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How to do a layoff January 26, 2009

Posted by jeremyliew in HR, layoffs, management.
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It’s never easy to do a layoff. If you have to do it, Professor Bob Sutton from Stanford business schools gives good advice via Wired (oddly not on their website, but in their print edition). I’ve repeated the advice below with my annotations italicized.

Predictability: (If it is clear that cuts will happen) Warn your staff exactly when cuts will happen. Secrecy breeds stress.

Understanding: Humans always want to know why. Give reasonable justification for termination. (Note that with layoffs personal performance is not a factor – layoffs are to do with positions being eliminated. Explain why the company cannot afford to keep the position.)

Empowerment: Let them have some control over their exit. A package with options – say, a choice between extended health coverage or cash up front – reduces anxiety.

Compassion: A little humanity goes a long way. This can include things like having surviving staff out of the office so that affected employees can pack up their desks without people watching them.


What other advice do readers have
?

Comments»

1. Eric Wu - January 26, 2009

I also think that subtle hints of future hope or opportunity to return helps with the employees resentment towards the company. “We’re in tough times and we regret losing you. But if things get better, we know how valuable you are.” Though this may cause questions as to the termination, I think this will lesson animosity towards the company, limit public bashing, and make the transition easier.

What do you think?

2. Mike B. - January 27, 2009

Dear Jeremy,

Saw your post on layoffs & you asked for opinion so here’s my two
cents. I’ve had a bad luck to be a part of one layoff and then to be
at the other side of the table during layoffs in two other companies.
My first layoff happened in 1992. I was fresh out of college and I
joined Intel. I had a choice to pick among a dozen or so companies but
I really liked the team that I was suppose to be working with at
Intel. Well, guess what… 2 weeks after I joined full time, Intel
made some cuts and our whole team, over 30 people, got the pink slip.
They handled it pretty badly and they sent in the goons (security) to
watch over every employee and to see them pack up and leave. Clearly,
lack of empathy seems to be the number one issue when dealing with any
layoff.

Then in 2001, dot com crash, I was on the other end of the table. I
was a manager and the company had to lay off approximately 200 people.
The mistake that management did was to cut in small tranches. We had
layoffs every week as economic conditions were worsening. That created
severe morale issues. Everyone was on the edge and productivity was
maybe 30% of what it was before. Uncertainty is really bad. I remember
once I asked few managers to see me in my office and I had a Kleenex
box on my desk and when people came in, they thought they were getting
fired as well and their mood changed in the span of 10 seconds. I then
had to spend 10 min explaining that I have a hay fever and they have
nothing to worry😉. So the lesson is to cut only once and cut as
deep as you think you’ll need to survive. Once it’s over, have a big
meeting with survivors and tell everyone that everyone’s safe for the
foreseeable future and that now you need everyone’s participation to
be 110% so that the company recovers. I saw every employee that was
cut and I explained to every one of them why they’re being let go (no
cash etc) and have offered help to every one of them. That approach
really makes a lot of difference.

I’m sure there’s other lessons but these stand in my mind the most.

Thanks for a great blog,
Mike

PS: Saw your blog post here: newmogul.com. I read it daily.

3. Kathey - January 27, 2009

Murphy ’s 3rd law in Action, ” Whatever can go wrong will go wrong, and at the worst possible time, in the worst possible way”

if any one interested in a no-nonsense game of “layoff survival” check out http://www.crootpad.com , a fun way to see different options to survive layoff.

4. Emrecan Dogan - January 27, 2009

Irv Grousbeck, again from Stanford Business School, adds a couple of things for consideration in these situations:

– Employees should be learning about the lay-off first from you, not from the coffee machine gossips or blogs.

– Managers should talk to employees individually (as long as is feasible) but emphasize that there are many others in the same situation.

– Once the decision is publicized, the employees should leave the company as soon as possible. The more these unhappy employees stay inside the company, the worse the atmosphere will become.

– Things to consider for each individual: Financial compensation, continued options vesting, health insurance and other benefits, office assistance, outplacement assistance, and a explicit commitment to give reference if requested (last one is very key).

– Very basics things to fulfill before the exit interview: Preparing all the paperwork and being ready to hand over earned pay or other compensation. These are commonly overlooked, and substantially extends the painful period after the decision is publicized but before the employees leave the company.

5. Sanjay - January 28, 2009

In India, most layoffs are disguised as performance related terminations because of various cultural, social, and political reasons apart from plain insensitivity.

Lots of posts on that topic on my blog. This post echos my thoughts posted at http://blog.sanjaydattatri.com/2008/12/on-layoffs-advice-to-indian-companies.html

6. Career | Male Nurse - January 28, 2009

There is no painless way to do a layoff. Based from experience from my company, the best things to do is to overcommunicate and show empathy to each person.

7. Start Blogging - January 28, 2009

There will be more layoffs in the future. So with these unprecedented times, we should value our jobs more. My own employer is a relative startup company, so they did not consider layoffs now. But things will most likely change once they see tougher times ahead.

8. peter - January 28, 2009

Two opinions based on prior experience: a) go twice as deep as you think is necessary to eliminate the likelihood of a repeat and b) treat the people getting laid off with respect and humanity.

9. Antonieta Castellanos - February 4, 2009

The company I worked for closed in 2004. 175 people were out of jobs. The company was generous and kind, but up to this date I get calls from ex colleagues saying how much they miss their former jobs. A chapter of your life is closed.


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