As the tech industry continues to suffer a tumultuous downturn, more HR leaders must face the question of who to let go and why. Frequently, leaders go for the most systematic strategies for deploying cuts in an effort to achieve equity. One storied practice for deploying layoffs is the concept of “last in, first out,” but experts now say following this path could come with the risk of losing your most diverse hires and top performers, and it could be discriminatory. But there are alternatives.
At the beginning of the pandemic, some of the groups most affected by layoffs included women and Black workers. In August 2020, the unemployment rate among Black workers shot up to 13%, almost double the unemployment rate of white workers at 7.3%, according to the U.S. Bureau of Labor Statistics. Women during this time also fared poorly compared with their male counterparts. According to the Brookings Institute, in early 2020 the unemployment rate for women rose more than 12 percentage points, while the rate for men increased by less than 10 percentage points.
Star Carter, co-founder and chief operating officer at DEI tech company Kanarys, said layoffs can disproportionately affect women and people of color when companies don’t have diversity spread throughout the organization. Oftentimes, more inclusive representation is concentrated in the entry level and in what are considered to be “nonessential” roles.
“Companies also tend to recruit more aggressively and expand their talent pools when the labor market is particularly hot,” said Julia Pollak, a chief economist at ZipRecruiter. “So company diversity often increases towards the end of an economic expansion. Those more diverse last-in hires are often the first out under a seniority-based system or even a performance-based system, because it can take time for new hires to learn the business and become fully productive.”
When companies decide to eliminate “nonessential roles” that usually means any roles that don't directly contribute to generating a company’s essential revenue, said Pollak. This means that advertising, talent acquisition or roles that conduct research for potential or future product lines are often first on the chopping block.
“Generally speaking, whenever there are layoffs, that can have a disproportionate impact on women or people of color because they do tend to be over-represented in roles like marketing or HR where layoffs often happen when the economy slows down,” said Glassdoor Senior Economist Daniel Zhao.
But he warned that HR professionals should watch out for the bias that comes with doing the exact opposite of “last in, first out.” He’s observed some companies in the past laying off more experienced workers who have higher salaries and replacing them with younger workers who cost less. “That was something that happened in the financial crisis,” he said. “Companies essentially downsized and replaced more experienced workers with younger workers. And so I think from a diversity perspective, really that speaks to ageism and how that can have an impact on workers.”
Though cuts can at times be unavoidable, Pollak suggests abstaining from implementing blanket solutions like “last in, first out” altogether, as they might not be worth the gamble.
“You risk keeping managers, supervisors and administrators, but losing the ‘worker bees’ who actually do the work and make money for the company,” she said. “You risk disparate impact for a protected class — individuals who are members of a certain race, ethnicity, religion, gender, sexual orientation, gender identity or those with a disability — and a slew of wrongful termination lawsuits.”
Determine an equitable system for layoffs
Sentiments among employees have begun to shift toward distrust. Following a growing list of job cuts in tech and the stock market’s worst week since the beginning of the pandemic, employees' confidence in the security of their roles has plummeted. So is there a way for HR leaders to steel the nerves of their employees and go about making cuts in a more strategic and effective way? Experts say there are a few things that can be done.
Lars Schmidt, founder of HR executive search company Amplify, suggests following the lead of what some of the most talked about companies did at the start of the pandemic when layoffs first hit. He points to Airbnb’s decision to deploy its recruiters as an outplacement team to help laid-off workers find new jobs.
“Any company can redeploy the recruiting team, any company can invest in outplacement, any company can offer severance. And yes, it's a cost, but it's the right thing to do,” said Schmidt. “Especially when you're letting employees go in a down market like we are in now, and potentially on the edge of a recession.”
He also recommends considering whether or not layoffs are completely necessary. Many companies he said are correcting for over-hiring during the pandemic. In addition to redeploying talent, he said this is a moment when leaders can think about whether certain teams or workers should be reassigned to more relevant projects.
“If it does get to layoffs you have to really be mindful of designing your program from the perspective of the employees who will be impacted by your efforts and who ultimately will be feeling the pain from this decision,” he said.
