It was bitter cold, well below zero. The sky was gray, with dark leaden clouds that would’ve meant snow, except it was simply too cold. I used just two fingers on the steering wheel, lest the ice shoot through my gloves, while I willed the car’s heater to life. It never made it; the drive was just a couple of miles. I crunched into an ice-covered parking space at Owens-Illinois’s Levis Development Park and clicked it off.
Levis Park is hundreds of acres of former farmland dotted with single story research offices and labs. They are scattered comically far apart as only the vast open space of the Midwest could allow. In the pool-table flat of northwest Ohio, the nearest thing to block the wind was tens of miles away. The walk across the barren frozen parking lot seemed like a mile.
I stomped off my boots as I escaped into the warmth of the mockup glass bottle factory. Shaking off my coat, I hung it at my cube and wondered where everyone was. I found them huddled in the kitchen, waiting on the coffee maker, and all abuzz.
The rumors were thick. Layoffs were coming. This time it would be big. The look on most of the faces was as ashen and cold as the morning sky. The conversation was a mix of quiet panic and nervous assurances that everything would be fine. Even the manager of the team was in the dark, and visibly shaken.
I knew precisely what it meant for me. Over the last three years, I had built my consulting business from just me to a team of four consultants. I had naively allowed OI to become our biggest customer. Almost 85% of our business. When layoffs loom, consultants are first to go. So, I was pretty sure my little company had some hard times ahead.
But what struck me wasn’t my plight. It was the conversations I had with other members of the team, with the employees faced with uncertainty. How they reacted, and worse how the company handled it, was a lesson as cold as that winter morning.
The recent Forbes headline said it best: “the way a company downsizes it’s staff says a lot about the organization.” And that’s what this is all about.
This is Leading Smart, the show about Managing in the Brainpower Age. It’s a field guide to the joys and challenges of leading and working in the modern workplace. I’m Chris Williams, your guide to the stories and ideas that I hope will inspire you to be a better leader in the world of knowledge work.
This is the fifth and last episode on firing. In this episode we’ll look at how to downsize the right way. This is Episode 202 – Mass Exit.
That cold Ohio winter did what seemed impossible, it got colder. Not outside, but the dark foreboding of the coming layoff sent a chill through the company. The whole experience was a lesson in how not to do a layoff.
First began the rumors, in hushed one-on-one conversations. I’m not sure how they started, perhaps someone in the company thought of this as a way of warning the employees. But their effect was one of corrosion, one I’ve seen several times since.
At the first wisp of layoff, employees sort themselves into three groups: the best employees promptly polish their resumes, work their networks, and leave for less tainted and greener pastures. The speed at which they do this is breath-taking, often within days. Long before the official layoff announcement.
Their reasons are clear. They are smart and talented. They have plenty of options. They don’t want or need to stick around and see what happens. They don’t want to compete in the frothy job market that’s coming. And they definitely don’t want the stench of failure on their resume. So they quickly move on, it’s relatively painless for them. But the loss is real and deep for the organization they’re leaving. The spark, the energy, the thought leaders are suddenly gone.
The middle tier of employees freezes, like deer in the headlights. They wonder aloud about their future. They buzz with their peers about everything from who will or won’t get axed to how they’ll make their mortgage. They may fiddle with their resume, but they haven’t the slightest idea where they’ll go or what to do about it. The quick exit of the peers they most respect only heightens their panic. Worst of all, they get zero work done. The impending doom haunts their every waking moment.
The bottom tier just muddles along, as they’ve muddled along for years. They’re either too helpless or willfully blind, so they shrug off the rumors and keep their heads down. Like woodland prey they cling to the faint hope that if they don’t move the layoff won’t see them. Much of what they do accomplish is in support of those above them. But since those people are frozen or gone, whatever they do seems like so much futile, Brownian motion.
This commotion, all before the formal announcement, typically wreaks havoc in management. Even IF the managers had some kind of detailed plan, it certainly included keeping the top players and jettisoning the dead wood. But that top layer is gone. The middle layer is ill-prepared to take their place. They are consumed with doubt, tentative about the future, and questioning their allegiance to their suddenly fickle employer. The most loyal and reliable are those at the bottom, the very ones most likely deserving of an escort to the door.
