How to Best Manage Layoffs and Downsizing

Even during the Great Resignation 2021, many companies are facing layoffs and downsizing. Read this guide for how to manage layoffs successfully.


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How to Best Manage Layoffs and Downsizing
Even amid the Great Resignation, some of the world’s biggest companies aren’t immune to layoffs and downsizing. In February 2022, virtual exercise brand Peloton laid off 2,800 employees, many of whom took to social media to talk about the company and promote themselves for new jobs.

When other big brands like QVC and Ford make news with layoffs, it’s a reminder that no companies are immune to cutting their workforce. Great Resignation statistics point to a record number of people giving notice, while many companies and small businesses are still dealing with the fallout from the COVID-19 pandemic.

It’s helpful to be aware of how to manage any downsizing and how to approach layoffs today, in case they’re needed in the future. Use this guide to retain good relationships with former employees, protect your business reputation, and continue successful hiring and retention after downsizing.

1. First, take a strategic approach to hiring

How you hire can play an important role in the likelihood you’ll need future layoffs. Conservative hiring strategies ensure you hire the exact amount of people you need. That way, your employees will be more engaged with an adequate workload and won’t be bored or resentful that their work is spread out over too many positions.

To hire effectively, take the following steps:

There should be specific guidelines for the results you expect for each position. That makes it easier to let go of individual employees when they’re not meeting your expectations, which may enable you to avoid more widespread layoffs.

Before you hire someone to replace someone else, examine whether it’s still necessary to keep that position. Can you reassign the former employee’s tasks to another worker or team of workers? Were those activities positively contributing to your company?

Take a detailed analysis of your business operations as well as the value added by each employee as you decide who to hire and replace. You may identify overlaps in business tasks you can consolidate, or identify teams where it’s appropriate to implement hiring freezes.

2. Explore all downsizing options

Explore all your options for downsizing. Look at the health of your business, such as whether any strategies can be reorganized, and assess your ability to rescope your business plan.

Before you conduct massive layoffs, explore all your options for downsizing. Look at the health of your business, such as whether any strategies can be reorganized, and assess your ability to rescope your business plan.

As we’ve seen during the pandemic, various companies have used methods like the following to trim down workforces without full-blown layoffs.

  • Furloughs: A furlough is a period of unpaid time off. Some companies implement furloughs for the entire workforce to save short term.
  • Exit incentives: You could offer employees the option to voluntarily leave and motivate them with benefits like severance.
  • Voluntary sabbaticals: This is unpaid time off that employees are in charge of. Workers can leave for an agreed-upon time frame to pursue education that can help their career or work on a passion project.

Options like these may give your employees a sense of control over their futures. When they have a hand in making the decision, they may feel better about your company instead of resentful when they’re let go completely.

You might let your workforce know that you’re considering layoffs or downsizing and ask your team for any ideas they might have. Using employee feedback can also help your workforce feel more in control of their future.

3. Determine a strategy for layoffs

When you decide you need to downsize, create a strategic plan to help the process go smoothly. The most important consideration is prioritizing the health of your business. If you don’t have a business, you won’t be able to employ anyone.

To strategize layoffs, ask questions like:

  • How will you determine which department or employees to cut?
  • Will your entire company face layoffs?
  • What criteria will you use for laying off an employee?
  • How will you document your decision-making process?
  • What type of exit package will you offer?

You want to avoid legal action from employees you’ve laid off. Because there are federal and state laws concerning layoffs, we recommend talking with a lawyer before conducting layoffs so you can meet all legal requirements as you strategize.

Because there are federal and state laws concerning layoffs, we recommend talking with a lawyer before conducting layoffs so you can meet all legal requirements as you strategize.

4. How can you communicate downsizing to employees?

If you’ve decided to offer downsizing alternatives, try to give employees plenty of notice so they can evaluate their options and potentially take an optional route to leave the company or pause their employment.

When you are making layoffs, communicate to the management team what the process will be. Be transparent about the state of the company and its finances and how you arrived at the decision to lay people off.

If you’re able to give advanced notice of the layoffs, we recommend doing so. That way, employees will be able to edit their resumes or reach out to their contacts before they’re potentially laid off.

Let your employees know how you’ll communicate the details of these changes. You might have managers make a phone call to their employees after work hours during a certain time period, for example, or conduct virtual layoffs if most of your workforce is remote.

Meet with each employee you’re laying off one-on-one. Give them a heads-up of the meeting time, so they’re alone and focused when they meet with you.

Offer employees the ability to tie up their work and transition it, if possible. Some companies give laid-off employees a week or several to continue to work and complete a successful transition. This also gives both laid-off employees and remaining employees the ability to gain closure and say goodbye.

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5. Offer benefits and references

You may potentially avoid a lawsuit and end your relationship on the best possible terms with laid-off employees when you provide benefits and references. An empathetic guide to layoffs may include transition support like the following:

  • Separation packages that include financial benefits, such as a couple of weeks’ salary
  • Redeployment options, including in different positions at your company or with a partner company
  • Employment assistance programs and career resources, like a recruiter partnership

You can also offer to be a reference for the laid-off employee as they’re applying for jobs. Suggest to your managers that they offer to write LinkedIn recommendations or serve as references for talented laid-off workers.

6. Manage the remaining workforce

It’s very important to bolster and support the workforce that’s still with you. Layoffs can be emotionally taxing. They can create a sense of worry or disengagement among workers who are left behind.

As part of your strategy for layoffs, determine methods you’ll use to keep your current workforce engaged. These might include:

  • An all-team meeting that clearly explains what the new organization looks like and how the downsizing will positively impact your company’s future
  • One-on-one meetings with managers so remaining employees can discuss their feelings about the layoffs and get any questions answered
  • Learning and development opportunities

Foster a culture of transparency and honesty. Be there for employees by offering open-door communication. Celebrate successes by promoting them in all-company meetings and communications to keep remaining spirits high.

Continually address staffing to optimize your workforce

A constant staffing strategy can help you avoid layoffs and optimize your workforce. Strategize your hiring process. Continually examine operations and tasks and note how they’re impacting your return on investment.

When you have to downsize, take a compassionate approach and offer support to laid-off employees when possible. Be mindful of how layoffs will impact the remaining workforce. Implement strategies that keep workers who are left behind engaged at your company.


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