Your Work Friends

The Layoff Playbook - Part 1: How Layoffs Are Decided & Communicated (Ideally)

December 05, 2023 • Mel Plett & Francesca Ranieri • Season 1 • Episode 3

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Hi Friend! 

This is our first (of many) deep dive topics. And it’s a two-parter. 

Have you ever wondered why layoffs occur, and how the decision of who gets laid off is made?  We have you covered in this eye-opening, two-part episode. 

We're pulling back the veil on this complex topic, drawing from our own experiences and offering you some real, practical insights into understanding layoffs. 

Disclaimer: This podcast is for informational purposes only and should not be considered professional advice. We are not responsible for any losses, damages, or liabilities that may arise from the use of this podcast. The views expressed in this podcast may not be those of the host or the management.

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Francesca:

Well, what's the thing you always say? Smell the candle, burn out the flower.

Mel:

No, smell the flower. Blow out the candle.

Francesca:

Hey friends, welcome to your work. Friends, I'm Francesca, I'm Mel and we're your two HR ladies wanting to make work more human and give you the best resources. And today, mel, what are we talking about?

Mel:

Today we are talking about layoffs, so why they happen, how they happen, all those things.

Francesca:

Yeah, and while we were building this out, friends, we found out that it is a super meaty topic. So this is going to be a two parter. We'll start today by talking about why do layoffs even happen, how it's decided who stays or who goes, and how they're best communicated. We'll come back in part two for something super important Mel. What are we going to be covering in part two?

Mel:

What you should do if you find yourself in the situation of being laid off and if you're someone who remains on the team, what you can do as well.

Francesca:

Yeah, and of course, we'll finish up that part two with a good roast and toast. We have some folks in mind that need to get roasted and some folks that absolutely need to get toasted. So join us today for this two part story, where we'll talk about layoffs, starting with why they even happen. So let's start with why layoffs even happen. To begin with, mel, I'm wondering you've been in this space of HR for a long time as of I what's been your experience as to why these things even happen?

Mel:

Yeah, so typically it's economic driven for the most part. That's been my number one experience. There are other reasons and I'll get into it, but usually it's business, business not making plan. There are economic drivers, like what we're experiencing today, with inflation, political things happening, infectious disease.

Francesca:

Oh yeah.

Mel:

Anybody when there's a hunger games layoffs.

Mel:

That impacts the economics of business, and businesses aren't making plan and they need to make decisions to address for that Divesting divisions, so changing what departments that they need, different skill sets to meet new needs, mergers and acquisitions, companies coming in and finding redundancy and roles, and new strategy. My favorite thing that you say is widget. They create this widget and now they're creating a new widget, and so we need to change who the widget makers are, and so new strategy might need new people and old roles just might not be needed anymore, depending on where the direction of a company is going. And so this has been my experience for the majority of layoffs. How about yourself?

Francesca:

I mean absolutely. Layoffs are either economic or they're strategic decisions right Right. Or if it was about performance, for example. We have other means of doing that right, and so layoffs truly are economic we're not making the money we need to be making or they're strategic, like we're going to be doing something differently. That's typically what they are, which also means, even though it feels very personal, if you do get laid off, it's not about you.

Mel:

It's not. It's not and I'm going to throw this out there and I'm sure there might be eye rolls because folks don't. I'm sure if you've been laid off or you've had friends who are laid off, you don't feel this way, and it really depends on how an organization handles layoffs. That makes the world of difference. I think I'm loving that. We're going to get into that, but layoffs typically are the last lever that a company wants to pull. They know how this impacts human beings and it isn't the first go-to decision that they make. They do explore everything before pulling this lever. So we'll get into some of that, but I'm excited about talking through this and equipping people with tools if they go through it.

Francesca:

Yeah, I know that's what's been really interesting to look at is I have been laid off. I have also been the person to have to lay people off as well and make those decisions. I've also been the person that's remaining on this team. I've been in each of these seats. We can say it's economic and we can say it's strategic. It just feels very personal and I get that. But I think the thing is that these are based on business decisions and, again, they're not based on your value or your performance. But there is this reality in business that sometimes leadership makes a decision that doesn't pan out the way that we thought we were going to need. We thought we were going to go big on this widget. It didn't sell, so now we need to pair back who's working on that widget, and that's what this really comes down to. So I think looking at those economic and those strategic reasons is really critical to know.

Mel:

Yeah, Agree 100%. The hope is anyone who listens to this if they find themselves in the position of being laid off, doing the layoff or a remaining member on the team, that they feel much more equipped to go through that experience and it doesn't take such a hit to their personal self-esteem by going through that experience.

