Leading Through Layoffs: Handling Downsizing with Care & Compassion

Saying goodbye is a natural part of the lifecycle of employment and running a business. Whether driven by changes in your business or a difficult economic environment, layoffs are inevitable in the long run. One of your most important responsibilities as a leader is setting the tone around challenging issues, and offboarding employees is a true test of leadership.

By Kevin Keegan

Economic uncertainty has taken root around the world, with mass layoffs one of its most troubling consequences. According to layoffs.fyi, companies in the previously booming technology sector are among the worst affected; close to 100,000 employees in the industry lost their jobs in the first six weeks of 2023. Leadership comes under particular scrutiny during such times.

With downsizing featuring so heavily in the news, it can be easy to get caught up in despair and forget that employee departure is a natural part of business. As strategies mature, certain functions become less valuable, with affected employees forced to redirect their careers. While difficult to stomach in the short run, this dynamic opens the door to long-term progress.

Data from the US Bureau of Labor Statistics highlight that it’s not uncommon to see over a million Americans lose work due to mass layoffs in just one year. In particularly bad years, such as 2001 (the bursting of the dotcom bubble) and 2008 (the global financial crisis), over two million US employees lost their jobs in this way. However, some business models and economies adapt and bounce back, and the dip in the tech sector will even out as well.

Nevertheless, letting employees go remains among the most challenging aspects of a leader's job, from a business, practical and human perspective. It’s vital to understand the psychology of those affected, the broader organisational impact and proper people practices before executing an offboarding strategy. A well-managed, considerate approach can allow departing employees to transition to the next stage and provide support for remaining employees, ultimately minimising disruption to your business.

The Challenges Posed by Large-Scale Layoffs

Although your approach will vary depending on circumstance, the leadership required and principles that underpin it remain the same; offboarding employees requires leadership behaviour based on emotional intelligence, compassion and integrity.

Executives come under a huge amount of pressure and scrutiny when they carry out large-scale layoffs. There is concern about departing individuals, the remaining team and impact on the brand. Even if part of a larger effort within your organization, it’s a time when your qualities as a leader will be carefully and closely judged.

Brand Management

There have been plenty of stories circulating about mass layoffs over the last few months, and many major corporations have suffered damage to their brands over reports of careless practices when terminating employment. Whether through traditional outlets or social media, these stories spread quickly and stick hard.

A now-infamous example is that of Nicole Tsai, a former Google employee who learned she had been laid off in January 2023. During her employment with the tech giant, Tsai used her TikTok account to extol the virtues of the company and her positive experience of working there. When she lost her job, Tsai used her platform to describe learning about her situation via a text message from her boss. She revealed that she lost access to her company account (including her email and calendar) the same day, and complained that she received no advance warning. The video racked up over four million views in a week.

Tsai’s case illustrates how former advocates can quickly turn on you after a negative layoff experience, and how devastating the resulting brand damage can be. Communication services like live streaming have made this impossible for executives to contain, so it’s crucial that you judge your approach to large-scale layoffs correctly from the outset.

Taking Responsibility

Employees in a large-scale layoff appreciate some level of acknowledgment of executive mistakes if these contributed to the situation. Meta CEO Mark Zuckerberg’s message to the company’s workers following the announcement of 11,000 layoffs provides a good example. Zuckerberg stressed he wanted to “take accountability,” sharing that he had misjudged the potential for market growth and invested too heavily in certain areas of the business.

How To Carry Out Layoffs

Part of succeeding as a global organisation is recognising that legal requirements across the world vary extensively. It is also vital to understand the cultural sensitivities associated with employment, and termination of employment, in different countries.

Taking direction from your chief people officer and general counsel is vital in the early planning stages. Best practice also suggests the development of a system to address the legislative and cultural factors that impact different countries; an understanding of these factors should inform your approach and messaging.

Care and consideration at this stage can avoid unnecessary legal challenges, as well as operational disruption and brand damage.

In a nutshell

Understand local legal requirements – seek advice from General Counsel.
Be aware of cultural sensitivities around employment in different countries – seek advice from your chief people officer or HR leader.
Address the impact on all groups: employees being laid off, remaining employees, local community, shareholders/stakeholders.
Understand the impact on your operations (e.g. supply chain) and brand, and plan approaches to minimise this.
Articulate the business case and acknowledge accountability, while being cautious of how much to share about business.
Be prepared for different emotional reactions; expect the unexpected.
Manage the impact on your own emotions and energy by carving out space and doing meaningful activities outside work.
Allow for a grieving period then refocus employees on the vision, mission, key strengths of the organisation and their role in its future.

It's Not You, It's Me

It’s important to remind departing employees that termination is a business decision. While people will inevitably take it personally, you need to focus on reinforcing the idea that the decision did not come about because of some character deficit on their part.

A 2020 report from the American Psychological Association (APA) cites a broad range of studies showing the negative impacts of job loss and unemployment on mental health. The risks are most pronounced for individuals with limited resources, for whom job loss will immediately threaten their ability to support themselves. However, even those who retain relative financial stability can suffer from mental health issues due to the lack of routine, purpose, and social engagement through employment.

Consider the Individuals Affected

Everyone receives bad news differently; some employees will respond with sadness or despair, while others will become angry. It can be a good idea to ‘expect the unexpected’.

The reason for dismissal is relevant here. If you’re letting someone go because of gross misconduct, there’s no need to be overly generous with time spent on discussion or the severance package you offer. However, if the person simply wasn’t suited to their role or is part of a larger layoff, you should consider offering more support.

