Workplace

How to lay off your employees without totally blowing it

‘Deliver the news with empathy’ and other tips for layoffs that should be obvious, but are not.

Empty cubicles

Don’t be worse than Better.com: The right way to lay off employees

Photo: Bill Varie/Getty Images

Layoffs are painful to execute and are of course far more painful on the receiving end. Last week, Better.com CEO Vishal Garg generated outrage when he laid off 900 employees over Zoom. He’s since apologized, but the damage might already be done: Three execs announced that they’re leaving the company, and it’s reportedly delaying its public listing.

Layoffs are never easy, but sometimes they’re necessary: Demand for a line of products or service may permanently fall, or the company may be in such dire shape that it resorts to drastic measures to keep itself afloat. But just because layoffs might be necessary doesn’t mean they have to be chaotic and they certainly don’t have to garner any public outrage.

Practice disciplined hiring

There’s usually a good business reason for having layoffs. Sometimes companies overenthusiastically hire when the company is flourishing. Better.com, a digital mortgage company, has a valuation of $7.7 billion, allowing it to double down on the pandemic frenzy of home buying. But hiring without a specific strategy in mind can have consequences for a company and especially for its employees.

Honeywell CEO Dave Cote had a better strategy. He imposed hiring controls after Honeywell went through a round of painful layoffs in the early 2000s. That helped put him in a position to use furloughs instead of layoffs during the Great Recession.

Be as transparent as possible

Better.com’s layoffs seemingly came out of the blue, shocking employees. The company had just received $750 million in funding, and in late November, CFO Kevin Ryan wrote that the company expected to have $1 billion in cash.

A layoff is less of a shock if people know that it’s even on the table. Whenever possible, give employees as much notice as possible. This allows them time to find a job and understand the kind of financial decisions they want to make.

In 2011, Nokia realized it would need to restructure, laying off 18,000 employees. Nokia announced the layoffs with at least six months warning. Leaders worried that most employees would quit, leaving Nokia unable to deliver its existing product pipeline. However, the majority opted to stay and brought in the same proportion of sales from new products they had before the layoffs.

Deliver the news with empathy

With our new hybrid way of working, delivering layoff news via Zoom might be the best option, or even the only option. But it can still be done with empathy.

When Airbnb had to lay off 25% of its workforce in 2020, CEO Brian Chesky thanked employees for their hard work and celebrated their talent. He emphasized that “the decisions are not a reflection of the work from the people on those teams.”

Use company resources to create a soft landing

When Airbnb laid off employees because revenue was expected to drop by 50% due to the pandemic, the company gave employees 14 weeks of base pay plus one additional week for each year at Airbnb. Airbnb also paid for up to a year of health insurance and tried to help employees find new jobs. Recruiters were reassigned to help laid off employees job search, and the company also created a talent directory, which other companies used to make hires.

In 2011, Nokia created a program to help employees find a new job within Nokia or elsewhere. They were also eligible to receive funds for additional training. The program was so successful, the Finnish government studied Nokia’s ideas as best practice for layoffs and rolled some into its legislation on what companies are required to provide laid off employees.

To the extent that it’s possible, companies should try to invest in reskilling or finding people new jobs in the organization.

Layoffs, by definition, are involuntary separations from a company for economic reasons. No matter what, there will be a certain amount of pain and acrimony. But there are still ways of executing a layoff that respects employees and gives them room to find new opportunities.

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