Frequently, recruiters and hiring managers assume that job candidates who don’t currently have a job due to a layoff are “B” or “C” level players in the talent field. The fact is, layoffs occur for a variety of reasons, including a change in product strategy, overstaffing, and other business decisions that have little to do with the performance or abilities of those who get caught in the net.

Why then do recruiters and hiring managers assume that job candidates who are applying for open positions, and are not currently employed, are somehow less talented or less qualified than those candidates who have jobs and are seeking to leave? The answer may be that recruiters and hiring managers assume that people are laid off due to performance issues. That assumption is far from the truth. In fact, there are a myriad of business reasons why companies choose to reshape their workforces, most of them not connected to individual employee performance.

To shine a light on the realities of layoffs, I thought I’d outline some of the reasons we have seen companies conduct reductions in force. I’ll also reiterate that, oftentimes, companies are letting go of employees with great reluctance and regret because they realize the valuable talent and assets they are losing. Even when they know the employees they are losing are assets to the company, businesses must meet the financial and strategic demands of remaining competitive in an often volatile and changing marketplace.

If you’re still thinking those who have been laid off are less than optimal job candidates, here are 5 examples of why companies decide to conduct a reduction in force (RIF) and how the impacted employees are selected:

#1. Reason for a RIF: Redundant tasks and overstaffing

Sometimes positions have to be cut due to over-staffing. When an organization doesn’t have enough work for the number of individuals in its employ, the company will keep only those employees that may be a long-term fit for the company’s strategic direction. The decision to layoff isn’t based on performance, but rather on long-term company fit. Since the determination is made on somewhat subjective measures, those laid off are often highly-skilled, experienced, and motivated employees who just may not fit into the company’s long term strategic vision of itself in the coming years.

In other scenarios, such as mergers and acquisitions, companies must reduce the number of redundant roles created as a result of two companies combining their forces. Decisions on who stays and who goes may be as simple as geography or proximity to other staff members or leadership. In these cases, companies often have two very qualified employees, but can only keep one. The employee impacted by the merger is no less a desirable job candidate than the remaining employee.

#2. Reason for a RIF: Change in business direction

Oftentimes, organizations need to cut staff due to a change in direction and a need for team members with different skill sets. For instance, a high-tech company in the midst of re-evaluating the company focus may make a decision to change the technologies and processes they have used in the past. If the company doesn’t have the ability or bandwidth to grow their current employees on the new technologies, they may opt to reshape their workforce to include personnel already familiar with the new technology. The result is that talented, productive team members with great technological skills are let go to make room for team members with different skills.

Another example may be, a financial institution decides not to continue traditional branch operations in favor of a different approach to “in person” banking. As a result, the organization must close branch offices without a mechanism to absorb the associates who work in those locations. The result is a group of qualified bank branch associates who are not currently working, but looking for new jobs.

In some organizations, it’s necessary to staff up for a multi-year project. When the project is over and the team that was assembled to complete the project is no longer necessary, the company will end up cutting the project staff when they aren’t able to absorb those individuals into other projects.  The result is that they must let go of some great employees who are just no longer needed by the company.

#3. Reason for a RIF: Expanding in one department, contracting in another

We often see organizations who are experiencing expansion in some departments, such as in manufacturing, and shrinking in others, like marketing. When companies are experiencing an imbalance in personnel and cost centers, they will often reduce staff in one area to free up funds to expand in another. In scenarios such as these, some personnel will naturally be displaced in order to accommodate the increased needs of the growing departments.

Even though best practices suggest that companies should attempt to redeploy displaced workers from one business unit to another, unless the organization is working with a contemporary outplacement provider who offers redeployment solutions, they often don’t have the mechanisms in place to effectively offer these types of services internally. They may also not have the resources to help those transitioning employees to gain the additional skills they need for the new department.  While the top performers may be asked to stay, that doesn’t mean those who are asked to leave do not have great skills for the right employer. 

Additionally, we have seen many cases where organizations end up rehiring those similar positions several months later as the needs of the company shift again. In some cases, the company will try to bring back former employees to fill some of the positions, thereby retaining the institutional knowledge they lost in the first place.

#4. Reason for a RIF: Relocation

Companies relocate for a variety of reasons. Most often, a change in location gives companies opportunities they would not normally experience. Recently, cities have been dangling tax breaks as incentives for larger, well-known organizations to move their operations there.  Given the right incentives, and the lure of a location near to qualified employees and a booming economy, organizations will choose to relocate entire facilities, or at least headquarter offices. In other cases, a company may need to expand its operations or may choose to close one location or department in favor of keeping others. 

Other reasons for business relocations, include:

  • Lower cost of doing business in a different city
  • Better quality of life in one city versus another
  • Current facilities are outdated or overcrowded

Whatever the reason for the relocation, employees who are not able to move, or don’t want to move may find themselves on the roles of the unemployed. When companies leave employees behind, both top performers and those whose skill sets may need to be enhanced are impacted.

#5. Reason for a RIF: Outsourcing operations to other companies or overseas locations

While the reasons to outsource have changed over the years, one thing has remained true: Outsourcing results in a reduction in headcount. The global economy, the rise and sophistication of the internet, and the proliferation of communication tools has made outsourcing a viable alternative for companies seeking to reduce operating costs, increase efficiency, or gain access to capabilities not otherwise available.

The reasons for outsourcing often match the reasons for layoffs in the first place. Since the largest operating cost for an organization is the cost of its workforce, companies looking for ways to remain lean and profitable in volatile markets will seek less expensive ways to get the work done.

When companies choose outsourcing as a solution to their bottom line challenges, the people who are laid off are selected solely on the role they perform within the organization. When a company decides to move its customer service call center overseas, those who are impacted are not poor performers, they are merely the people who held the jobs that are moving to another country.

For HR leaders, hiring managers, and recruiters looking to fill open positions at their organizations, it’s important to keep in mind the difference between employees who have been fired from their previous jobs and those who were simply laid off. If an employee is a poor performer, companies have better recourse than to conduct a layoff. When the work and the position are still required at a company, but the employee is not a good fit, organizations should provide feedback and possibly fire that employee for performance. When the work is gone and the employee is no longer needed, that is when layoffs should occur.

In today’s war for talent, companies that give careful consideration to job candidates who have been laid off from their previous position may be the ones who find that perfect fit. Can your organization afford to make assumptions that may cause you to lose access to more qualified candidates for your hard-to-fill roles?