to recover,” said Sumit.
He further listed three fundamentals of empathetic layoff - compassion, patience and effective communication. “As a people manager, never forget to be compassionate when having that difficult conversation. Second, be forbearing enough to listen to them and to not just deliver the news. And third is effective communication. I strongly recommend avoiding phone calls, zoom calls or any virtual source to fire employees. In addition to the financial aspect of losing a job, it can cause serious mental and emotional stress. Leaders need to focus on the messaging to make the best out of a bad situation,” Sumit told People Matters.
Alternatives to layoffs
The reality is whether leaders conduct the layoffs with kindness or cruelty, the end result is the same – lost jobs. Hence, considering some alternatives to termination may help HR avoid all the drama. “Before finalising terminations, leaders need to ask the following fundamental questions – Are there other operational costs that can be minimised? Do companies really need to sign up celebrities for promotional campaigns? Do new facilities really need to be constructed? Are there recurring expenses that can be cut instead?” suggesed the Chief People Officer of Log9 Materials.
He further added, “If cutting these expenses will not work, then the focus must shift to another set of questions, such as – can people be redeployed to other roles internally or to low cost cities, especially where the expenses are lower and can the objective be achieved through some kind of temporary salary restructuring? By considering these, layoffs can be shifted to being the last resort.”
Finally, while we deliberate on layoffs and seek to understand the best practices for employee terminations, don’t forget about those workers who are fortunate enough to keep their jobs. Many will now face increased workloads and pressure to perform. This may lead to overwork and a lack of job satisfaction.
To learn more from leaders about some of the burning questions in today’s world of work, stay tuned to People Matters' Big Question series on LinkedIn.