When layoffs loom, experts weigh in
How employees are told can affect morale and retention of best staff members
Buckle up. The mass layoffs we thought we left behind in 2023 aren’t over yet — especially if you work in tech. Companies like Apple, Sony, Rivian and Google made headlines as they continue to reduce employee headcount in 2024, causing disruption within their workforce.
Rivian sent employees an email saying cuts would be disclosed the next day, while Apple is giving members of its autonomous electric car team 90 days to find a reassignment before being let go. In this volatile marketplace, 85% of Americans are worried that they’ll lose their jobs, according to a survey from MyPerfect Resume.
That raises the question: Is transparency about future layoffs ever a good idea for an employer?
Andrew Shatté, Ph.D., chief knowledge officer and co-founder of the employee resilience solution meQuilibrium, cautions against thinking there’s something Machiavellian about the general announcements that companies sometimes make forecasting layoffs before notifying affected employees. While they can be anxiety-inducing for individuals, he says that there are business reasons why companies make preemptive announcements.
“Publicly traded companies may be trying to protect their stock,” he says. “If they had a bad year or quarter, they want to let stockholders know that they’re going to take measures. They want to get that message out very quickly.”
The move could help employees better prepare, says Carly Holm, CEO at Humani HR, an HR consulting service provider. “It gives employees who know that they’re not performing well an opportunity to look for a job. It’s always better to look for a job when you’re still employed.”
The breakup
Tom Gimbel, founder and CEO of LaSalle Network, a national staffing, recruiting and culture firm, likens it to wanting to break up with someone.
“You hope that they do the hard work and leave you first,” he says. “These announcements tell the rank and file, ‘Get out ahead of this thing while the market is good.’ Then if you do layoffs, you save the company severance packages and morale issues of having to let more people go.”
Transparency can also help an employer brand in the long run, Gimbel says, if they announce far enough in advance.
“We’re not announcing this at the 11th hour when people aren’t ready for it,” he says. “We’ve given people enough warning, go out and look for a job and don’t be caught with your guard down. That’s the positive play.”
Can it backfire?
Yes. While there are good reasons to be transparent about layoff plans, the act isn’t without risk. For example, the announcement will likely hurt company culture ahead of the actual cuts, Gimbel says. “People may start doing less. But the company may look at that and say, ‘Well, now we’ve got reasons to terminate somebody’ versus it solely being a reduction in force.”
Layoff announcements create stress, Shatté says. “Anxiety pops up when people are focusing on a future threat, and it doesn’t get much bigger than losing a job,” he says. “Typically, when you have high levels of anxiety and stress, it hurts productivity, which is exactly the opposite of what you want to achieve.”
The resulting drop in output can be especially harmful to smaller company, Holm says. “If you’re a large company, you can afford some of that far more than small to midsized companies,” she says. “For them, the hit to productivity could be more substantial.”
Gimbel agrees that announcing layoffs ahead of time is easier for large companies: “Small companies are going to have mass turnover, and they can’t control the culture as much.”
Layoffs also create survivor’s guilt. “‘Why did I get to stay when my best friend and colleague didn’t?’ ” Shatté says. “It’s an emotion that comes up when we have thoughts about how we may have violated the rights of another. And then, ‘survivors’ are often asked to do 1½ or even two jobs to make up for the people who have been laid off. We can see frustration starting to come up.”
Companies may also risk losing some of their stronger performers. “People who have polished résumés and are wellcredentialed might jump ship because they’re able to find a position at another company,” Shatté says. “People who are barely getting by aren’t going to be attractive to another company. You could lose your top talent and keep the people who are benchwarmers if you announce ahead of time.”
Best practices
Layoffs are going to happen, and experts say there are right ways of going about it.
“I’m seeing organizations today being preemptive with layoffs more than any other time in my 32-year consulting experience,” Shatté says. “In many cases, I believe it’s to shore up the stock price, but right-sizing is a good thing.”
A lot of organizations were hiring in 2021 and 2022, anticipating continued growth in their industry — growth that didn’t happen or leveled off. “We’re seeing companies return to the employment levels that they had prior to the growth,” Shatté says. “That needs to be communicated to people.”
While companies often want to get the news out fast after making a layoff decision, Gimbel recommends taking time and making the announcement within the company layer by layer.
“It’s respectful,” he says. “You’re letting people who are responsible for more people know sooner. Even if the manager is going to lose their job, you want them to feel like they’re being treated with respect.”
If possible, the actual layoffs should be done in one round, Holm says: “That’s the best way to prepare communications for those who are being impacted and to take care of them in the best possible way.”
One round also helps you address the people who remain. Holm recently worked with a tech company CEO who fully admitted to his employees that they had overhired in 2022.
“He took the blow for that,” she says. “He said, ‘This is my mistake. We’re not doing as well as I thought we would be. We are going to have to let people go, but after we let these people go, here’s our strategy and our path forward.’
“Being as human-forward as possible — thinking about the people, overcommunicating and treating them as best as possible — that’s the best way to navigate this very unfortunate situation.”