In my career I’ve done 6 turnarounds. They were all successful, but the most painful thing that I had to go through was laying off employees that I could not afford to pay. As one who has had to make cuts many times my heart goes out to you. The good news for me is I no longer run companies so I don’t have to do layoffs. The bad news is I coach a lot of CEOs and I have to coach them on how to deal with the need to do layoffs.

Layoffs: one big one or a number of smaller ones?

One big one. There is little more that de-motivates employees than wondering if they are next. Productivity and loyalty are the benefits of this approach and they more than make up for the cost of recruiting replacements if too many cuts are made.

There’s a lot more than meets the eye

When planning layoffs, companies are thinking about a lot of issues around the situation including what goes into a severance agreement, how to train managers and how to conduct layoffs. A company must consider whether to do layoffs in person or video call, how to deal with vocal employees that will use social media to criticize the company, the company reputation, severance pay and accelerated stock vesting, and that’s just the tip of the iceberg.

1.    Company Reputation—Survivability trumps. You do not control many aspects of company reputation damage, so do the best you can with those aspects of a layoff you do control.

2.    Message Control—The Employee base (including those you want to keep) will be turned off by different messages coming from different managers that are responsible for doing layoffs. Make the message short, with heart, and indicate that the environment is causing the layoff.

3.    In Person vs. Remote—In person is the most humane if possible. Using e-mail or social media are inappropriate.

4.    Vocal Employees—They’re going to do what they’re going to do independent of how they are treated. Don’t spend time worrying about their reaction to your layoff or your process. Whatever damage they attempt to create through company channels like Slack and social media will soon be forgotten.

5.    Severance Compensation—Provide as much severance as you can afford. However, regarding stock options, they are for rewarding employees for helping build value in your company, and departed employees cannot help in this regard. In addition, if they exercise their options you have non-employee minority shareholders who may be able to cause some kind of problems for the company in future financings or an IPO.

Considering layoffs in your company? Let’s walk through the process together, book a call here.

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