It's All About The Experience

How can a Manager Properly Implement a Layoff?

My previous blog post about layoffs covered the primary reasons companies lay off employees. Now that we know layoffs are part of business life, what should you do if you have to administer a layoff, and what are the consequences of getting a significant downsizing wrong? Let's start with a to-do list for managers planning a Reduction in Force:

Pay Attention to the WARN Act. If management assigns you the task of organizing a layoff, first review the size and scope of the anticipated layoff. You must know precisely how many people management wants to lay off and how long the layoff will last. You'll want to see if the planned downsizing falls under the WARN Act (Worker Adjustment and Retraining Act.) The WARN Act, passed in 1988, helps people who work for medium-sized and larger companies in the event of a large layoff. The law requires a company with 100 or more workers to give notice before closing a plant or firing a large workforce. WARN says you must tell workers at least 60 days before the mass firing. (For a "mass layoff," at least one-third of the workers must lose their jobs, and the layoffs will last six months or more.) To comply with WARN, you must "warn" employees of the upcoming layoffs. This notice should be in writing and provided to each affected employee at least sixty days before termination. You must also notify the state's dislocated worker unit. Penalties are stiff. Violators may have to pay back wages, benefits, and even civil penalties of up to $500 daily! (WARN Act Compliance Assistance, n.d.) The bottom line? If you have 100 plus employees and are likely to terminate a third or more employees, red lights should go off in your head, and you should involve a lawyer experienced in employment law.

Use A Fair Selection Process. Be sure to base your decision on objective criteria within federal equal opportunity guidelines. A best practice is to use objective measures such as performance reviews or attendance records. Seniority, merit, or skills-based criteria are acceptable for selection; employers should avoid making decisions based on personal biases or preferences. Discrimination based on age, race, gender, or sexual orientation is illegal under federal law. Be sure that performance, not demographics, is the metric used to decide who the company lays off. Any failure in this area can open the company up to damaging lawsuits. (Society for Human Resources Management+, n.d.)

Try Not To Knick Any Arteries Or Vital Organs. Successful downsizing planning is complex because you must think like a surgeon. Your goal with the downsizing is to save the patient and keep the organization alive. It is, therefore, critical to go to your most important sources of revenue (the main arteries in our surgical metaphor) and work backward when deciding how to make your headcount cuts. Look carefully at key differentiators, essential product offerings, and services your customers rely on. For example, suppose your single largest customer, whom you rely on for much of your revenue, maintains its contract with you because of a project in your R&D Department. In that case, you may not want to eliminate that Department with your downsizing. Doing so will likely push the customer to another competitor. Start with your revenue stream and use old-fashioned value-added analyses or zero-based budgeting techniques to determine where to make (and not make) your cuts. Don't shoot from the hip if you still need to learn the business. (See below for an example of a company that did.) Instead, involve subject matter experts or a middle manager who knows it well before deciding what to cut (Jones, 2023).

Give Advanced Notice. Giving your employees advance notice of a layoff will allow you to comply with the WARN Act. More importantly, from a human perspective, it will help soften the blow and give them time to prepare. Remember that the higher up or more complex the role an employee loses, the longer it will take for the terminated employee to find new work. (The WARN Act: What Is It and Who Must Comply With It? Stokes Lawrence, n.d.)

Schedule a Meeting with the Laid-off employee (s). Once you have determined the size of the layoff, you need to inform the affected employees. It is essential to schedule an appointment with the employee to deliver the news respectfully and professionally. During the meeting, explain the reasons for the layoff and thank the employee for contributing to the company. Employers should provide this information in person. While it is essential to protect sensitive company systems by canceling access to those systems for terminated employees, it is also essential to do this in a way that is sensitive to the employee and their need to gather information that will allow them to find a job. (Society for Human Resources Management+, n.d.)

Be Clear and Concise. The employee should understand the reasons for the dismissal and their next steps. Be sure to answer any questions the employee has. Explain the exact timing of the layoff. Review any benefits available after termination and what the employee needs to do to access them. Finally, carefully review severance compensation terms and timing (if any.) (See below.)

Offer Severance Pay and Benefits. A severance package can help to ease the transition and make it easier for a terminated employee to find new employment. It can also lessen resentment and anger from displaced former employees. A hard lesson I have learned over the years is that small acts of generosity at termination do much to lessen the likelihood of lawsuits from angry terminated employees. Severance pay is typically lump sum compensation calculated based on the length of an employee's tenure with a company or as a multiple of the employee's final salary.

Assist with Job Search Efforts. Job search assistance can take many forms. A little generosity of spirit goes a very long way in this activity. It may include providing leads on open positions or writing letters of recommendation. Give your laid-off employees a positive reference highlighting their skills and accomplishments whenever possible. Since many recruiters use LinkedIn, a positive review for former employees can be a valuable asset after departure from your employ. 

