Layoffs is one of the most painful process any company can go through and it effects everyone from people who are let go (and their lives disrupted as a result of it), to people who stay back (and are demoralized) and the management who has to lead them post layoffs. While this process is as painful as it is, it is sometimes needed and unavoidable.
I have been involved in the layoff process directly or indirectly for the last 10 years at Verizon, Sourcebits, Yahoo and Personagraph. I have first hand knowledge of what leads to the necessity, what goes on during the planning phase, during layoffs and post layoff environment. Based on my experience I have seen the employees falling into one of these three groups
Layoff group
These are the people who the company has decided to let go for various reasons. Sometimes it is not at all about performance but rather change in direction. Sometimes it is about cost cutting and your project might not have made the cut.
Attrition group
These are the people you definitely don’t want to loose, but they are going to quit. Most of these people are from your top 20–40% who will quit because they no longer thinks the company is growing or they have lost trust in the future. I have seen time and again that companies don’t realize that the layoffs is always a 2 step process. The people you let go and the people who will quit. One is always followed by the other almost immediately within the 3 months of the layoffs.
I am amazed how many companies don’t get this. They get carried away by the target reduction goal of certain percentage without realizing that you are going to loose more people by attrition as a direct effect of these layoffs. If the target goal is 20% reduction, you are going to loose another 10–20% by the means of attrition and these most likely are going to be your top performers. I always recommend companies to do 70% of the target reduction and let the process of attrition (as affect of layoffs) get you to the remaining % target.
Remaining Employees
These are the employees who are obviously in a state of uncertainty due to the layoffs and post layoff attritions. Obviously companies do their best to handle this upfront by coming up with the transition plan and series of activities to continue the momentum in the company. Some companies handle the layoffs on a more continuous basis like Netflix which has the policy of “Satisfactory performance is rewarded with a generous severance”. Other companies like Goldman Sachs have a standing policy of bottom 5% are let go during every performance cycle.
Irrespective of the reasons for the layoffs, companies need to keep the above in mind and plan well as it can take life of its own and get out of hand. Be mindful of the fact that a certain % of employees will quit and there is nothing you can do to stop it. Take this into account during the planning phase of layoffs.
