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The PeopleCap Playbook

Timely insights and actionable people strategies for leaders.

Navigating Employee Layoffs in the Wake of COVID-19

The economic impact of COVID-19 is far-reaching and potentially devastating. Many small businesses are facing the very real possibility of shutting down. Larger businesses are confronted with the possibility of having to significantly reduce headcount to survive.

We tend to talk about these business decisions using sterile business terms like ‘Layoffs’ or ‘RIFs’ – terms that are highly impersonal. But for most leaders, decisions about letting people go are intensely personal. They create so much stress that it’s hard for leaders to sleep and eat. Personal relationships, loyalties, and our inherent desire to do no harm make firing people the very last option many want to consider.

If reducing headcount – or making significant cuts in hours or pay – is your unavoidable reality right now, there are some guidelines that will help you through the process:

  1. Humanity and transparency are paramount. Let employees know what you are thinking and where you are in the process of decision making. If you are still considering options, tell them and give them a timeframe of when they can expect more information. Are you viewing layoffs as a last resort? Are you giving up your salary to try to avoid layoffs? Are you waiting for a response about government assistance? Let them know how hard you are working to figure out the future. If layoffs become unavoidable, your employees will know that you tried to avoid the cuts. They will know that layoffs were not your first choice and that you fought to keep their jobs. And most importantly, during these difficult times, they will value the fact that you have kept the lines of communication open, and you have shown empathy and understanding for their situation.
  2. Keep your employees informed. Employees should know the numbers and forecasts – not necessarily down to the penny, but they should know enough to be able to see what you see in terms of company health. They should understand how dire the situation is and anticipate what the company may have to do to stay alive. Shielding employees about the financial reality is irresponsible and takes away their ability to make their own, informed decisions. When given the facts about the situation, some employees may choose to find alternative employment, it also provides all employees the ability to prepare for potential layoffs, and it establishes trust in the messaging from employers.
  3. If the ship sinks, employees lose too. If your business is sinking, you have to make hard decisions about what to change, what to let go of, and what to invest in. As a business leader, you know that business decisions can’t be based on sheer emotion. This is not about being unfair, greedy, or irresponsible, but it is about making the decisions that will keep your company afloat and ensure there is work for employees in the future. Keeping everyone in the short term and then being forced to shut the doors down the road doesn’t make sense. Unfortunately, this is a common scenario in business, because we don’t want to deal with the conflict or inflict pain on anyone. Ask yourself, “What advice would I give to another company?”
  4. Plan for the Future. While your business may be slow now, you have to be in a position to thrive when business picks up. If you are unable to service your customers when they return, you’ll never recover. Take the time to make a list of the employees you simply can’t afford to lose. For these critical team members, you need a deliberate plan to keep them. Open up the floor to employee innovation. How can you expand services or products? Does this situation illustrate a need or a gap in business offerings? Take this time to develop a strategy for growth in the future.
  5. Look at poor performers first. Lean times call for lean leadership. This is a good time to examine performance. During normal times of operation, we tend to let things run as is, and many leaders tolerate poor performance and have team members whom they would not rehire, given the opportunity. If reducing headcount is necessary, the lowest performing employees should go first. Carrying low performing employees always presents the risk of lowering the moral of good employees, but trust and morale will take a bigger hit if good employees are let go before those who don’t carry their weight. (Your team knows who those people are.) Of course, solid HR/L&E counsel is necessary, but this may provide the opportunity to level up your talent in the long run.
  6. There is an opportunity to be found within even the worst crisis. Unfortunately, we’re all being forced to reinvent ourselves, and many of us will have no choice but to scale back our teams. However, even the worst overhaul of your organization is an opportunity to reinvent yourself to be stronger, more effective, and to change those things that have been lingering in the background unattended. The COVID-19 virus has presented businesses across the globe with complicated and unprecedented situations, but the buzzwords of the decade: disruption, agile, lean, and nimble guide the strategies we need to develop to ensure our businesses are well-positioned for growth.

This doesn’t make the complex decisions about scaling back your head count easier, per se. But if letting people go is necessary for the company’s survival, these guidelines will help you make the best decisions possible under these extraordinary circumstances.