Culling with kindness - the right way to go about making redundancies in the tech sector

Cath Everett Profile picture for user catheverett October 21, 2022 Audio mode
Summary:
As global recession looms, it appears the tech sector is not out of the woods yet in layoff terms. So if redundancies become necessary, how can employers ensure they avoid hitting the headlines for all the wrong reasons?

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Although mass layoffs in the tech sector, particularly over the summer months, may appear to be easing somewhat - although Microsoft’s latest round of cuts bumps up the tally - the looming prospect of a global recession could well mean that more pain is on its way.

According to research by Crunchbase News, by mid-October this year, more than 44,000 US tech workers had lost their jobs due to redundancy. Reasons included everything from international supply chain problems to a liquidity crunch among venture capitalists due to rising interest rates. The resultant reduction in access to previously easy money hit start-ups and scale-ups, many of which had significantly overhired, particularly hard.

But some employers also found themselves hitting the headlines because of how they had chosen to let staff go. Digital mortgage lender Better.com is a case in point. The start-up’s Chief Executive Vishal Garg shocked many when, during the December 2021 holiday season, he sacked 9% of his workforce in a reportedly “cold, awkward, one-way video announcement”, stating:

If you’re on this call, you are part of the unlucky group that is being laid off. Your employment here is terminated effective immediately.

Another CEO, who raised eyebrows after axing 20% of the workforce in August, was Snapchat parent Snap Inc’s boss, Evan Spiegal.  He allegedly upset staff initially by simply reading out prepared remarks about the job cuts during a company all-hands meeting, before answering a few pre-selected questions from staff.

A month later, he appeared to make matters worse, however, by telling the employees that remained, whose morale was already “extremely down”, that they should see the restructuring as a chance to “prove the haters wrong” as the company moved forward.

Learning lessons from past mistakes

So what lessons can other employers learn from their mistakes to ensure that, if and when the time comes to take such action themselves, they are well placed to get it right?

The first thing to take into consideration, believes JC Townend, Chief Executive of Adecco Group’s workforce solutions provider LHH, is that when company leaders feel under pressure, they are more likely to say something inappropriate. This means that preparing in advance what they intend to say and how they intend to say it is vital. In a redundancy context, there are five key issues to bear in mind here:

  1. The impact of the situation on the corporate brand, and how investors, clients, consumers and future employees will view it
  2. Whether the organisation wants to create company adversaries or advocates of its former staff, and what behaviour could lead to either
  3. The possibility of legal exposure by saying something off the top of your head or that is ill-thought-through
  4. How to ensure those employees left behind feel reassured and motivated as the company moves forward, which includes dealing with survivor’s guilt
  5. Think carefully about what would make you, as a senior leader, personally feel as though you had done the right thing by employees both past and present.

Townend continues:

It makes sense to get business leaders together with HR and legal directors, and probably your marketing and media person, to discuss how best to explain to people what’s happening and why you’ve had to take these difficult decisions. It’s important to treat them like adults, and in a fair and legal way. All businesses experience hard times and, while it’s not a part of business anyone likes doing, it is a part of business you need to be ready for.

Charles Krugel, a labor and employment lawyer and HR counsellor, agrees:

Keep it simple, to the point and try to be as open and transparent as possible. Layoffs aren’t generally personal so be honest if the company’s not performing well, as otherwise you wouldn’t be doing this. Give people advance notice, tell them they’re free to ask questions, and that you know this isn’t going to be pleasant but you want to minimise the pain and keep it as simple and clean as possible.

This kind of honest, clear and proactive approach will “buy you much good will and faith” and stops damaging rumour-mongering before it can become a serious problem, confirms William Ratliff, an executive at outplacement services provider, Employment Boost. In fact, Ratliff even advocates spelling out the company’s severance policy in advance when times are good, so that everyone knows where they stand.

Acting with humanity

But on top of calling an all-hands meeting in which senior leaders make their formal, company-wide lay-off announcement, he also recommends ensuring middle managers are informed of the situation beforehand - which all too often is simply not the case. They should also be adequately prepared, and ideally trained, to deal both with individual team members’ anxiety and to answer their questions on a one-to-one basis.

As Krugel points out:

Doing this kind of thing with humanity is common sense, and the golden rule is treat others how you’d like to be treated yourself. So ask yourself, ‘Would I prefer to be told I’m losing my job in a five minute, pre-recorded Zoom video, or in person where I can ask questions and hopefully get straight answers?’

The idea of treating people with respect and compassion is essential, not only due to the impact of redundancy on individual’s lives and livelihoods but also for business reasons. Ratliff explains:

Word is going to spread if you don’t handle things well and aren’t effectual in handling people’s needs. There’s been a lot of talk lately about the need to bring your whole self to work and to be people-centric, but making layoffs is often a cold process that can result in the biggest hit of all to your brand. According to an article in the Harvard Business Review, for example, downsizing a workforce by 1% leads to a 31% increase in voluntary turnover the next year.

Moreover, if layoffs are handled in an “egregious, callous and careless” fashion, which includes trying to blame employees for the situation, the backlash is likely to be quite forceful. Probable activities here include former staff talking to the media, posting about their experiences on social media and leaving negative comments on the Glassdoor employer review site.

Another risk generated by disrespectful behaviour is that it tends to leave a bad taste in the mouth of those employees that remain at a time when morale is likely to be low anyway. This situation does nothing for staff engagement, productivity or, as previously mentioned, retention.

Taking a purposeful approach

On the other hand, Townend warns, trying to be too compassionate can have its downsides too. For instance, giving people false assurances that ‘everything will be OK’ when it patently will not is not helpful to anyone. Introducing a voluntary redundancy programme is another mistake. She explains:

You can risk losing your best staff, which isn’t good when you’re thinking about the future health of the company. This means HR should put together clear and fair selection criteria so the business chooses who should go in a very purposeful way. That way the company you’re left with will be lean and outstanding. If not, the danger is you’ll end up in the same situation again.

Another option is to look for redeployment opportunities. Townend acknowledges this approach has “got a bad name” these days as it has all too often been executed poorly. But she believes it can be very effective, not least because staff feel like their employer cares. She explains:

I always recommend that employers do formal skills and capability assessments, and think of it as an opportunity to transition people by giving them appropriate training. It can be costly but if you weigh it up against the cost of redundancy, severance and new hiring, you can actually save a lot of money if you do it right.

An exemplar of this approach is defence contractor BAE Systems, which saved itself £20 million over the course of five years by redeploying 1,300 UK employees.

Whatever tack is taken though, Townend believes that the coming months will not be easy for many employers as redundancies start to mount in the face of likely recession:

There’ll be many more redundancies over the next six months. We’ve already started to see evidence that the market is changing as redundancies start to tick up in the US again, and we’re starting to see it in the UK too.

My take

In today’s uncertain climate, the old adage of planning for the worst and hoping for the best would seem to hold as strong as ever.

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