The result of the actual layoff is a organization in chaos. The plans that were scaled down to meet the new less lofty goals are further adjusted to make the best use of those who remain. The leaders struggle to make the remaining vision credible and compelling to their new team. And everyone, including the managers wonder if this was the end, or just the beginning of a long nightmare. Are more layoffs to come? Often that’s the result, as the chaos breeds more failure, the company struggles further, and helplessly circles the drain. It’s a familiar saga and not a pretty sight.
I watched this all play out at OI, with the clear star of the group gone within days, long before the formal layoff announcement. He was doing amazing cutting-edge work, having developed a system that examined glass bottles using three cameras, and four networked microcomputers. All of this in the 1980s. It could find defects in bottles flying by at 1200 a minute, twenty bottles a second. So fast the naked eye could only see a blur of glass. I heard it took months for a junior engineer to pick up his work. The system I had just completed that coalesced the information from that system and a half-dozen others was eventually implemented. But it was not long before a leveraged buyout firm stripped the company bare.
Layoffs done poorly can be a nightmare, indeed.
The recent pandemic lockdown and resulting layoffs, furloughs, and retrenching have offered a student of management a broad array of examples of how to handle this kind of mass exit. Because this isn’t something companies often do, they rarely do it well. Just a few weeks ago Uber had to lay off 3500 people, and they did it so badly it made the news.
Inside edition host: and as Megan Alexander reports, the same technology that many are using to work from home is also being used to fire them.
Reporter: It’s the Zoom call no worker would ever want to get.
Video: Today will be your last working day.
Reporter: This top executive from Uber is using Zoom to inform 3500 workers that they’re being laid off because business is down by half.
Video: We had to do this in a way that allowed us to tell you as quickly as possible so that you did not hear it from the rumor mill.
Reporter: She chokes up as she delivers the grim news.
Video: I know that this is incredibly hard to hear. No one wants to be on a call like this.
For a $100 billion-dollar company to handle this so poorly is inexcusable. It resembled a hostage video, with the executive backed up against a bare white wall. The video and audio quality were terrible, seemingly on a cell phone. The phrasing was awkward, and the executive couldn’t make it through without nearly breaking down in tears.
To make matters worse, it was done as a one-way Zoom call, with all the participants muted and no chat or comments. There was no chance for any feedback, no clear opportunity to get clarification, or to find out next steps. It was simply a live video message, and everyone from both sides was left traumatized.
I understand what Uber was trying to do. They wanted to avoid the perils of the rumor mill like those I described at Owens-Illinois. There’s clearly an argument for a single clear and direct announcement with no leaks beforehand.
But when you do an announcement, do it right. Be professional. If it’s going to be a one-sided announcement with no feedback, pre-record it. Make sure there are no mistakes, that it has the correct tone, that others have a chance to review it. And that the presenter doesn’t break down.
Most of the debacles in layoffs come from managers not planning the operation as thoughtfully as they would any other part of their business.
No experienced leader would announce a new product or broad initiative without careful planning. They would think through to the desired end result, they’d plan every step of the rollout, they’d analyze every element of the announcement. They would test it for mood, check it to be sure there are no vague or confusing messages, and carefully consider how each person would react. They would analyze the announcement from the perspective of potential customers. They’d think about how it would motivate their own teams. They’d check to be sure it sends the right message to the press. Nothing would be left to chance, and the best such announcements go off without a hitch.
Now consider that the most important asset for many companies is their team, the people who make up the organization. Without them, most companies simply wouldn’t exist. This is so true that it’s become cliché. “People are our most important asset.”
Yet when it comes to the largest and most impactful people action that most companies will ever take, they wing it. They don’t think it through or plan it carefully. They just toss together a half-page script and have some mid-level person read it in a hostage video. And that’s how you end up as the featured company in a Forbes article with the subtitle that reads: “the way a company downsizes it’s staff says a lot about the organization”.