Comply With Laws on the Continuation of Health Insurance. If your company offers health insurance, consider continuing coverage for your laid-off employees. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law allowing terminated workers to continue their health insurance coverage. COBRA lasts up to 18 months after they leave their jobs.

Manage the Public Relations  (PR) aspects of the layoff. Companies implementing a layoff should never ignore the PR needs that arise from downsizing. Without information released to the public, employees, suppliers, business partners, and customers will begin to speculate about the layoffs. In an information vacuum, misinformation, gossip, and made-up facts fill the void. To head this off, as soon as possible after departing employees are notified of the layoff, the company should share a carefully worded and detailed press release notifying the public about the size of the layoff, reasons for it, and a few confidence-building sentences about the revised strategy moving forward. In addition to the public relations release, senior management should send a similar email to remaining employees, customers, and suppliers to ease concerns.  

Keep in Touch. Once an employee is no longer with the company, it is often a good idea to check in with the employee occasionally to see how they are doing. Offer assistance if needed! This follow-up, especially to past strong performers, can make it possible to rehire laid-off employees when business picks up. It also may result in that employee returning the favor to you if you lose your job sometime soon!

A Case Study - Mistakes Twitter (Rebranded as "X") Made With Its Layoffs

Now that you know the basics of administering a layoff, let's explore a recent example of Twitter after its acquisition by Elon Musk as an example of a company that didn't manage its firing well. My journalist friends have described the implementation of the Twitter layoffs in terms that range from the sophisticated word "Shambolic" to the more pedestrian "Dumpster Fire." Here are some of the better-documented mistakes made by Twitter in its layoff.

• Twitter (Apparently) Ignored The WARN Act. In January 2021, Twitter announced it would lay off over 3000 employees worldwide as part of a restructuring effort. However, as required by the WARN Act, critics contend many affected employees were given less than 60 days' notice before the layoffs. Many of the affected employees have spoken publicly and on Twitter about how Twitter treated them. Some have said they were given no notice before being laid off, while others claimed only a few days. Many have specifically criticized Twitter for not following the requirements of the WARN Act, and some plan to file lawsuits against the company. (Perez & Mehta, 2022)  Twitter has issued a statement saying it "fully complied" with the WARN Act and gave affected employees "severance, extended health benefits, and career transition support." However, many employees have disputed this claim. These disputes are now in the courts. If regulators find Twitter liable for back pay and benefits, it could owe millions of dollars to its former employees! (Ferris, 2022)
• Twitter laid off too many vital employees too quickly. Another mistake that Twitter made was laying off key employees. Key executive layoff of personnel with necessary knowledge led to a decline in the quality of Twitter's products and services, as there needed to be more people left to do the work properly. Some employees had to be rehired. (Mann, 2022) In one case, comically documented on Twitter, an employee who managed office building badge access was fired. Most employees were locked out without weekend access to the San Francisco office. (Twitter Employees Locked Out of Company Offices Until Monday as More Staff Resign, Reports Say, 2022)
• Twitter layoffs showed little understanding of the roles played by the terminated employees or the business consequences of their elimination. The termination of international moderation teams in foreign countries opened dissidents in those countries to retribution from political enemies. (Bond, 2022)  Critics raised similar concerns at home about the layoffs causing a lack of moderation of extremist posts on the platform. Twitter had laid off content teams staffed by contractors who were experts in hate speech and violence moderation. Critics voiced concerns about what would happen if efforts to moderate content in the U.S., Brazil, Japan, and Argentina disappeared. (O'Brien, M. and Ortutay, B., 2022)  Their fears were realized. Concerns snowballed, with Twitter employees publicly expressing anger and dismay and debating Twitter's viability on the platform itself! More impactful from a business perspective, advertisers began to leave as public concerns about content increased. In particular, advertisers raised worries over extremist content, which increased after the layoffs. Many influential advertisers, including Apple, exited the platform out of concern that their advertisements would appear near extremist posts (Reimann, 2022).  
• Twitter made too many changes at once. Myriad changes included altering the company's strategy, employee policies, leadership, and name (now X.) The seemingly unending conga line of revisions and rework increased employee bewilderment and discomfort. Employees with talent and other employment options left the company as soon as possible, looking for a more stable working environment (Mac & Conger, 2023). This environment made it difficult for Twitter to recover from the layoffs. With so much change happening simultaneously, employees didn't know what to do next. (Schiffer et al., 2023)
• Twitter was not transparent about its layoffs. Twitter also made the mistake of not being open with employees or the public about the downsizing. The lack of transparency led to rumors and speculation about who the company would next lay off and why. It also led Twitter users and employees to debate on Twitter whether the platform would survive. The fear, doubt, and uncertainty triggered an exodus of users to other platforms and opened the door to creating the competing Facbook-owned Threads. (Hoover, 2022)

Twitter has lost a substantial portion of its market value since Elon Musk took it over, partly due to how he managed the Twitter layoff. To err is human; to learn from our mistakes (and those of others) is divine! Rarely has a series of missteps been more public than Twitter in its recent layoffs. Keep best practices and lessons from Twitter in mind if you ever have to manage a downsizing!