Francesca:

Yeah, so that's typically like why they even happen, right? The strategic, the economic let's get into how we choose who goes or not, which I know is kind of the meaty piece too. So let's go into that. So one of the things I want to talk about in terms of how we decide who gets laid off or not, is to ground everybody in the cost of labor. And so, mel, as you may mention too, layoffs are typically, and ideally, the last resort that we're going to take, right? So we're going to start to cancel out things like travel, things like, maybe, initiatives that are more innovative, so we don't have to move to layoffs.

Francesca:

One of the things that is really important to know is that labor is typically the highest cost for most organizations. It's expensive to employ people because it's not just about your salary, right. For the most part employers, when they hire someone, they're paying your salary. They're paying employment taxes on that, they're paying for benefits. Typically, as you go up in the echelon, they might also be paying for things like equipment, laptops, cell phones, they may be taking office space, other benefits like stock options, 401ks, pensions all that For the most part, each of us. As employees, we can be as expensive as anywhere from 1.4 times to almost up to three times our salary to employ us, absolutely. So if you're making $100,000 a year in your salary, it's costing your employer. It could cost them up to $300,000 to employ you, with everything else that goes along right. So that's why labor a lot of times is viewed as a very high cost and it's also why, when we're doing these layoffs, there's two ways that we look at them.

Francesca:

Again, this is going to feel a little bit sterile and antiseptic, but what I want to do is open the hood as to how these decisions typically are made in terms of deciding who goes. The first one is economic. So if you are needing to lay people off because to your very good point, mel we didn't make a plan right, we need the money back. As an organization, Typically what happens is each organizational head or leader is given a dollar amount that they need to find in their organizations. So, for example let's keep on this example of an employee that makes $100,000 a year, if you're an organizational leader and you're given a dollar amount of $500,000, what you typically will need to do is find $500,000 in payroll cost of that employee. So that means you have to find five people to lay off.

Francesca:

Yeah, I want to say right now that these decisions are awful typically because they are not related to performance. So what you're going to need to do typically in these examples is you're looking at who do I need to keep to keep the lights on People that are closest to your core competence, so people that are in revenue generating roles, people that are making the products, people that are as close to the core confidence as possible and a lot of times, we consider this as who do we need to keep the lights on. So if you're in a non-general or if you are doing more innovative work that's not directly related to a core confidence, you may be the people that are on the chopping block.

Mel:

Yeah, I've seen that too. I mean, things like innovation is quickly set aside just to keep things functioning. They don't have the time or the money or the resources to focus on just that, or have people dedicated to that. How about yourself? What have you seen?

Francesca:

Yeah, absolutely. And it doesn't mean that innovation or maybe if you're in an internal role like training or communications, does not mean that you are not valuable. It just means that this is a money play and they're going to stick to the core competence. Those roles are incredibly valuable If your organization can't afford it that's what's going on here.

Mel:

They can't afford it.

Francesca:

So that's economic. We're looking for payroll dollars to put back into the organizational bucket. Basically, the other is on strategic. So if it's structural, to your point, we've decided we're not going to make widget X anymore and we're going to make widget Y, for example. So we're moving in a different direction where we're divesting a business, if you will. What will typically happen is it's based on skills. So we're doing I think called a skill mapping exercise. So ideally, this is a very thorough process where we're mapping the skills that are needed to execute on the new strategy towards those people that are currently at the organization. For those people that have the skills needed, they remain with the organization. For people that don't have those skills needed, they don't. Yeah, yeah, yeah I know you talk about this a lot, Mel that ideally, we actually are upskilling our people instead of laying them off right.

Mel:

Yeah, that to me is an ideal state and I do think organizations that handle this well do take a look at the existing workforce to see if it's possible to upskill or reskill that audience before letting them go. But that, to me, is ideal state and a more human way to look at this.

Francesca:

Yeah Well, we see a lot of organizations doing it and actually investing a lot of money AT&T, amazon, deloitte, right where they're taking millions, sometimes billions you know, Deloitte is and reskilling their folks before we even get to the point where we realize they don't have the skillsets we need.

Francesca:

So I think some of these really proactive organizations are doing this. It is absolutely doable, so applaud those organizations that are doing it. Sometimes organizations don't do this and they have to go through this skill mapping exercise in order to figure out who remains with the organization.

Mel:

Yeah, yeah.

Francesca:

So how it's decided. Is it's really that economic factor right? We need to find money in the payroll, we need to stick to our core competence or we need to find the people that are going to have the skills needed in order to do the strategy that we're about to embark on? That's how it's decided. I think what's really interesting, though, is, you know, while that's being decided, sometimes, as an employee, you start to get a feeling, for it should go down. Yeah.

Mel:

I know we all sometimes have that hair on the back of our necks.

Francesca:

You know what's been your experience, right? What's been your experience with this around like how do you know a layoff is common.

Mel:

To your good point there are signals, right.

