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Navigating Workforce Reductions: A Framework for Organizational Leaders


Layoffs are among the most challenging situations that organizational leaders must face. With downturns in the economy or changes in business models, difficult decisions often have to be made to reduce costs through workforce reductions. However, layoffs come with significant human and financial costs that must be thoughtfully navigated


Today we will explore how leaders can best manage layoffs in a humane way, from start to finish, including pre-layoff planning, conducting the layoffs, communicating with remaining employees, and post-layoff support. By following best practices at each stage, leaders can minimize disruption and help the organization and its people transition through this difficult time.


Pre-Layoff Planning


Establish Clear Criteria: The first and most important step is establishing clear, objective criteria for determining which positions or employees will be affected by layoffs. Research shows that layoff processes seen as fair reduce the negative impact on morale among remaining employees (Alexander & Ruderman, 1987). Criteria can be based on factors like performance, skill sets, recency of hire date. It's critical these criteria are defined before any employee names are considered to avoid perceptions of bias or favoritism. Documenting the criteria used provides transparency and a defendable process if challenged.


Outplacement Support: Organizations should explore providing outplacement support services to assist laid-off employees with things like resume writing, interview coaching, job searching (Brockner, Grover, Reed, & Dewitt, 1992). This offers tangible help during a difficult transition and signals the company still values their contribution despite the layoffs. Tech company Cisco, for example, provides subsidized career coaching and access to job boards after layoffs to aid in reemployment.


Severance Packages: Severance packages are another way to ease the hardship of job loss. Research shows generous severance relieves stress for laid-off employees and their families compared to minimal or no severance (Moser & Kalton, 1971). Packages should consider factors like tenure, age, financial obligations. A software startup laid off 20% of its workforce but offered 4 months of salary as severance, plus benefits, citing it as important to do right by long-term employees.


Conducting the Layoffs


One-On-One Meetings: The best approach is to inform each affected employee individually through private meetings rather than group announcements (Appelbaum, Patton, & Shapiro, 1987). This allows for empathy, answers to questions, and signing of paperwork. Meetings should be led by the employee's direct manager where possible for a more personal touch. An auto manufacturing plant held individual exit interviews for each of 500 laid-off workers conducted by department heads over several days.


Communication Materials: Packages with relevant information support the one-on-one meetings, including details on severance amounts and timing, benefit continuations, outplacement services available. A letter from leadership reiterating their appreciation for contributions can provide closure. Information on filing for unemployment and other resources eases the transition. An airline provided laid-off pilots with a comprehensive handbook covering all administrative and support aspects after terminations.


Temper the Message: While honesty is needed, the delivery of layoff news should emphasize it is due to difficult business circumstances rather than performance-related when applicable (Greenhalgh & Rosenblatt, 1984). A soft tone expressing regret prevents further damage to morale or reputation. The CEO of a retail chain that laid off 10% of its staff sent a company-wide email emphasizing the layoffs were necessitated by the pandemic's economic impact, not work quality.


Supporting Remaining Employees


Timely and Transparent Communication: Research shows over-communicating with remaining employees during layoffs reduces uncertainty and stress (Adams, 1965). Leaders should clearly explain the reasons for layoffs, the criteria used, and plans going forward in multiple forums to prevent rumors. Town hall meetings allow for Q&A. A construction firm laid off one-third of field staff but leadership gave daily briefings to all employees throughout the process for continual updates.


Address Morale and Productivity Concerns: Layoffs damage morale and productivity if not properly addressed (Datta, Guthrie, Basuil, & Pandey, 2010). Leaders can acknowledge natural anxieties but also emphasize the organization's mission and viability. Expressing confidence in employees' abilities and continued job security reassures those staying. Bonus or recognition programs can boost morale. A healthcare provider sent handwritten thank you cards to all workers after layoffs to reinforce their value.


Manage Increased Workloads: Research shows remaining employees often must absorb the work of those laid off, risking burnout if not managed (Barton & Viard, 1996). Leaders should be transparent about workload changes and distribution. Temporary help, hiring freezes, or postponed projects may ease the burden. Acknowledging the extra effort required shows appreciation. An engineering firm brought in freelance help for 3 months after layoffs to support staff handling 20% more assignments.


Post-Layoff Support


Outplacement Follow-Up: Laid-off employees benefits from ongoing career support even after formally leaving the organization. Periodic check-ins assess their job search progress and needs. Continued access to career coaches and company job boards extends help. Halliburton follows up with laid-off oilfield workers for a year via email to provide motivation, advice, and new job leads.


Consider Rehiring: As business needs change, leaders should consider approaches to potentially rehire from the laid-off pool when suitable openings arise. This requires tracking departed employees' skillsets and contact info. It builds goodwill among the alumni community. When demand rebounded, an automaker reached back out to production supervisors laid off 6 months prior as positions reopened on new lines.


Reference Support: Previous employers serve as crucial job references, so leaders should coach managers on providing positive ones for laid-off workers when contacted by prospective companies. Honest, encouraging references respect former contributions while aiding new starts. Leadership at a healthcare provider implemented mandatory reference training for all managers to ensure glowing recommendations for former colleagues.


Conclusion


Layoffs present immense challenges for organizations and individuals alike. However, following research-backed best practices can ease the difficulty of layoffs at each stage from planning to post-layoff follow through. With transparency, objectivity, empathy and care for all impacted, both current and past employees, leaders can navigate these necessary yet trying situations in a principled manner that minimizes disruption and maintains high productivity, loyalty and reputation over the long term. By thoughtfully applying practical tools and examples shared here, organizations weather workforce reductions with maximum consideration for people.


References


  • Adams, J. S. (1965). Inequity in social exchange. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 2, pp. 267-299). New York: Academic Press.

  • Alexander, S., & Ruderman, M. (1987). The role of procedural and distributive justice in organizational behavior. Social Justice Research, 1(2), 177-198. https://doi.org/10.1007/BF01048015

  • Appelbaum, S. H., Patton, E., & Shapiro, B. T. (1987). The timely and accurate evaluation of employee performance. Personnel Administrator, 32(11), 73-82.

  • Barton, M., & Viard, V. B. (1996). Technology shocks and aggregate factor prices. Economic Journal, 106(435), 381-400. https://doi.org/10.2307/2235338

  • Brockner, J., Grover, S., Reed, T., & Dewitt, R. (1992). Layoffs, job insecurity, and survivors' work effort: Evidence of an inverted-U relationship. Academy of Management Journal, 35(2), 413-425. https://doi.org/10.2307/256380

  • Datta, D. K., Guthrie, J. P., Basuil, D., & Pandey, A. (2010). Causes and effects of employee downsizing: A review and synthesis. Journal of Management, 36(1), 281-348. https://doi.org/10.1177/0149206309346735

  • Greenhalgh, L., & Rosenblatt, Z. (1984). Job insecurity: Toward conceptual clarity. Academy of Management Review, 9(3), 438-448. https://doi.org/10.2307/258299

  • Moser, C. A., & Kalton, G. (1971). Survey methods in social investigation. AldineTransaction.

 

Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.



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