References

ABC7 San Francisco. (2022, November 18). Twitter employees locked out of company offices until Monday as more staff resign, reports say. ABC7 San Francisco. https://abc7news.com/elon-musk-hardcore-twitter-resignations-ultimatum/12465940/

Bond, S. (2022, November 30). Twitter's chaos could make political violence worse outside of the U.S. NPR. https://www.npr.org/2022/11/30/1139924914/twitters-chaos-could-make-political-violence-worse-outside-of-the-u-s

Capel, C, and Carroll, S., (2022, November 14). Twitter Must Cut Extreme Content to Lure Back Ads, Sorrell Says. Bloomberg. https://www.bloomberg.com/news/articles/2022-11-14/twitter-advertisers-worry-about-extreme-posts-s4-s-sorrell-says

Ferris, C. (2022, November 4). What is the WARN Act, and what does it do with the Twitter Layoffs? Newsweek. https://www.newsweek.com/warn-act-have-do-twitter-layoffs-1757119

Hoover, A. (2022, October 28). Twitter Users Flock to Other Platforms as the Elon Musk Era Begins. WIRED. https://www.wired.com/story/twitter-users-flock-to-other-platforms-as-the-elon-musk-era-begins/

Jones, H. (2023, March 15). TechCrunch. www.techcrunch.com. Retrieved January 13, 2024, from https://techcrunch.com/2023/03/15/zero-based-budgeting-a-proven-framework-for-extending-runway/

Mac, R., & Conger, K. (2023, April 7). Senior Twitter lawyer resigns, the latest in a series of executive departures. The New York Times. https://www.nytimes.com/2023/04/06/technology/twitter-lawyer-resigns-christian-dowell.html?unlocked_article_code=1.N00.oZvV.pla1i0YB8UyG&smid=nytcore-android-share

Mann, S. (2022, November 7). Twitter is now asking DOZENS of newly laid-off staff to COME BACK to work on new products. Mail Online. https://www.dailymail.co.uk/news/article-11396581/Twitter-asking-DOZENS-newly-laid-staff-COME-work-new-products.html

Obrien, M, and Ortutay, B. ((2022, November 11) Musk's latest Twitter cuts: Outsourced content moderators. (2022, November 14). AP NEWS. https://apnews.com/article/elon-musk-twitter-inc-technology-misinformation-social-media-a469130efaebc8ed029a647a149c5049

Perez, S., & Mehta, I. (2022, November 4). Twitter sued in a class action lawsuit over mass layoffs without proper legal notice. TechCrunch. https://techcrunch.com/2022/11/04/twitter-faces-a-class-action-lawsuit-over-mass-employee-layoffs-with-proper-legal-notice/

Reimann, N. (2022, November 28). Musk Says Apple Cutting Twitter Ads—Here Are The Other Companies Rethinking Their Ties. Forbes. https://www.forbes.com/sites/nicholasreimann/2022/11/28/musk-says-apple-cutting-twitter-ads-here-are-the-other-companies-rethinking-their-ties/?sh=7a948ef07032

Schiffer, Z., Newton, C., & Heath, A. (2023, January 17). Inside Elon Musk's "extremely hardcore" Twitter. The Verge. https://www.theverge.com/23551060/elon-musk-twitter-takeover-layoffs-workplace-salute-emoji

Society for Human Resources Management+. (n.d.). Selecting Employees for Layoff. shrm.org. Retrieved January 28, 2023, from  https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/selectingemployeesforlayoff.aspx

Society for Human Resources Management+. (n.d.). Checklist: Reduction in Force (RIF) Strategy and Selection. shrm.org. Retrieved January 28, 2023, from https://www.shrm.org/resourcesandtools/tools-and-samples/hr-forms/pages/downsizingchecklist.aspx

Starner, T. (2022, November 10). The HR troubles with Twitter's layoffs—and how to avoid them. HR Executive. https://hrexecutive.com/the-hr-troubles-with-twitters-layoffs-and-how-to-avoid-them/

The WARN Act: What Is It and Who Must Comply With It? | Home | Washington Law Firm | Stokes Lawrence. (n.d.). https://www.stokeslaw.com/news-and-insights/stokeslaw-briefs/the-warn-act-what-is-it-and-who-must-comply-with-it#:~:text=In%20general%2C%20employers%20must%20give,employees%20for%20the%20notice%20period.

WARN Act Compliance Assistance. (n.d.). U.S. Department of Labor. https://www.dol.gov/agencies/eta/layoffs/warn

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