Storefronts have been closed for 60 days to slow the spread of Coronavirus.
Here’s the hard truth: in any location that isn’t being wildly cavalier about the health of its population, things will be closed, or operating beneath previous capacity, for a while.
That means that businesses will to have to lay people off. I’ve experienced four layoffs and witnessed eight—two of them in the last month. This is my perspective on what works and what doesn’t work. I hope it helps.
There are two ways to do this, and I’ll go over each one.
We’ll discuss potential pitfalls, things that make it worse versus less worse (there’s no better here), and what I recommend.
I’m focused on the people aspect of this. I’m not going to cover how to use your financial metrics to decide a layoff is needed, or how to adjust your budget so you won’t need to do it. This piece assumes you have to do layoffs; the question is how.
It is super easy to get this wrong in like 6,000 ways, so I’m going to go over the biggest ones. I’ll put what I recommend in bold, and then I’ll explain why (plus things I see as inferior alternatives) below each bolded recommendation.
First way to do this: cut staff.
Do it exactly once. Do not do a graduated layoff where a few people get cut every month until you’re making rent. Here’s why: after the first layoff, if people continue to get laid off, everyone who is left after the first layoff just lives in constant fear that they are next. First of all it’s deleterious to your employees’ mental health, and second of all those deleterious effects make it really hard for them to get any work done. Third, it creates a potentially wildly inaccurate proxy hierarchy in which people get the idea that “better” people will be saved for last, which can turn employees against each other and make the layoffs feel like they’re about employee performance in ways that they are not.
Avoid all this crap. Make one round of layoffs. One. Reassure anyone who isn’t laid off that there aren’t more cuts coming.
Now, to make this work, you’re gonna have to do something unsavory: you’re going to have to cut more of your staff than maybe you absolutely have to right now. You have to look at your current cash and revenue—not the amount you dream of or want, but the amount you have right now—and determine how many people that amount can support for the next 12-18 months at their current, full salary. Cut to that number of people.
I know: the numbers look terrible. You might have to cut half your staff right now to make that number work, and half just seems too high. The situation sucks. Don’t make it worse. Cut once, and cut deep.
Second way to do this: cut pay.
Start at the top. If you have execs who are making millions, a cut doesn’t affect their physical security. If you’re a small company with a few execs, a few directors, engineers, and an office manager, that’s the priority order of who gets pay cuts and/or how much the pay cuts are.
You can graduate the amount of the cuts, but don’t graduate the timing. I recommend cutting by the same amount for everyone in each pay band. Someone in the “millions” pay band might take a higher percentage cut than the “hundreds of thousands” pay band, who might take a higher percentage cut than the 70k pay band. (My recommendation is to avoid, if you can, cutting hourly workers’ pay). Make the cuts for everybody at once, just like a staff cut. Again, you don’t want people latching onto bad proxies about whose performance is justifying full pay for a longer period.
Assume people are going to talk about their cuts with each other, and make space for yourself mentally to be okay with that. People might get angry and/or ask questions. Prepare to answer these questions honestly. You’ve cut their pay; the least you can do is answer their questions.
Drop labor expectations commensurately with the drop in pay, if you can. After all, your revenue is dropping due to having fewer customers. It’s likely you don’t need the same degree of labor from your staff right now. So if you’re levying a 20% pay cut on full time staff, approve a four day work week. Send the signal that their work is worth the same amount it was before; the company just needs less of it right now.
Know that you might lose some people. I know it sucks. All of this sucks. That’s how it goes.
All right, now let’s talk messaging for either case:
Don’t draw it out. Don’t send an email on a Thursday telling people there are going to be layoffs and telling them to watch their inbox next week to find out who it is. The minute you send that email, all the consequences of a graduated layoff cycle happen to your whole staff instantly. I know, you want to be transparent. You and I have talked about the importance of transparency as a manager. This is a special case where transparency does not help you.
Tell people the day before to come to come to a meeting, or be available for a phonecall, the following day. Day-of would be ideal, and the only reason I don’t recommend day-of is because you don’t want someone to accidentally choose to take a day, not realizing what’s happening, and then try to come back to work in two days and find out that way that they got laid off.
Definitely don’t ask your staff for sympathy as you do the work of deciding which of them are losing their incomes and health insurance. They’re going through worse, and you need to respect that. Acknowledge that, today, you have to be the bad guy. Turn to other members of leadership who are involved in the decision-making for comfort. Do not ask that of your staff right now.
When you do the layoff, do not be cavalier about it. Get straight to the point. Don’t lead off with some ambling speech about how amazing the organization is and how it needs to make difficult decisions. That’s making your laid off staff responsible for your feelings again, and remember, we don’t do that.
So, no speech. Out with it. Wax poetic only to reassure your charges that this decision has to do with your budget, not their worth. “I’m sorry, I have some bad news. We’ve had to make a decision to terminate your employment for reasons related to finances, that have nothing to do with your performance or how much we value you.”
