How to downsize with dignity and grace

You’re the CEO. This is your worst nightmare.

You were supposed to drive hockey-stick growth. But that’s not happening, at least not right now. Whether you’re changing strategies, tight on cash, looking to get acquired, or need to close a business unit, you’ve decided that you’re going to downsize, and you need to tell your company.

“grayscale photo of people on white pavement” by Zac Ong on Unsplash

While delivering downsize news is always difficult, how you deliver the message matters more than many CEOs realize. The way you treat your team members — both those who will be terminated and those who will remain — determines whether your actions end up improving your company’s prospects, or destroying both morale and enterprise value in one fell swoop.

To help make sure that you, your team, and your company manage this difficult transition as smoothly as possible, we’ve gathered some tried-and-true best practices:

1. Downsize only when absolutely necessary. Communicate to your team that you have painstakingly considered all other options but couldn’t make them work. If you fail to explicitly recognize the gravity of the situation you’re in, you risk exacerbating the blow both to employee turnover and to your future recruiting efforts. When you share downsize news, share clearly that you absolutely needed to cut valued team members.
2. Notify affected employees immediately. Before you broadly announce that a downsize is coming, identify who specifically will be affected, and tell them that same day. Uncertainty leads to chaos, lost productivity, and resentment. If same-day notification isn’t possible, keep the time lapse between delivering the downsize message and identifying those who will be affected as short as possible.
3. Share the news as personally as possible. Live, in-person conversations are better than video calls, emails, or instant messages. Sensitive issues deserve dedicated time and attention. Don’t forget: downsize events directly affect people’s careers, finances, passions, work visas, and healthcare. The closer you can get to delivering your news in person, in real time, the better. Dedicate as much time as possible, supported by your HR and People teams, to follow up with recordings, emails, and question & answer sessions.
4. Acknowledge the impact on your team members’ lives. Layoffs can have disastrous implications for people who depend on your company’s sponsorship to stay in the country, or on your paychecks to cover their bills. Recognize that directly by resisting the temptation to downplay the scenario. If you refer to your layoffs as affecting “just a small percentage of the firm” or “an isolated department,” you aren’t re-assuring anyone; you’re inadvertently saying that your company treats employees as disposable resources rather than as people.
5. Be generous with severance, introductions, and post-layoff (outplacement) resources. Despite unfortunate circumstances, you have a golden opportunity to help the people affected. Offer as much severance as you can. Ask team members up and down the org to go out of their way to make introductions within their networks. And line up outplacement services that will provide the best possible resources for affected employees. If you’re an SF Bay Area tech company, your search can be brief: Layoff-Aid for Downsizing offers a free service. Simply refer affected employees to Layoff-Aid.com to provide them with best-in-class resources, including a dedicated network of SF Bay Area startups who are excited to hire the talent that you are no longer employing.

We recognize that restructuring is a frequent tactic in the business world, particularly in high-pressure tech startups. But we have also heard of poorly-executed downsizes in which team members watch world-class coworkers and friends get let go through no fault of their own, leaving those who remain both shocked and thinking that it could have been them:

“I am more worried about the culture and people left going forward than for those who have lost their jobs.”

Your goal as CEO is to build a lasting company and stay true to your mission. If you have to downsize, you must treat your outbound employees with respect if you want to stand a chance at coming out ahead. Motivate your employees not just when times are good, but when times are tough. When you think about what you need most to achieve your goals, you already know the answer is “amazing people.” Your most important job as CEO is team-building, which sometimes includes letting people go. How you handle that matters, and we hope this helps you downsize with dignity and grace.