Layoff Best Practices in a Low Unemployment Economy
The topic of layoffs has been gaining some attention lately as people anticipate the end of a long-period of economic growth. In addition, companies hoping to remain competitive are staying nimble by keeping work forces fluid. These organizations are reducing in some areas where growth is slower while expanding in others where there is more potential. The reality is, layoffs are a normal part of doing business and have been for some time. The challenge for companies is to make sure that any workforce changes result in positive results and not a loss in brand perception among customers, communities, remaining employees, and those impacted by the changes.
Recently, RiseSmart’s John Taylor appeared on “In The Workplace” (originally aired on Sirius XM Channel 132, Business Radio Powered by the Wharton School) with Dan O’Meara and Peter Cappelli to discuss layoffs and best practices for companies undergoing change.
As Peter noted at the beginning of the radio show, before the 1980’s it was common for companies to lay off employees with the expectation of hiring them back. Once the business began to recover, organizations would recall employees based on seniority. In the meantime, laid off employees depeirded on unemployment benefits to fill the gaps between periods of employment.
After that time, companies began permanently laying off employees with no expectation of return. Some provided support through outplacement services, but many did not. Peter noted that annually an average of 14 percent of U.S. workers are laid off, even during a boom economy.
The following is a recap of some of that conversation. You can hear the radio show in its entirety, here.
What not to do during a layoff
Peter: Can we talk about what not to do [during a restructure or layoff]?
John: “Well, I've seen lots of things over my years in the business world. And earlier in time, there was a lot of very brusque dismissals if you will, and very, very impersonal and cold. In today's world, that doesn't bode well because of the likes of social media, so on and so forth. So, we've really moved away from that, you know, here are your walking papers type of approach from past years, into very much of what I would call the more caring companies, offering support for this kind of this transition, if you will, when the employee is offered outplacement as a service.
Now the impact is still somewhat the same in that you're losing your position. There's still that traumatic experience, but to some degree, think of it as sort of a safety net that a person has there to take advantage of if they so choose. That's where companies are going. What's driving that to a certain degree is the recognition on the part of the company that their brand can be heavily impacted by how they treat their employees that have been displaced, are being displaced, or could be displaced.”
Layoffs and the employer brand
Peter: You think they’re really worried about that now?
John: “Well, there are a lot of companies that are putting resources to watching all of the social media sites, being responsive, etc. So, it really does impact a company's brand, and if you believe that, that means its impact on the loyalty of customers, sales, even the company's ability to recruit people.”
Best practices for layoffs
Peter: Can you walk us through now good practice for laying off employees?
John: “Well, the plan basically is the foundations are based on, okay, how many people are impacted, what locations, what types of positions, in addition to impacts on those folks. Obviously, there are impacts on those people left behind. Who's going to cover the work? When will they be informed? What will they be told?
It really is a plan that has a number of elements to it that need to work in concert, if you will, such that it's a respectful, caring experience as much as possible for those directly impacted. And, for those who are left, you know, there to pick up additional work, which is typically the case. And then of course, once you have that plan, that you've got to bring it to life, which is easier said than done because, you know, things happen in the world and plans don't always work the way they should so you need to think of contingencies, so on and so forth.”
Key takeaways for employers planning a layoff
Peter: Is there one thing in particular that is important for employers to keep in mind?
John: “I guess I would say, focus on the emotional impact not just on the individuals impacted, but the others who are not laid off. The survivors. Basically, you develop a sort of a sub-plan, if you will, that speaks to what will you tell them? When will you tell them? What will you set up in terms of, you know, will you have HR folks or other people available after dismissals are announced for those who are left behind who are having trouble dealing with what just happened?”
Peter: “John Taylor is the manager of Practice Development at RiseSmart, a company that specializes in doing this. You know, Dan, what we know about this research they got going in the '90s, I'm actually looking at this, is the discovery by Kim Cameron at the University of Michigan who did this work, that the big problem with layoffs is not so much the people who leave, of course, it's a big problem for them, but for the organization, it's the survivors.
And the big issue is people feel, why did I survive, right? How come I didn't get laid off? And so, the big thing that matters to the surviving employees is an explanation as to why you are still there. Because if people think it was luck, then going forward, they're spending their time prepared to get whacked, right? So, they're spending their time looking for another job and sometimes they're paralyzed by fear. Oh my gosh, it's going to be me next.
So, the key thing seems to be to be able to tell them a story and explain why you survived and how you fit into a plan going forward, right? So, and if you can't do that, the layoffs end up paralyzing the organization going forward. And you've probably seen these companies get paralyzed by this, yeah?”
In a recent study by RiseSmart, the company found that it takes employees three months or more to return to productivity after a reduction in force. Investing in things like resiliency training and other programs designed to help employees deal with survivor guilt and anxiety over job security helps workers get back on track and improves productivity and ultimately the bottom line.
The key to conducting a successful layoff is really about remembering that although these are business decisions, you are impacting people’s lives. When people are involved, no decision is easy. However, if you know that you are providing those individuals with the support they need—whether that’s finding a new job outside the company, redeploying to a business unit that has open positions, or getting the assurances and resiliency training to remain confident and productive, then the task isn’t as hard and the business consequences tend to be more positive.