Analysis: there's no good way to do it, but organisations considering layoffs need to decide who stays, who goes and how to conduct the process
In the last year, many organisations, particularly in the tech sector, have laid off large numbers of workers. Meta (the parent company of Facebook) laid off almost a quarter of their workforce in recent months. Amazon, Google, Microsoft and many others in this sector have been shedding workers by the thousands. Sometimes layoffs occur because of changes in the market or external environment (Kodak shed virtually its entire film division because of the rise of digital cameras), and sometimes they occur because of perceived over-staffing (Twitter).
Regardless of why they occur, these layoffs can help organisations weather economic downturns and market disruptions, but they can also create significant problems for those companies. Layoffs can lead to low morale, reduced job satisfaction, and lower levels of commitment from staff. They not only affect the employees who are laid off, but they also affect those who survive the layoff, who might be wondering will they be next.
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From RTÉ Radio 1's Today with Claire Byrne, Silicon Republic's Leigh McGowran on why Twitter just isn't working anymore
Businesses considering layoffs need to confront two questions – who and how. They must decide who stays and who goes, and they must also decide how to conduct the layoff. In the last year, Elon Musk has conducted a real-life clinic on how not to conduct layoffs at his newly acquired Twitter. He started by laying off almost two-thirds of the workforce, but is now hiring to fill many of these same positions. So many engineers have been laid off that Twitter is starting to encounter technical problems in rolling out new features and even in continuing to provide existing ones.
If layoffs must be done, they should be done with clear strategic intent and with a clearly explained rationale. Having a clear strategy not only helps you in making decisions about who should be let go and who should be retained, it also helps in explaining and justifying the layoff to both the employees who will be terminated and the employees who remain. Doing layoffs quickly has less of an impact on the morale and commitment of the remaining workforce than dribbling out termination notices over an indefinite period.
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From RTÉ Radio 1's Morning Ireland, Una Fitzpatrick from Technology Ireland discusses the impact of the tech sector layoffs
We know more about how to structure layoffs than about who should be laid off. There are several schools of thought, each of which presents unique problems. The most traditional approach – i.e., "last hired, first fired", has several seeming advantages, including the appearance of fairness and impartiality. The disadvantage of this approach is that it tends to harm workforce diversity. Many of organisations have only opened their doors to women and members of many disadvantaged groups, and a "last hired, first fired" policy can derail this progress.
A second approach is to trim highly paid employees. The rationale for most layoffs is economic, and there is more cost-cutting if relatively highly paid employees are laid off than if workers who receive less pay are let go. Unfortunately, this approach has two worrisome costs. First, employees are often highly paid because they have skills, abilities, and experience that are valuable to the organisation, and their loss might hamstring the organisation. Second, employees at the top of the pay scale are often older than other employees, and a strategy aimed at trimming highly paid employees can lead to inadvertent age discrimination.
Read more: How did layoffs become the answer to every business problem?
A third strategy is to trim deadwood – i.e., lay off poor performers. Unfortunately, performance appraisal and performance management systems in organisations have a poor track record for identifying truly good or truly bad performers. Even when poor performers are accurately identified, it is not always clear whether poor performance is a function of the person or the situation. That is, some employees perform poorly because they receive inadequate training, help, or support, and today’s poor performer might become a star given the right situation.
The best approach to deciding who to lay off and who to keep is likely to be a hybrid of several of the above. First, it is critical to make the best assessment you can of each employee’s contribution to the organisation. This is likely to go beyond evaluations of current performance and may require a consideration of the value of the skills and experience particular employees bring to bear. Employees whose compensation greatly exceeds their contribution might be given first consideration when deciding who to lay off.
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From RTÉ News, Meta announces 10,000 global job cuts
Second, it is important to keep in mind the potential indirect effects of layoffs, which can create age discrimination or discrimination against other categories of employees if either highly paid employees or new employees are targeted for a layoff. Third, it is critical to do what you can to soften the blow to the employees who are laid off by providing severance pay or assistance in securing a new job. This not only buys some level of goodwill, it also provides some assurance to the employees who have survived the layoff that the organisation is willing to step up and do the right thing.
There is no good way to do a layoff, but layoff decisions that are cognisant of the value different employees bring to the organisation, the indirect effects of targeting different classes of employees, and the long-term good of employees (both those who are laid off and those who remain) are less likely to create problems for organisations than decisions that fail to consider these factors.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
