Layoffs are a key tool in the corporate cost-cutting toolkit. While popular culture may demonize staff-cutting executives as corporate boogiemen laughing with joy as they hand out pink slips (Elon Musk comes to mind), the truth is nobody enjoys layoffs.
Business leaders are people too, and they understand the pain cutting jobs causes, especially cutting thousands of jobs at once. Aside from the human element, layoffs aren’t necessarily great for business, aside from anticipated cost savings.
The Trouble With Layoffs
Layoffs are hugely disruptive logistically, as fewer staff are left to do the same amount of work and employees often need to be transferred to new roles where it takes time for them to learn new responsibilities.
And on top of all that, layoffs have big impacts on workers’ psyches. They’re scary and distracted. Some employees find it hard to focus on their work when they’re expecting to see a meeting with HR pop up on their calendar at any moment. Others decide it might be safer to look for a new job than to cross their fingers and hope they survive cuts. And it’s hard on employees when they lose colleagues and office friends they’ve grown close to, sometimes over the course of decades.
Nevertheless, layoffs are often a necessary evil to keep companies afloat financially. So, if layoffs must be done, how best to minimize the disruptive impacts to the rest of the organization? We reached out to business leaders and industry experts to get their thoughts.
Layoff Season Is in Full Swing
Labor is far and away the largest business expense for most organizations, in many cases accounting for up to 70 percent of overall costs. Consequently, when companies are forced to cut costs, it shouldn’t be surprising that reducing headcount is a common strategy.
A number of factors have been placing strains on balance sheets in recent months: stubborn inflation, rising interest rates, supply-chain challenges, and general economic uncertainty. In response, many big-name companies have been announcing big-time layoffs.
Tech giants have led the charge (or at least the headlines) in recent layoffs, with Amazon, Google, Facebook-parent Meta, Accenture and Microsoft all having laid off at least 10,000 employees as of April, 2023. Companies with lower headcounts have also seen considerable staff reductions in percentage terms—think Twitter and Salesforce. The tech sector has been particularly hard hit due to over hiring during the pandemic, when a widespread shift to remote work meant a spike in demand for telecommunications and other online tools.
But tech isn’t the only sector cutting staff. Clothing retailer Gap and manufacturing conglomerate 3M have also recently announced cuts.
Timing the Announcement
When and how to announce layoffs is a small logistical consideration compared to the mountain of work often required to restructure the post-layoff org chart, but that timing can have big impacts on staff.
“I think that early transparency when it comes to layoffs opens up a can of worms,” says Cynthia Davies, founder, and CEO of Cindy’s New Mexico LLC. “Breaking the news of potential layoffs too early will only cause employees to be distracted at work because they’re all worried that they could be one of the people to lose their jobs, which will cause their performance to slip,” she says. That runs the risk of having employees spend time while at work browsing for other jobs just in case they might need them, which means they’re spending less time actually working. Because of this, Davies, suggests, “it’s best to hold off until the actual layoff announcement is made and simply deal with the consequences after the news is live.”
Not everyone agrees with that sentiment, however. Many experts argue that early and transparent communication over layoffs is key to retaining employee trust and morale more generally over the long-term. Employees can feel deceived or caught off guard by last-minute announcements, these observers argue.
“Let employees know that layoffs are based off performance and that top performers will not be laid off,” suggests Jacob Binke of The Birmingham Group/SRA. “It’s important to follow up with top performers to have a one-on-one so they can know that there are plans in place to ensure that workloads won’t be overwhelming due to additional support from upper management. A good idea would be implementing more benefits concerning mental health like summer Fridays, hybrid work, mandatory day-off every month, etc., to show remaining employees that the company is investing more into its employees than beforehand,” Binke suggests.
Show Empathy
We alluded to Twitter CEO Elon Musk’s layoffs earlier in this post as an example of how business leaders are often demonized for staff reductions. In Musk’s case, the criticism isn’t necessarily about the layoffs themselves, but also the manner in which they were communicated to staff. Many observers felt he was flippant and inconsiderate.
Similarly, online mortgage company Better.com made waves when it announced a layoff of hundreds of employees over a Zoom call. And then, there’s this great example of how not to communicate layoffs from PagerDuty.
It’s crucial for employers to let staff know that the company understands how painful layoffs are for both those employees being let go and those who remain. “It’s critical for employers to explain the reason behind these layoffs or furloughs, but they need to understand it’s not enough to mitigate this type of guilt,” says Emily Killham, Director of Research and Insights at Perceptyx.
“Proactive communication and listening to employee concerns go far when navigating the effects of survivor’s guilt,” Killham says. “Most notably, “survivors” that are left behind often experience a decline in their well-being and turn to unhealthy coping behaviors. Employers who actively listen to and communicate with their employees during layoffs are likely to have engaged employees and commitment from them.”
Staff cuts are often a last resort for businesses looking to shore up profitability amid declining revenue or rising costs. Layoffs can be tremendously disruptive and traumatic for staff and can leave lasting scars of resentment and job insecurity for years. But sometimes businesses have few options and layoffs are simply a necessity. The key in these situations is to ensure that the human element isn’t left out of the equation. Companies need to carefully think through and plan how to deal empathetically with displaced staff while ensuring that their remaining staff continues to be productive and engaged.
Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.
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