Wartime Leadership 4: Layoff Day

Many companies savaged by loss of sales due to Covid-19 have already been through a first round of layoffs. Even with talk of easing stay at home restrictions, the revenue outlook for many businesses is looking bleaker now as companies are still grappling with prospects of a long recovery.

If you’re readying another round of headcount reduction, it’s important to go as deep as you possibly can to keep the business afloat with defined revenue and available cash. The preparatory steps were outlined in my previous posts Survival Assumptions and Picking the Wartime Team.

We’ll presume you’ve thought through whether to furlough staff (which may keep employees on benefits for those most likely to return) versus outright layoffs (for those less likely to return in the immediate future). Both sets of employees would be eligible for state and federal unemployment benefits, including additional benefits provided by the Federal CARES act. Lots of guidance is available on those topics. Here is one example for New York State employers.

This post is about the human interactions on layoff day. All team members, departing and retained, deserve your respect and sensitivity. The right approach involves coordinated steps for consistent company wide execution.  I’m drawing from experience in having been through this painful process too many times in TriNet’s struggle to overcome the dot com blow up.

All Hands Announcement  

A morning company “All Hands” meeting is the best avenue to answer the most important question and ensure it is communicated consistently – why are we doing this?

Even though everyone knows that Covid-19 is affecting the business, the extent to which that has affected your revenue line is probably not well understood throughout the ranks. If you haven’t previously shared financial information company wide, then the connection between revenue and what’s available to pay for salaries may also be a big unknown for those not directly involved in the budgeting process.

The All Hands should provide staff with an objective grounding in financial and operating metrics that stresses how significant the difference is from the pre-pandemic world to the currently uncertain future. It’s important that the full team be aware of the non-people-related costs you’ve already stripped out. Ideally, the contrast between the pre-pandemic and the wartime plan ties to elements of your Survival Assumptions. These critical items have to be clear so everyone understands the need for dire action and the layoffs occurring that day.

Following the facts outlining the need for drastic change, you can describe the process by which people will be informed and highlight steps the company is taking to help those being released.

Close with your personal, most sincere thoughts about what taking these reductions mean to you. There’s no perfect script. Your openness, accountability and vulnerability will impact how people remember your leadership at this most critical time.

1:1 Discussions with released team members

Rule one about informing people being released is never deliver the first news by letter, email, text, slack or voicemail. Since the pandemic precludes in-person meetings, videoconferencing is the best option, with a direct phone call the only alternative. Anything less smacks of callousness. Departing team members will never forget their separation experience and will likely share with others how the company treats those it let go.

Ideally, these are one on one discussions led by an upline manager or executive, not a job for HR or someone not involved in managing the team member being released. In larger companies with entire departments being shut down, it is possible a group meeting with several people on the same session may be necessary. In situations where the manager or executive is also being released, the notification responsibility rolls up to the next level – all the way up to the CEO.

While you might plan on a layoff notification taking 10 minutes, most will require 5 minutes or less. Even though the earlier All Hands meeting set the stage, if you’re the team member receiving official notice your income is being cut off, it’s simply not a discussion most people have a desire to prolong.

Neither managers nor the team members want to be in these meetings. Some will seek to avoid them. It’s up to the CEO to drive the requirement for personal interactions and ensure managers are provided an appropriate HR approved script that is followed consistently throughout the company.

This includes providing written documentation on the details for timing and offboarding process, impact on the employee’s benefits and guidance on filing for unemployment benefits. Doing so allows the procedural part to be mentioned and passed along in writing, and offering the opportunity to answer questions. HR may also have a list of Frequently Asked Questions that managers can refer to.

After the formalities are done, comes the important topic of what the manager can do to assist the team member being released. Managers can deliver great value to a released team member in a number of ways. For instance, writing a recommendation that appears on the employee’s LinkedIn profile and showing  readiness to support job search efforts are basic steps. Going into details at this stage is not the point, as most terminated employees won’t remember them. What the employee will remember is how sincere and compassionate you were in being sensitive to their situation. A personal follow up the next week to show your support will be a better time to talk about specific ways that you can help them.

Recapping With Survivors 

By the end of the layoff day, all the survivors will be emotionally exhausted. A close of day All Hands meeting for those who remain is your first opportunity to address the survivors’ grieving process as well as set the tone for what’s ahead.

Recognize that while survivors are grappling with a sense of relief as well as regret and sadness over the loss of colleagues, some of which may have been close friends. They may also be concerned about losing key contributors whose work will now be distributed among a smaller team.

This meeting is the CEO’s opportunity to lay out key elements of the wartime strategy to answer top of mind questions like “How are we going to survive this? What are we going to do differently?”

Possible topics might include:

  • Department and role consolidations (described in Picking the Wartime Team) and what will be necessary to put these changes in play while minimizing disruption to customers.
  • What new revenue opportunities will you be evaluating? Are there some new service opportunities appropriate for the pandemic environment that are suddenly in demand?
  • Back burner pet projects that had longer term implications – explaining the lens used to consider resource allocations beyond fulfilling immediate customer or near-term revenue.
  • Looking at shifting some fixed compensation to variable, as well as hours reduction and a re-examining of paid time off policy.
  • Closing with a very clear set of wartime priorities and a reminder that everyone has the opportunity to contribute. This is a great time to roll out changes that enable sharing across department lines and push ideas and opportunities upwards.

Leave time for Q&A and in these remote situations, define your process for Q&A to be accomplished virtually. There are some questions that are best addressed individually, while others require the CEO speaking to all in attendance. A chat moderator may be helpful in deciding which questions are suited for a group response.

When you get to Q&A, it’s guaranteed to include the most top of mind issue for all: “Will there be any more layoffs?”

Steer clear of making promises you may not be able to deliver on. It’s your customers buying that drives revenue and the prolonged period of uncertainty will have implications you simply can’t predict.

Like other rookie CEOs facing their first massively secular downturn, I fell into the trap of feeling like my making a commitment that we’ve put the pain behind us would instill confidence in survivors. But as TriNet’s revenue slump continued to deepen, it became obvious our cuts were not deep enough. In retrospect, my answer only created further questions about my leadership because I had set expectations I could not deliver on.

Having to go through layoff agony multiple times is my deepest regret as CEO. Especially with regards to how I set expectations about our recovery. In response to the “Will we have any more layoffs?” I should have responded truthfully along the lines of: “I can’t make promises about the pace our customers are going to resume buying. We’ve cut really deep so we don’t have to do this again. It’s a coordinated effort that needs buy-in from every single person here. That’s the only way we get out of this with the very talent we have on board today.”

My friend Jeff Hyman is a superstar recruiter, Silicon Valley serial entrepreneur and former TriNet client. He went through his own dot bomb experience and has a terrific video capturing elements of Wartime Leadership. Scroll ahead to 58 minutes for a quick look at survival assumptions followed by guidance on your D-Day meeting with survivors.

You can also take advantage of TriNet’s Business Resiliency and Preparedness Center for free access to Covid-19 related strategies and resources for Small to Medium sized Businesses.

The next post in this series will expand on resetting expectations and navigating survival themes – including organizational changes needed for wartime victory.

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