10 Mistakes Companies Should Avoid During Layoffs

When it comes to layoffs, companies must approach the process with careful planning and strategy to minimize negative repercussions. While the impact of layoffs during the pandemic and in 2023 was widely felt, the first two months of 2024 have proven to be equally challenging. Companies resort to layoffs as a last resort after exploring all other viable options. However, conducting layoffs can be a delicate task, especially for large tech enterprises, which often face significant backlash. Let’s look at the importance of conducting layoffs without tarnishing a company's reputation and discuss key considerations for organizations during this challenging process.

The Impact of Layoffs on Reputation

Layoffs in big tech companies tend to attract negative attention. Employees often find it difficult to comprehend why well-established companies with abundant resources face difficulties that result in job cuts. The vast difference in the challenges faced by the company and the employee being laid off can make it hard for the affected individual to understand the strategic necessity behind their redundancy.

Additionally, internet culture has empowered those who are being laid off, to request more transparency and explanation. Just recently an employee who worked for a big tech firm went viral after filming his firing via video call from said company, who after 10 years, refused to give him a direct explanation as to why he was being released. Legally the employer was in the right, and did not have to give a direct reasoning behind a layoff, but it was a very negative publicity moment for a company with a reputation to protect. The fine line between balancing legality and our shared humanity is where companies need to strive for in this complex postmodern social media world where recruitment isn’t just judged on hires, but also by reputation and long term job security.

Case Study: Tencent's Riot Games Layoffs

Tencent's Riot Games announced significant layoffs in 2024 as part of a cost-cutting trend in the gaming industry. The news of these layoffs, which would affect 11% of the staff, received widespread attention. Such high-profile layoffs in the tech industry often capture headlines due to the large number of employees affected.

This negatively affects talent acquisition as well, as even talent who isn’t afraid of being laid off, could develop a more short term outlook and mistrust for their current employer. Extended office hours can create strong bonds among employees, and the way everyone is treated has sweeping repercussions for employee loyalty and trust.

Case Study: Lazada's Layoff Mishandling

In Southeast Asia, Lazada, a subsidiary of the Alibaba Group, faced severe criticism for the way it handled its recent layoffs. Employees returned from their year-end holidays only to discover they were unable to schedule meetings. Eventually, the news of the layoffs broke, and affected employees received notifications via email. The office atmosphere transformed from positive to somber, leaving employees in tears, angry, and confused. Unhappiness with the layoff terms and confusion about the affected employees and selected departments further compounded the situation.

Mitigating the Impact of Layoffs

While conducting layoffs is sometimes unavoidable, companies can take steps to minimize the negative impact on their reputation and support affected employees. Here are ten essential actions for companies to consider when making the difficult decision to downsize:

Ensure Legal and Ethical Compliance: Companies must be well-versed in relevant laws and regulations governing layoffs to protect employees' rights and dignity. Failure to do so can result in lawsuits, fines, and reputational damage.

Thoughtful Announcement: Layoffs should be announced with empathy and sensitivity, avoiding impersonal or insensitive methods such as email, phone, or video calls. Sufficient notice, explanation, and feedback should be provided to affected employees.

Fair Severance Packages: Companies should offer appropriate severance pay, benefits, and outplacement support to laid-off employees. Negligent or insulting severance packages can cause financial hardship and emotional distress.

Considered Workforce Reduction: It is crucial to strike a balance between downsizing and maintaining a functional workforce. Mass layoffs can create panic and uncertainty among remaining employees, damaging the company's reputation and brand image.

Strategic Layoff Decisions: Layoffs should be based on careful evaluation of employees' contributions, skills, and potential rather than solely relying on seniority, salary, or performance metrics. Losing valuable talent can hinder innovation and growth.

Clear Vision and Strategy: Before implementing layoffs, companies must have a clear plan for utilizing saved resources and achieving their goals. Without a well-defined strategy, confusion, inefficiency, and missed opportunities can ensue.

Open Communication and Support: Transparent communication regarding the reasons, processes, and outcomes of layoffs is crucial for employees, stakeholders, and customers. Companies can provide assistance and resources to support affected employees during the transition, reducing anger, resentment, and stress.

Explore Alternatives: Before resorting to layoffs, companies should explore other options, such as cost reduction, revenue increase, or retraining and redeploying employees. Failing to evaluate alternatives can result in missed opportunities to avoid or minimize layoffs.

Assessing Impact: Companies should measure the effects of layoffs on their performance, culture, and morale. Soliciting feedback from employees, customers, and partners can provide valuable insights and opportunities for improvement.

Follow-up and Support: It is essential to maintain contact with laid-off employees, checking on their well-being, offering references or referrals, and providing assistance where possible. Going the extra mile by offering placements and medical assistance demonstrates genuine care and support.

Conclusion

Layoffs are challenging for both companies and employees, and they can significantly impact a company's reputation. Being regarded as a company who respects its employees and offers long term job security is key in attracting top talent in any field. Ultimately, layoffs should never be seen as a quick path to profits; instead, companies should focus on long-term strategies that ensure sustainable growth and success while treating their employees with respect and empathy.

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