How do you do them?
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Today’s topic is layoffs. We’re diving right in.
As we move into a year of economic uncertainty, it's time to don our thinking caps and plan for the worst while hoping for the best.
Unfortunately, this year's challenges are a bit more complicated than trying to keep Bob from microwaving his tuna casserole in the break room.
We know that mainly tech companies have started doing big layoffs. From Google to Microsoft, almost everyone has reduced their workforce. If it weren’t for its serious impact on organizations and people, one could rant about layoffs being a la modé in the tech industry. Usually, that’s blamed on the microeconomic environment.
But is that the whole truth?
In his latest piece, "The Four Horsemen of the Tech Recession," Ben Thompson paints a great and deeper picture of why we've ended up here:
Rise of interest rates
Tech companies are facing unique headwinds that are causing a tech recession. COVID is the biggest issue facing tech companies, and even though it is mostly over in most parts of the world, it still affects the economy.
The tech sector thrived during COVID, but now they face challenges such as the four horsemen of the tech recession. The four horsemen are e-commerce, cloud computing, layoffs, and slowing earnings. These issues impact the broader economy and cause tech companies to face a complex economic environment. Amazon is feeling the impact, especially in its cloud-computing business, which is affected by slowing growth rates.
About the hardware cycle, here he refers to the cyclical nature of consumer electronics sales, which can impact companies such as Apple and Microsoft.
Ben argues that rising interest rates have caused a devaluation of long-term revenue streams for Software as a Service (SaaS) companies, which makes total sense. When interest rates were low, you needed your capital to work work work, e.g., you needed to invest it, and many did so - in people. (Sidenote, that’s also one of the reasons why our department made significant leaps over the last years; more people means more work for HR.)
Finally, Ben argues that ATT (App Tracking Transparency) has significantly impacted the digital advertising industry, causing revenue growth to crash for companies like Meta, YouTube, and Shopify. This has also impacted cloud providers such as AWS, who are hit multiple times.
It sums up the current landscape pretty well for those working in or around tech companies.
Which has led organizations to look for ways to reduce costs.
Hence the layoffs.
And sure, layoffs can help reduce costs, but they can also lead to decreased morale and increased turnover rates, and by that, I mean involuntary turnover.
People who we wanted to keep may feel they need to leave.
And here, we tend to fail.
As HR professionals, we must ensure that our organizations create a sense of security and belonging for the remaining employees.
Otherwise, they might start practicing their best Scooby-Doo impression and exclaim, "Ruh-roh! I better start looking for a new job!" It can be a triple-whammy to the people still left in the organization, including survivor's guilt, slimmer outlooks, and a heavier workload.
We will likely see an increase in attrition during the spring from organizations that have done the layoffs and cannot meet their employees' feelings, cannot articulate a clear vision, and cannot create that sense of belonging.
What can organizations do to help reduce turnover after laying people off?
If you haven’t laid people off yet but are thinking about it, there’s one podcast you should listen to, most likely twice.
Sandra Sucher, a professor at Harvard Business School, talks in a recent HBR Idecast episode about what you can and should do if you need to do layoffs.
Be transparent and empathetic: Acknowledge harm and say you're sorry. Explain why you did what you did. Make an offer of repair to try to make the other party whole. Commit to understanding what led to the breach of trust and how you'll prevent it from happening again.
Praise those who are let go: Talk about their performance and make it clear that they're talented. If you want to help people have a more positive sense about themselves after they've been terminated, this can help sustain that.
Help people transition: Provide support for people's vesting regarding shares they had and other things that will help them in visa-related ways. Offer support for people's resume writing and other job-hunting skills.
Take care of your managers: Managers who deliver bad news can suffer from negative psychological effects. Make sure they care for themselves and know they're not alone.
So what if you've already done the layoff?
Well, we can borrow the first point from Sandra. It all starts with transparency.
Be honest about the situation and clarify the organization's future. It's not a time for smoke and mirrors. Remember that people might be grieving; they might have lost people they worked with for quite some time.
It's a loss, and like with all losses, people will handle them differently but embrace openness and honesty as much as possible.
What does that mean in practice, then?
Here are some of my suggestions:
Host a "fireside chat" or "ask me anything" session with company executives to allow employees to ask questions about the organization's future plans and strategies.
Town halls are a great way to communicate broadly.
Use interactive channels such as social media or messaging apps to facilitate real-time communication and feedback.
Host a regular podcast or video series featuring employees from different departments discussing their roles and how they contribute to the company.
Make sure each manager checks in regularly with their people. (And make sure to check in with your managers as well.)
Will this be enough?
Most certainly not.
It must be combined with creating or re-infusing the organization with a sense of purpose. People feel more invested in their work and are more loyal when they know why they strive towards a certain goal. This is true whether you've laid people off, but if you have already done the above, make sure to reinfuse people with a sense of purpose.
Ok, but how does one do that?
Regularly highlight and celebrate employees who embody the company's mission and values, which could be on your intranet or in a newsletter.
Provide opportunities for employees to work on cross-functional teams or projects that span different departments or functions aligned with the company's mission and values.
Create opportunities for employees to give feedback on the company's mission and values and to participate in discussions about how to improve them.
Host company-wide events such as conferences or retreats that focus on the company's mission and values and allow employees to learn from and connect with each other.
Regularly share stories and examples of how the company is making a positive impact on the world, and encourage employees to share their own stories and examples.
Provide opportunities for employees to participate in community service or charitable initiatives that align with the company's mission and values.
Encourage employees to develop their personal mission statements and align their work with their values and purpose.
Will this get you all the way? Probably not. And these are merely suggestions from my end.
But what I want to emphasize with all of this is:
Don't forget the people who are staying.
When laying people off, it's easy to focus all your attention on the ones being laid off, which makes sense at first glance.
You don't want to do a Better.com-version of your layoffs.
But it's also crucial to continue to take care and have a plan for the ones that will continue to deliver the things you need them to deliver.
Don’t forget them.