Mel:

We've all experienced these signals where, whether it be a conversation or an all hands meeting or just something in passing that someone says makes your ears perk up like Hmm, what Something going on here? And so I do want to cover a couple of things that one trust your gut, not to say jump to conclusions, but trust your gut in the sense that if you feel something might be happening, there are things you can do to be proactive in preparing yourself. Ideal state companies will tell you they're coming and you might be thinking what? Why would I want to hear about whether or not a layoff is coming? And there's a lot of reasons, right From a personal standpoint, if I think clear and transparent is kind.

Mel:

Thanks for name Brown. I think clear is kind. Be transparent about this. If an organization is transparent, it allows people time to prepare, to get over the initial shock of what's about to happen and they can start preparing themselves for what they need to do. And if they do get laid off, there's also something called the worn report, francesca, have you? Have you heard of the worn report?

Francesca:

Yeah, I have, and quite honestly, periodically I check what's going on in my state just to see, because I'm a stalker. Yeah, I know we do.

Mel:

Well to our fellow State Department of Labor stalkers or to create new ones. We're going to share with you what this means. So the worn WARN is the Worker Adjustment and Retraining Notification Act, which is really enforced by the US District Court for any district that might be in violation of not adhering to the rules here. So what is what is the worn report? What is it? What do they need to report? It requires any employer with 100 or more full time employees, not counting workers who've been there for less than six months on the job, to provide at least 60 calendar days advanced written notice of a work site closing if it's going to affect 50 or more of those employees or if it's a mass layoff affecting at least 50 employees and one third of the work site's total workforce. So essentially, 60 days in advance. If they meet these criteria, they need to report this to the State Department of Labor, and anyone can see this. This is public information, so you have an inkling. Maybe there's rumor mill happening in your office.

Mel:

Look up in your State Department of Labor's worn report to see if your organization is out there. Sometimes it's not where you live, especially if you have a distributed workforce across the US. You'd want to check the headquarters site for your company to see if they have a worn report out there. So be a stalker for your State Department of Labor, check out the worn reports. And then financial performance. You alluded to this a little bit earlier, francesca, but things like Budget cuts Are you getting money for the work that you need to perform? Are you being asked to find money? Give money back? Are you going through a hiring freeze? Are job recs not getting approved? Those are all signals that things might be slowing down and other levers are being pulled before a layoff happens. None of, I just wanna point out, not all of these signals mean a layoff is going to come. It just may be that you're gonna start experiencing things like you have a training program no more hot breakfast, so little things like that and people get upset about losing those pancakes and scrambled eggs.

Francesca:

No, okay, I can't Angry participants.

Mel:

But if you're an employee and getting rid of hot breakfast is going to save some jobs, I think we could all sacrifice a pancake or two.

Francesca:

No, you better do that, I'm just joking.

Mel:

That's where you draw the line, okay, so just look out for some of those signals. Other things Look gossip sites. They're fun in the workplace, they're fun to read and some of the stuff ends up being true. So things like thelayoffcom glass door, fishbowl industry blogs I know for law above the law is a place where you start to hear about things pretty early. Think, in the accounting world, going concern is a gossip blog that folks can check out. Reddit there are a ton of things that you can check out and subscribe to, tiktok, even LinkedIn. You'll start to see things coming out in social media. And then, last but not least, google News Alerts are your friend.

Mel:

Not just to support you in doing the best job you can for the organization that you're working with, but the first thing that I do when I'm even interviewing is I sign up for Google News Alerts for the organization that I'm interviewing for. If I'm hired, I can continue to get Google News Alerts to see what's happening with the organization. I might sign up for alerts about their competitors, et cetera, just to stay on top of things, but you'll also start to see press come out if a company is performing poorly, and so if you wanna stay connected and what's happening in your organization, google News Alerts are your friends. That's my list, francesca, but what am I missing?

Francesca:

Yeah, you know, listen, I think all of those together are really good things to pay attention to. Right, ideally, your organization is being transparent and letting you know ahead of time. Right, even ideally, before the warn report goes out. Right, this is coming. That is ideal state. I know it's not easy to hear, but it's ideal state.

Francesca:

Friends, if I could offer any advice, I don't care what your level is Know how your company is performing financially. If they're public, that information is incredibly open to you in things like their annual reports. Sometimes these are called a 10K in terms of their shareholder meetings. Those are all open to the public. Sometimes they'll be in your internet. If they're private, there are sometimes financial reports on your internet site. You can also ask your leadership as well for how you can find out how the company is doing financially. But know how your company is performing. Keep yourself abreast of that, because that will give you a sense of do you all have cash or not? Are you solid or not? Right, that's always just a good thing to do to understand again financial performance and, directionally, where's the company going. Last thing I will say is on your competitors' financial performance as well, because typically what we see is that when competitors start laying off, your organization may be soon to follow.

