With recession fears looming, companies including Twitter, Stripe and Meta have been announcing mass layoffs and hiring freezes. Some believe we could witness more companies following suit in the coming months. This potential for layoffs means that it’s important for HR professionals to look at the best ways to handle these workforce changes to minimize damage to company culture.

Prevailing wisdom states that layoffs are a necessary evil during economic downtimes. Yet the data shows that job cuts can be ineffective. In a 2012 study of 20 companies that were facing layoffs, researchers found that there was a 20% decline in survivor engagement or the willingness for remaining employees to perform at their best. Most of these businesses’ financial performance didn’t improve either. [1]

Companies that slash jobs (especially if its habitual occurrence rather than a one-off business decision) also put quality, productivity, and physical and employee psychological safety at risk. Research from the University of Wisconsin and University of South Carolina found that shrinking the workforce by 1% resulted in a 31% increase in voluntary turnover the next year, sometimes due to burnout. [2] Ironically, this comes at a time when work demands are greater for the workforce. Remaining employees are relied on to pick up additional tasks terminated colleagues have left behind – and help companies navigate tough economic times. [3]

Layoffs Should Be the Last Resort

Evidently, layoffs often come with a host of hidden costs that don’t necessarily help businesses achieve their goals. So, before resorting to that decision here are some cost-saving alternatives businesses, alongside HR professionals, can consider.

  1. Retrain employees: You can move employees to new roles rather than letting them go. For example, Credit Karma moved several dozen employees to departments like recruiting and marketing (and closed smaller ones) when they faced revenue challenges.
  2. Remote work: Most knowledge workers have been working remotely due to the pandemic. Getting rid of leases and office spaces can free up funds needed to pay employees. Of course, not all positions can work remotely but if you have knowledge workers, selling off office space may be a good alternative solution to company financial problems.
  3. Other Cost-Saving Measures include implementing hiring freezes, salary cuts, cutting down on benefits and perks, reducing work hours, cutting freelancer positions, offering unpaid sabbatical leave and offering early retirement packages to eligible employees. [4]

When Layoffs are Inevitable

Unfortunately, there are times when layoffs appear to be the only way forward for your organization. If the business is shedding jobs, here’s how HR can have a more positive influence under these circumstances.

Terminations should never feel haphazard. Rather, employees must be left with no doubt that job cuts were the last resort and that there’s a rationale for the decision. (Tip: Consider who is getting laid off. Will this have a negative impact on your diversity, inclusion and equity efforts?)[5]

Sandra Sucher and Shelene Gupta of Harvard Business School advise that organizations adopt a clear and explicit philosophy that addresses workplace transitions and includes values and principles the organization will uphold as the workforce navigates change. [6]

It goes without saying that layoffs can be an emotionally difficult experience. It’s a loss that HR professionals need to handle with respect, empathy and fairness. So, be cognizant of how and where the news is delivered.

Joel Peterson, the Chairman of JetBlue, outlines what the termination conversation should look like:

a. Be clear about the basis for the termination decision.

b. Recognize the contributions the employee has made to the company and express real regret about the termination decision. Be available to answer any questions.

c. Make room for the affected individual to express their thoughts and listen and or respond with empathy and respect.

d. Ask for input on termination communication.

e. Offer introductions to your network in addition to other relevant resources, benefits and guidance that can help in their job search. Also offer to keep communication channels open in case there’s an opportunity for them to be rehired. [7]

After layoffs, remaining employees may feel apprehensive, worried about job security and the future of the company. They may also be grieving their departed colleagues and taking on an increased workload due to a downsized workforce.

At times like these, transparent and ongoing communication from leadership is needed especially if employees have additional work on their plates. Future plans should be communicated about when their workload will go back to normal.

Additionally, businesses and HR must hold space for employees to express themselves and provide a psychologically safe environment where employees can discuss worries without feeling judged. HR will undoubtedly be looked on to step up and guide managers on how to address employee concerns.

Helping employees feel connected to your company’s mission and values may also be key here. [8] [9]

Bottom line: As layoffs continue to make their way across North America having a plan for navigating financial downturn is a must. Don’t forget that talent is the lifeblood of your organization so be sure to treat employees well even amid workplace change and uncertainty.

Most importantly, as an HR professional, remember not to neglect yourself in the process. Take care of your own mental health and wellbeing to ensure you’re in the right headspace to properly serve and support people, especially during difficult times.

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