The Right Way to Lay People Off

Layoff tend to break a company’s culture. After seeing their friends laid off, most employees are no longer willing to make the requisite sacrifices needed to build a company. Although it is possible to survive an isolated layoff, it’s hugely unlikely that a company would go on to experience great success afterwards. However, you may be able to keep cultural continuity and retain your best employees if you lay people off the right way. Here’s how.

Step 1: Get Your Head Right

When a company fails to hit its financial plan so severely that it must fire the employees it went to great time and expense to hire, it weighs heavily on the chief executive. During a time like this, it is difficult to focus on the future, because the past overwhelms you—but that’s exactly what you must do.

Step 2: Don’t Delay

Once you decide that you will have to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible. If word leaks (which it will inevitably if you delay), then you will be faced with an additional set of issues. Employees will question managers and ask whether a layoff is coming. If the managers don’t know, they will look stupid. If the managers do know, they will either have to lie to their employees, contribute to the leak, or remain silent, which will create additional agitation.

Step 3: Be Clear in Your Own Mind About Why You are Laying People Off

Going into a layoff, board members will sometimes try to make you feel better by putting a positive spin on things. They might say, “This gives us a great opportunity to deal with some performance issues and simplify the business.” That may be true, but do not let that cloud your thinking or your message to the company. You are laying people off because the company failed to hit its plan. If individual performance were the only issue, then you’d be taking a different measure. Company performance failed. This distinction is critical, because the message to the company and the laid-off individuals should not be “This is great, we are cleaning up performance.” The message must be “The company failed and in order to move forward, we will have to lose some excellent people. Admitting to the failure may not seem like a big deal, but it is. Every day, a CEO says to her employees, “Trust me.” Trust me: This will be a good company. Trust me: This will be good for your career. Trust me: This will be good for your life. A layoff breaks that trust. In order to rebuild trust, you have to come clean.

Step 4: Train Your Managers

The most important step in the whole exercise is training the management team. IF you send managers into this super-uncomfortable situation with no training, most of them will fail. Training starts with a golden rule: Managers must lay off their own people. They cannot pass the task to HR or to a more sadistic peer. Every manager must lay off his own people.

Why so strict? Why can’t the more confrontational managers just handle this task for everyone? Because people won’t remember every day they worked for your company, but they will surely remember the day you laid them off. They will remember every last detail about that day and the details will matter greatly. The reputations of your company and managers depend on you standing tall, facing the employees who trusted you and worked hard for you. If you hired me and I busted my ass working for you, I expect you to have the courage lay me off yourself.

Once you make it clear that managers must lay off their own people, be sure to prepare them for the task:

  1. They should explain briefly what happened and that is a company rather than a personal failure.
  2. They should be clear that the employee is impacted and that the decision is nonnegotiable.
  3. They should be fully prepared with all of the details about the benefits and support the company plans to provide.

Step 5: Address the Entire Company

Prior to executing the layoff, the CEO must address the company. The CEO must deliver the overall message that provides the proper context and air cover for the managers. If you do your job right, the managers will have a much easier time doing their jobs. Keep in mind that the message is for the people who are staying. The people who stay will care deeply about how you treat their colleagues. Many of the people whom you lay off will have closer relationships with the people who stay than you do, so treat them with the appropriate level of respect. Still, the company must move forward, so be careful not to apologize too much.

Step 6: Be Visible, Be Present

After you make the speech telling your company that you will be letting many of them go, you will not feel like hanging out and talking to people., You will probably feel like going to a bar and drinking a fifth of tequila. Do not do this. Be present. Be visible. Be engaging. People want to see you. They want to see whether you care. The people whom you laid off will want to know if they still have a relationship with you and the company. Talk to people. Help them carry their things to their cars. Let them know that you appreciate their efforts.

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