There should be a general level of consistency in how you handle discussions about severance; you should always maintain a professional demeanour, be clear and direct, and offer whatever level of support you feel is appropriate. Taking individual considerations into account, where possible, is a good way to keep things running smoothly.

Put Your Own Life Vest on First – Look After Yourself

Handling layoffs and terminations is an emotionally draining process. As an executive, there are a number of actions you can take to make things easier on yourself, including:

Being thoughtful about your schedule. Consider postponing non-urgent meetings to give yourself space.
Practice self-compassion outside work, such as spending time with loved ones or doing leisure activities you enjoy.
Engage in the usual techniques for positive stress management, such as exercise and meditation.

As is the case with any difficult process, handling terminations gets easier the more you do it. However, letting people go is a highly sensitive process, and it’s crucial to retain an awareness of this. Don’t let yourself become desensitised to the distress of departing employees; you may come across as unsympathetic.

How Downsizing Affects Those Who Remain

A study that surveyed 4,172 workers who survived a corporate layoff revealed some eye-catching statistics about stress and other issues. Almost three quarters reported a decline in their own productivity following the layoffs, while nearly 70 percent said the overall quality of the company’s offering got worse. This has come to be known as ‘survivor’s guilt’.

The study also revealed that 87 percent were less likely to recommend their company to others. This flies in the face of the presumption that surviving workers might feel grateful they kept their jobs while others lost theirs. You must be prepared for the likelihood that a percentage of your remaining workforce will blame you and the business for the loss of their co-workers, even if the layoffs were unavoidable.

The Employee Experience

Employee experience is a concept that has become popular in business circles in recent years. Studies have repeatedly shown that happy workers are more productive, so leaders increasingly ensure their employees are satisfied in all aspects of their work.

A 2021 report from McKinsey explored how expectations around employee experience have changed since the COVID-19 pandemic. Factors like work organisation, flexibility, physical environment and social climate were all of primary importance.

A poorly judged approach to downsizing or terminations will have obvious negative impacts on the employee experience. Taking the time to execute severances properly will minimise dissatisfaction and uncertainty among remaining employees and support a quick and effective recovery for your business.

How Transparent Should You Be?

Your remaining employees will appreciate transparency in explaining the reasons for workforce reduction, but there may be details you’d prefer to keep private for business reasons, so think carefully about how much you can share. This is particularly important for further layoffs; employees will naturally be concerned about their job security.

Authentic leadership is about having a genuine relationship with employees, and a good leader walks a considered line between being honest and oversharing. In large-scale terminations, it’s important to give employees space to vent and process their emotions about losing colleagues, how work will be completed, project concerns and other issues.

In the event of a one-off exit, you need to have a carefully considered message with reasons for the employee’s departure. Depending on the circumstances, it is often advisable to say you’re not in a position to answer questions or share further information.

Moving On

Employees moving on is part of the lifecycle of any organisation, however, terminations on any scale can be traumatic. Time heals and people move on, but good leaders need to know how to accommodate a natural grieving process.

Emotional Intelligence

Layoffs, whether individual or large-scale, are highly personal for the departing individual and those who remain. Compassion and care are the hallmarks of a good leader and are key to inspiring trust and confidence in your people. Remember, people choose to follow leaders.

Should You Take a Progress-Oriented Approach?

While it’s important to allow a period of grieving, it’s critical that organisations don’t move on too quickly, as this will be seen as inappropriate.

Equally, you cannot allow an indefinite mourning period to ensue. You must lay out a path to progress and focus people on what needs to be done. The key is in striking the right balance.

Deal in Hope

It’s critical to remind employees that better times lie ahead. Stress the vision and mission of the business, what needs to be done, and the underlying strengths of the organisation. The idea of pragmatic optimism may be of value here; remind employees that while circumstances may be difficult, positive thinking is crucial to success going forward.

Call to Action

While it’s important to acknowledge the difficulties remaining employees face, it’s equally crucial to rally employees and ask for their support. This needs to be done carefully, in a way that isn’t demanding. Encourage workers to recognise that no company can function without its workforce, and the future success of the business lies in their hands.

The Bottom Line

Downsizing is an unpleasant but an inevitable necessary part of business. Businesses will always need to make dramatic changes to their workforces when financial realities demand it, and doing this is a critical test of leadership. A considered and thoughtful approach in terms of project management, your leadership of those around you, and your ability to keep showing up when things are at their most difficult, is crucial for everyone affected.

Managing layoffs with courage, care and compassion as well as efficiently and with one eye on the future will make you a more effective leader. No successful company has lasted for generations without weathering tough times, and the ability of a leader to keep moving through challenges is a decisive factor.

As Sir Ernest Shackleton, the legendary British explorer who led three expeditions to the Antarctic but is known for his fourth failed expedition and an exemplar of leadership in adversity said:

“The quality I look for most is optimism: especially optimism in the face of reverses and apparent defeat. Optimism is true moral courage.”

About the Author

Kevin Keegan

Partner, Leadership Consulting, Ireland

Kevin Keegan is a Partner at Boyden UK & Ireland with an extensive background in executive search and leadership consulting. As a former FTSE 100 Chief People Officer and HR Director he specialises in sourcing world class talent, developing and coaching individual leaders/high performing teams, and helping businesses tackle complex organisational challenges.