Your company is planning a layoff, and you're one of the managers who has to decide and deliver the bad news. What do you say? What do you do?
Almost everyone I know who has to do the laying-off feels terrible about that. But you can create a congruent environment and make it possible for the remaining people to succeed. And for the people who have to go still feel okay about your company.
Let's start with the biggest reason I see for layoffs: money, and the lack of it. (Or the anticipated lack of it.)
Insufficient Revenue Can Lead to Layoffs
How often do you pay your bills and balance your checkbook? I suspect you review your bills weekly. You might wait to verify your checkbook monthly, but I bet not much longer than that. And unless you work for yourself, you can pretty much depend on when your company pays you. (Let's call that every two weeks.)
As a result, you know exactly how much money you'll receive every two weeks. You can plan when to pay your bills, assuming you make enough to cover your expenses.
People manage their profit and loss via their checkbooks on a regular basis, at least as often as every couple of weeks.
Your company manages its expenses similarly. Except they have more tools at their disposal. Companies can:
- Capitalize expenses, assuming the team has completed features. (No one can capitalize WIP, Work in Progress.)
- Choose when to pay vendors for products and services. (That's why I offer a discount for upfront payment.) These are often variable expenses.
However, companies cannot choose when to pay their employees. And employee salaries are part of operating expenses, as well as rent and other fixed expenses. Just as you have fixed expenses in terms of rent, etc, your company has fixed expenses, too.
When companies bring in less revenue than they need to cover their operating expenses, the managers consider layoffs.
However, the layoff decisions aren't easy. When managers are incongruent, they can make the decisions worse.
Making Congruent Layoff Decisions
When you see you don't have enough money, you don't reduce expenses across the board. For example, you don't just cut your food budget by 10%. Instead, you might say, “I'll eliminate (or reduce) my streaming services.” Or, you might move to save on rent.
But you choose what to keep as an expense and what not to keep. Some of those decisions hurt, especially if you waited “too long” to decide. But, the faster you decide, the faster you can get back to a reasonable money situation.
That's what companies need to do, too. They need to choose which projects or products/services to keep and which ones to stop. (I'm going to use the term, “project” from now on, and have it mean project, product, or service. However, I do not mean an effort where you disband the people when the effort is done for now.)
But, too often, companies do an “across-the-board” layoff. That means they starve the projects/products that they need to fund in favor of the no-longer-useful projects/products.
Across-the-board layoffs are incongruent.
Instead, companies need to assess all the work in progress, and decide which work to no longer fund. (See One Quick Way to Start to Manage Your Project Portfolio for questions that might help managers make decisions about what to fund now.) You do not need all of the projects you are currently funding. You do NOT. Decide.
Now it's time to manage expenses.
Options to Manage Expenses
The managers now know what projects matter. That's a huge piece of the puzzle. Depending on when managers decide, they have these options:
- Don't lay anyone off yet. Instead, see if adding more teams to a project will help release features faster. Depending on the organizational silos, this can work.
- Lay off the unjellers, the people who make everyone else's lives miserable. (See this newsletter series about jelled teams that starts with: The Case For Stable Teams, Part 1.)
- Manage management's salaries first: Decrease the managers' salaries, decrease the number of managers, etc.
- Decide which people or teams to lay off.
Option 1 requires early-and-often portfolio and financial replanning. I don't know too many organizations that do that.
Managers should always look at Option 2 because unjellers slow everything down.
Too few managers will lay themselves off or decrease their salaries—especially senior management. That's too bad, because decreasing a senior leader's salary can often save several people's jobs. However, some of the money does not come from operating expenses, which makes this calculation a little tricky.
Let's talk about Option 4 for a minute.
Lay Off People Whose Skills You No Longer Need
If managers make the decision that “we are not going to do these projects” and add a “never again” or “not for a long time,” then the organization does not need those people's skills. The managers can safely lay those people or teams off. In a future post, I'm going to discuss what managers might offer those people, such as recommendations or references.
But, whatever you do, don't lay off people whose skills you still need.
That's why an across-the-board layoff makes zero sense. With an across-the-board percentage, you lose necessary people for necessary projects. And, worse, you keep unnecessary people for unnecessary projects.
What if you think you need it all? You don't. You might even ask, “If we were in danger of losing the company altogether, what would we still want to do to save it?” That's what you keep. (And you lay off a bunch of the managers.)
So you've now decided which work you will no longer do. The next post is about how to frame the discussion with the people you will lay off.
The entire series:
- Have to Lay People Off? Practice Congruence and First Choose What Not to Do, Part 1
- How to Approach the Layoff Conversation with Respect and Congruence, Part 2
- Acknowledge Everyone's Emotions for a Congruent Layoff Conversation, Part 3
- Lay People Off with Congruence to Make Better Business Decisions, Part 4, Summary