Companies should review how and who they lay off in the new year. Curiously, the people usually ... [+]
Companies should review how and who they lay off in the new year. Curiously, the people usually impacted are the workers and never the CEO or members of the C-suite. The upper echelon is exempt from receiving a pink slip. Nor do they volunteer to take a pay cut, which could save many employees from getting the ax.
Instead of a knee-jerk reaction to lay off workers, corporate leadership should empathetically consider other ways to cut costs. Jettisoning expensive real estate and leases, allowing people to work remotely, offering four-day workweeks, work-sharing arrangements and other measures could be enacted before people are shown the door.
This year, there have been layoffs across all sectors, from tech to Wall Street to media. It’s a painful experience for the workers who are thrusted into unemployment right before an anticipated recession. There is palpable fear that a new job may be hard to find. They wonder if they will receive the same level of compensation or be able to continue working remotely, if a new job is found.
More Humane Ways To Deal With Layoffs
Rather than immediately jumping to the conclusion that people need to be axed in cost-savings initiatives, business leaders must consider various other options. Management could offer temporary furloughs with an opportunity to return once the circumstances improve.
Companies can convert employees into temporary or contract workers for the short term until the economy rebounds. Shortened work days, truncated workweeks, sabbaticals and flexible scheduled hours can keep people working. It would mean fewer hours and a slight decrease in compensation. However, at least they will still have some money coming in. A company can enact hiring freezes and allow attrition without replacement until its financial situation improves.
The CFO can look at the budget and cut the fat. For instance, before Meta employees were downsized, the social media giant could have cut over-the-top amenities, such as ever-increasing stock grants to senior management. The company could have done away with free laundry services, transportation, unlimited food and other lush perks. These and further incremental cuts could have been put on hold to save at least a few jobs.
Human Resources can use artificial intelligence to discover people's skills, talents and abilities that can be repurposed for other organizational roles. An investment in the future can be made by training people to learn new skills. Workers with 20-plus years of experience may be offered buyouts for early retirement. Pricey real estate can be sold off, or companies could let their leases expire and pivot to a remote-first policy. This would save people from being cast out in the cold during the holiday season.
Should C-Suite Executives Be The First To Go?
If it's determined that layoffs are required, the rule should be that the C-suite and people earning more than $250k should be considered first. Instead of downsizing several people, only one executive will take the hit.
Just as companies put workers on performance improvement plans or stack rank them, executives must be held accountable to the same policies. Low-performing C-suite executives should not be immune to the vicissitudes of the marketplace and be earmarked for termination if they have not met the standards set for them. Not only do the senior-level professionals earn lush salaries, they are also highly compensated with stock options. Their separation from the payroll would save a fortune compared to the average worker.
It’s the management team that makes the decisions. If a company is placed in the position that it needs to downsize, the managers didn't do their jobs. If they don’t get axed, at the very least, they should be stripped of all the stock and other forms of remuneration they receive, which would save a lot of workers.
Why Companies Need To Hold Onto Workers
Laying off people is a short-term solution that can backfire. The United States economy is like a pendulum that swings back and forth between two extremes. While it may be tempting to enact massive layoffs when things look bleak, it could only take three to six-plus months for the economy to turn around.
Similar to what happened during the pandemic, once the U.S. headed out of the danger zone, businesses could not find enough workers to meet their demands. This could happen again. Maybe there won’t be a recession. The company could lay off the superb talent that its competitors could later pick up. Then, the business has to hustle to find, recruit, onboard, train and retain new employees. The odds are high that the new people will require higher compensation to offset the record-high level of inflation. It would have been less costly to simply hang tight and hunker through the difficult times without letting folks go.
By keeping employees when things go wrong, the company earns a reputation for being empathetic, loyal and employee-friendly. People will remember the bold decision to hold firm and keep everyone employed. Conversely, if workers are summarily dispatched without compassion, they’ll be seen as cold-hearted and untrustworthy.
Airbnb’s Masterclass In Letting People Go
Letting a person go doesn’t always have to be a harsh and humiliating experience. One standout example is how Airbnb handled separations from the payroll in May 2020, during the early months of the pandemic. In a message to employees, Airbnb cofounder and CEO Brian Chesky said that he had “sad news” and told his staff that they were forced to downsize, in light of the company’s financial situation and the uncertainty of how badly the virus outbreak could impact its business. The short-term home and apartment rental app downsized 25% of its workforce, representing around 1,900 people out of the 7,500 international workforce.
Instead of using one-way Zoom calls to extend the message, Chesky provided color and context as to why this had to be done. He acknowledged that the pandemic could have a major impact on the travel industry for an unknown amount of time, and as a result, revenue could be hit hard.
Chesky told his team that it was not because of anything they'd done wrong, nor was it a reflection of their work ethic. Rather than providing platitudes, the company was prepared to offer severance, equity and healthcare packages. The company provided its team 14 weeks of base pay, plus an additional one week for every year at Airbnb, and the tenure will be rounded up to the nearest year. Health insurance was covered through COBRA for 12 months.
The short-term rental company provided an Alumni Talent Directory to help people find new jobs. Departing employees were given the option to have their profiles, résumés and work samples available for future employers to see. The company allocated its recruiting team to help the impacted workers find jobs. The departing staff also received four months of career services and were permitted to keep their Apple laptops to help with their job searches.
‘Dumb Dolphins’
And then there is Vishal Garg, CEO of unicorn mortgage lender Better.com. In a one-way video, the chief executive coldly told his 900 employees that around 15% of the workforce would be fired.
To add insult to injury, Garg accused “at least 250″ terminated staffers of stealing from the company. In an email to employees obtained by Forbes in 2020, the Better.com CEO wrote, “HELLO—WAKE UP BETTER TEAM. You are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS and…DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBARRASSING ME.”
If The Company Has No Choice, At Least Be Humane
In a downsizing, leadership should clearly explain why the layoffs are mandatory and what will happen next. Management needs to praise and thank their staff for all their hard work, efforts and accomplishments.
The impacted workers need to be given generous severance packages, healthcare options and instructions regarding what happens to their stock and options. The departing employees should be given free access to the services of recruiters, career coaches and connections within the firm’s network of contacts. Positive and effusive recommendation letters that actually highlight the worker’s contributions and accomplishments rather than a perfunctory template would be a nice touch. Personal introductions made by senior management to their contemporaries at similar firms would be a class-act move to help a person procure a new job.
Human resources and managers need to chat empathetically with the people being let go. Some workers will be angry and resentful. That is not an excuse for managers to be rude in return. Instead, they must actively listen to their feedback, thoughts, fears and constructive criticisms about the organization. They should offer kind words of encouragement. It is smart to stay in touch with those given the pink slip, as one day, they could return as a “boomerang” re-hire.