Mel:

Yeah, there is a domino effect that happens. Same thing happens when they're looking at compensation and they're trying to match each other. So pay attention to this stuff. One thing that keeps coming up over and over is the communication piece, Francesca, and how key communication is here. What does the gold standard look like here for an organization in terms of communication, even like a leader, a team leader?

Francesca:

Yeah, the gold standard for me is transparency. It's so interesting to see how the gold standard has evolved, because we still do not feel like we needed to be transparent. There are still some schools of thought that tell people the least amount of information they need to know. Let's be quote-unquote professional about it and let's move on, and that, to me, is a really antiquated kind of a 90s way of thinking. I cannot agree more. Yeah it's like.

Mel:

People are going to find out. We're in such a different world today and you know, I don't know, it's a bad look.

Francesca:

It's a bad look. It's also. Let's treat people with respect with dignity.

Francesca:

And part of that is giving people the information they deserve in order to make the best choices for them and for them to also understand what happened. Knowing what happened is a really big deal for people, so transparency to me is huge. One is to be transparent about what's happening. Ideal state your organization, before layoffs have even happened, will let you know Again. I know it's uncomfortable, but it's kind. It's giving you the information so you know what you need to do with that. Whatever that looks like for you, being transparent about when it's going to happen, why it's going to happen, et cetera. Ideally, when they have happened, again we're continuing with transparency around what happened, that they have stopped, so the folks that are there know that they're not going to get a phone call. That's something I see a lot of organizations doing, where they don't say We've stopped and people are still scared that they're going to have a phone call. The other is around giving the reason why they have happened and reiterating that in a way that it's clear and not corporate speak.

Francesca:

And so I know a lot of organizations are like oh we gave the reason why it's because we wanted to protect the health of the organization. Yeah, that's clear as mud. What does that mean? Yeah, In what way? In what way?

Francesca:

I'd much rather see an organization quite honestly hold themselves accountable and say we need to define $20 million Right and letting go of some folks, Right, Right. People will understand that it's not a great position to be in, and I understand that. But giving a reason why that is clear is huge. And then giving, if you can there are some limitations here but giving some reasons for how decisions were made right, I understand, from an HR perspective, from a legal perspective, we've got some limitations here, but again, giving the when, giving the why, given the how is huge.

Francesca:

The other thing I think is really important, as you're guiding that through your organization through the next few weeks, ideally as an employee, your leadership is talking about what happens now in terms of how we make sure that this doesn't ideally happen again and what we're going to do as a collective organization to get through this together.

Francesca:

Yeah, right, this is where you'll see organizations ideally giving some sense of here's for mental health actions that we are going to be taking collectively. Here's how your leaders will be going be there for you. And the other thing is is here's how we're taking care of the people that we just said goodbye to. Yeah, Sometimes I see organizations not doing this, but I think if you've really taken care of people that you need to say goodbye to, you'll be letting people know that are still there. What you did in terms of giving them insurance benefits, giving them resources to help soft land with a job search and giving them generous severance packaging, and if you've done all that, communicating that or looking to see if your employer is communicating what they're giving people, is a big deal and that's full transparency.

Mel:

Yeah, I think that the impact of that is, as you said. One, it's treating people with dignity and respect. That's number one. And two, organizations benefit from being transparent. For the folks who remain, that's going to help retain that existing talent.

Mel:

Like typically after layoffs, you will see a trickle of people leaving on their own because they don't trust an organization if they don't have the transparency that we're talking about here, or if they feel it's just corporate word salad that they're getting and they're not getting the transparency, and or they've heard through the grapevine that their peers and colleagues were not treated well in that. So I'm looking at folks who've given just two-week severance, for example, or, if not, honored things like bonus and that sort of thing. Your people that are remaining are listening to that and they're paying attention to it. And I might add, in the competition for talent in the marketplace, people who are interviewing with you either immediately after or even a few years down the road, they, in their research, are going to find that information and it's going to play a part in whether they choose you as an employer of choice, and so all of these things are beneficial to an organization to just make this process more human.

Francesca:

Yeah, there are times where some organizations don't even have that. There are no funds for severance, for outplacement services. There aren't funds. There are times that that happens. Yeah, as an employee, let me tell you something it costs organizations nothing to be transparent. Right, at the very least, that is something that I think we should expect of our organizations. Agreed, I agree. And to your very good point as an employee, looking at how your organization handled the layoff will tell you a lot about how they value their people, absolutely.

Mel:

All right, this was really good to talk about this topic with you today. For Inchaska, I know we've been impacted by layoffs. We've had friends and family impacted Feels good to share resources with others. We're going to come back to everyone next week with what you should do if you find yourself in this scenario and we're going to do our trusty roast and toast of those in industry those who may have bifted a little in this process and those who are doing things really well in treating their people with dignity and respect. So looking forward to following up on that.

Francesca:

All right. Well, thanks, friends, and we'll see you next week. See ya, Bye friend.