No humor. No pop culture references. No celebrating all the things your organization has accomplished or will accomplish. No attempt to draw attention to silver linings. No rousing, motivational monologues. I don’t care what you saw in the movies or whatever—now is not the time. People are shattered and grieving. When you try to lighten the mood, you look callous. I get that maybe this is how you process stress or grief. Great. Do that with you family or colleagues. Not in front of the staff you are letting go.
After you do the layoff, gather the remaining staff. Tell them what happened. “We had to lay off X%/terminate X number of positions.” Do not go into this meeting assuming everyone knows what happened and referring to the event with vagaries like “this tough decision” or “the thing we had to do yesterday.” It’s not Voldemort. Say its name.
Then, I recommend taking questions. Answer briefly, and answer honestly.
- “No, these layoffs had nothing to do with performance whatsoever. We had excellent people in positions that we simply cannot support under current circumstances. We will miss our colleagues and do all we can to help them in their future endeavors.”
- “No, there will be no more layoffs. We’ve cut to a number that we have confirmed we can sustain for the next year and a half.”
- “No, we haven’t told the press. We have arranged to speak with them this afternoon, though. You are not obligated to respond to press requests.”
In this meeting, same rules apply as the layoff meeting. No humor. No pop culture references. No attempt to draw attention to silver linings. No rousing, motivational monologues. This is sad. I get that maybe you are sad. You can be as sad, or not sad, as you need to be in this meeting, but don’t try to influence how your staff are feeling. And do not do one single thing that could be construed by a grieving person as attempting to lighten the mood. There’s too much risk it will backfire.
There is one more thing.
Know that, no matter how you do this, you will get criticism about how you do it. This thing is just too sad, and too hard, for people to not have their own ideas about how you should have done it in their opinion. I am sharing with you, here, the strategies that I have seen create the least consternation during a layoff. Nevertheless, there will be some.
Once again, you’re the bad guy today. I’m sorry. I am. But please remember this: when you took the promotion to management, you signed up for this as part of your job. Your employer is now calling you in on that responsibility. It sucks, absolutely, but it is not unfair to you. You accepted this role.
I’m not writing a conclusion. If you have to lay off your staff, I hope you’re willing to spend 9 minutes reading about how to make that suck less without requiring a tl;dr.
Update! Down below this post, there are several thoughtful comments from others who have experienced, executed, or consulted on layoffs. Those comments also contain good advice. I recommend taking a look.
If you liked this piece, you might also like:
The Remote Work Category (which also discusses reputation management)
Networking (another interpersonal thing that’s rife with business buzzwords screwup)
Assisted Processing (a healthier and less harmful alternative to making your just-laid-off staff responsible for your feelings)
So much excellent wisdom here. And oh hell yes do just one cut. The monthly/quarterly rolling cuts are brutal. This post should be in the CEO manual, if there ever is one.
A couple of things I’ve seen done that have been helpful:
– Make the announcement day of, but check whatever system you use to track days off and call those people on their personal number the day before and say there is a mandatory meeting at x o’clock and the video link will be in their email in the morning. I’m a big believer that you want this to just happen all at once, because who wants to put employees through a sleepless night over an ominous mandatory-meeting warning?
– In a pay cut, have just two percentage tiers: x percent for non-execs, and y percent, where y>>x, for execs. Then there’s little for people to compare. Exception: one place I worked had a hardware manufacturing arm. They were paid lots less than software engineering side. I’d say x% for them, y% (y>>x) for the software engineering division, and z% (z>>y) for the execs.
“Definitely don’t ask your staff for sympathy as you do the work of deciding which of them are losing their incomes and health insurance.”
Yes! I think there’s a subtle but important difference between saying “I’m sorry, I know this is terrible news and I wouldn’t have done it if there was a better option.” and saying “I’m sorry, I feel terrible about this.” Tell your family you feel terrible, tell your friends, tell your fellow execs, but do not tell the people you just laid off how bad you feel. You still have a job, suck it up. I wasn’t even laid off and I still think that’s tacky.
“The situation sucks. Don’t make it worse. Cut once, and cut deep.”
I once worked at a company that did multiple rounds of layoffs and it was so demoralizing. If you want to drive away everyone who possibly _can_ get another job, that’s how you do it. The exodus was great for my network, but it would’ve been much better for the employees and the company to cut once and cut deep.
Speaking of that place, one extra piece of advice I have is that after all of the layoffs have been announced and every person affected has been contacted, let the rest of the staff know who has been laid off. They didn’t do that after the first round of layoffs at that former job and it was not exactly fantastic for morale among the remaining employees. Shockingly enough, it turned out a bunch of the people who get laid off weren’t super into going all around the office announcing they got laid off and saying goodbye to everyone and instead went straight home to lick their wounds in private. The remaining employees got to wonder if the colleagues they hadn’t seen lately were just out sick with unfortunate timing or if they were never going to see them again. Obviously that sucks less than getting laid off, but it still could’ve been handled better.