How to Lay Off Employees the Smart Way

By Robert McGarvey | Wednesday, 26 April 2023 | Feature

It seems like just a few months ago that the worry was how to hire new employees in a full-employment economy. And now the headlines are all about layoffs. As this is written, Meta — formerly Facebook — is in yet another round of layoffs where this time, the target is technical staff. 

Amazon is also in a new round of layoffs — advertising employees are the current targets — and the company’s goal is to shed 27,000 employees before the ax stops falling. Additionally, Disney is in the midst of layoffs that are targeted to separate 7,000 from the company. 

Will there be a recession? Will it be deep or shallow? Economists brawl over these questions — we just don’t know the answers. You probably cannot say with certainty that you will never lay off anybody.

Are Layoffs Necessary?

First, ask yourself: are layoffs really, truly necessary? Kim Crowder, CEO of Kim Crowder Consulting which specializes in leadership and workplace equity issues, asks the big question: why are so many companies using layoffs as a first step in restoring health to an ailing business? She continued: “layoffs should not be the default when things get tight — they should be the absolute last resort.”

Take time to ponder what Crowder is saying. It does seem that at many companies balancing the budget starts with laying off lots of employees. But there may be other options, such as cutting executive pay.

Have you looked at those other options?

When a Layoff Is Your Only Choice

You’ve pondered Crowder’s thoughts, you’ve looked at other cost-cutting tactics, and you wish you could avoid layoffs. But, sometimes, a layoff is necessary to keep a company from going under.

Here’s the question, however: can a company do layoffs humanely — or must they always be done in a fast, brutal fashion, such as when Twitter’s new owner Elon Musk fired about 70% of the staff, many via emails? 

Remember the Remaining Staff

Don’t forget this: a layoff is about more than just the separated employees. It very much concerns the remaining staff. How? Explained Jon Greenawalt, an SVP at 15Five, a developer of a leadership platform: “Seeing colleagues leave and fearing the loss of their own job creates a sense of instability and insecurity among remaining employees.” 

See a friend pink slipped, and just about every employee will have some fear that he or she is next. Even worse, the very best current employees may take a mass layoff as their cue to update their Linkedin profile and get that resume circulating because the ship, to them, looks like it’s sinking.

How to fight that fear from spreading? Greenawalt spells out the antidote to that fear: “Communicate openly and honestly: Keeping all employees informed about the layoffs, the impact on the organization and the future plans is essential.”

Ryan Miller, director of client success at Employment BOOS, an outplacement services provider, offered more advice: “Companies should clearly explain why the layoffs are happening and what the criteria for selection are. Open communication can help employees feel less blindsided.” Employees who get the layoff notice usually ask: why me? Their co-workers who escaped getting the notice often ask, “Why not me?” Attempt to answer both sets of questions in the statements that are issued about the layoffs. Don’t let the layoffs seem arbitrary or vindictive. 

A Boss’s Take on Layoffs

Ivan Lobo, co-owner at “Made in California,” a magazine, says he knows about layoffs from personal experience. He elaborated: “I've faced the difficult task of laying off several employees due to economic factors beyond their control. I've come to understand the importance of approaching these situations with kindness, humanity, and genuine concern for the well-being of my employees.”

Lobo went on: “I recall one instance when I had to let go of a few staff members at my magazine. I made sure to have a face-to-face conversation with each affected employee. I believe that delivering such news personally demonstrates respect and empathy.”

Separating With Kindness

Know that when big companies lay off employees, they typically leave with a bushel of perks — everything from job search assistance to continued employee health insurance benefits. Small companies generally are operating with leaner budgets, and lavish exit benefits probably won’t happen, but that doesn’t mean they should do nothing.

So, what can a startup do? Lobo offers this, for instance: “I provided support to help them transition to new opportunities. For example, I wrote a personalized letter of recommendation for one employee who had been an exceptional editor. For another, I connected them with a contact in the real estate industry, knowing their skills would be a great fit. By offering guidance and resources, I showed that I cared about their future success, even after they left the company.”

Nathan Brunner, owner of job search engine Salarship, said similarly: “When I lay off employees due to economic reasons, I always write them a letter of recommendation and a glowing comment on their LinkedIn profile. It makes it easier for them to explain questions about their departure during job interviews.”

As they exit, help laid-off employees land on their feet — and above all, help them leave with their self-esteem intact — and you are sending a strong message: This company cares about its people. That’s a message that will matter to the separated employees, the remaining workers, and people you want to recruit to your team when your company’s balance sheet is stronger. Show you care — really — and there will be dividends.

About the Author

Robert McGarvey

Robert McGarvey, a veteran journalist who has long covered startups and small businesses, created and hosts the CU2.0 Podcast for credit union and fintech executives which is at 120 episodes and counting.