So what’s the right way to do a layoff? There are a few simple rules.
First and foremost, just like you would with any project, think carefully about the end result. What does the organization look like when you’re done? That’s the single most important consideration, since the layoff will take just days, the remaining organization will need to work for months or years.
Plan for the team that’s left. Think and speak about them at least as much as those being laid off. Consider the very best people in that future organization. What can you do now to keep them in the fold? Give them some extra attention before the layoff. Ensure they feel like are a valuable member of the team. Make them feel loved. If they are overdue for promotion or a pay increase, do it now. If you can really trust them, confide in them. Tell them that things may get a little unsettled, but that they are a core member of the team, and you want and need them. This makes them feel special, part of the insiders. It will help them weather the storm and make them far less likely to run for the exit.
One thing that can help, if you have the time, is to do what I call a “pre-org”. Reorganizing the team into the future organization before the layoff. This gives the future team a chance to get familiar with the arrangement and to get settled before the earthquake. Move those who will be laid off into a “special projects” team. This makes laying them off easier, certainly, but it also is less disruptive to the on-going organization. Rather than looking around and seeing every other desk empty, they see “that group over there” going away. This may seem callous, but it is less disruptive, and even gives a subtle heads up to those being laid off – if they can see the clues.
When it comes to the announcement of the layoff, direct it to the entire organization. Not just to those being laid off. The Uber example of “if you’re on this call, or in this room you’re gone” is the worst. It leaves the most important people – those who will remain – in the dark. Those who are laid off immediately rush to communicate with peers and awkwardness will reign. Their panic will be infectious, and the remaining team will feel terrible.
Better is a message to the whole organization from the senior-most person in charge. “We are facing difficult times and have had to make some difficult choices. We will need to cut our staff substantially, and that means that some of you here today will be leaving. We will speak to those effected personally very shortly, but I wanted everyone to understand how we got here, and the plan going forward.”
Then immediately address the specific problems facing the organization. Honesty and frankness are mandatory, as are as many details as possible. Humility is vital. A strong leader will accept responsibility and not place the blame entirely on others or outside forces. Carefully lay out the plan going forward, and how it will make the company more successful. Key to this is to send the signal that this layoff is the only one planned for the near future. That once this hard time is over, the worst has passed. The rest of you need not live in fear of “the other shoe dropping.” The remaining team will have enough survivor’s guilt to bear, without adding on the fear for their own future.
When it comes time to actually lay the people off, just like with firing an individual, it’s best done in person, ideally in the smallest setting possible. Individually if you can, small groups of ten or less if you must. Like we discussed the last time, plan it to the letter, be well prepared, and have all the questions answered and written out. The best layoffs are no different than an individual termination, just done at scale.
Finally, make sure you gather the entire remaining organization instantly after the layoff is complete. Many companies try to sweep it under the rug or pretend it didn’t happen. As if “phew, that’s over with”. It’s best to acknowledge it in the open. “That was very hard, everyone agrees. We’re now in a better place financially, and we hope to not need to do that again for a long, long time.” Then carefully reiterate the plan going forward. Highlight how, now more than ever, everyone has a part to play in it. Build some enthusiasm and get everyone back to work.
If you manage it with care, planning, and professionalism, a large layoff doesn’t have to be a disaster for the organization. It can be the fresh start, and you can avoid an uncontrolled mass exit.
Leading Smart is from me, Chris Williams. You can find out more about the show and discover other resources for leaders at my web site CLWill.com.
If you like the show, please share it with your friends especially on social media. Referrals are the greatest source of new listeners. And send me your thoughts, comments, and suggestions either on the web page for this episode or to email@example.com. I’d love to hear from you.
That’s it for this episode. The next episode is one I’ve been anticipating for years. It’s part one of my conversation with Brad Silverberg. Brad is widely known as the father of Windows 95. His life story and leadership lessons are fascinating. I hope you’ll listen. Until then, please remember that each of the several dozen decisions you make today are part of Leading Smart.