With economic and market drivers and conditions creating uncertainty across industries, many organizations are buckling down to prepare for potentially changing environments. Their reactions to newer government policies, changes in consumer tastes and behaviors, and the rapidly advancing availability of new technologies have led them to reconsider the size and makeup of the workforces they employ. As a result, staff reductions by many leading organizations have been a consistent subject of news reports. Challenger, Gray and Christmas reports nearly a million jobs cut this year, which is 55% higher than the prior period and the 5th-highest in the past 36 years. Preparations for planning and conducting a layoff are consuming the time and energy of thousands of HR leaders and teams in industries and companies of all sizes.

Whatever they are called—layoffs, reductions in force (RIF), rightsizing, or organizational flattening —they all have the same purpose and result: involuntary terminations of a portion of the employer’s workforce. Staff payroll costs alone make up between 15% to as much as 50% of a company’s operating expenses. As a result, leadership teams can determine layoffs to be the best course of action to support a range of purposes, including restructuring the business, reducing operating expenses, improving profitability, or achieving operational efficiencies. These can be due to government cutbacks, less favorable market and economic conditions, changes in business strategy, facility closures, bankruptcies, adoption of advanced technologies, and mergers and acquisitions. Regardless of the rationale, successfully planning and conducting a layoff requires a practical, disciplined, and comprehensive approach.

Considerations and objectives when planning and conducting a layoff

As many experienced HR professionals will agree, not all layoffs are well thought out. When faced with a fast-moving acquisition or merger, financial stress, the loss of a major contract, or weakened market demand for their products or services, boards and leadership teams can quickly conclude that reductions in force are necessary. As the planning process is often lengthy and financial returns develop slowly due to severance payments, benefits continuations, outplacement contracts, legal or consulting fees, and lost productivity, the pressure to start and finish the process quickly can be substantial. Planning and execution speed can be achieved through pre-planning and the development of playbooks and analysis tools when the business is stable. However, very few companies make those types of investments.

The core elements of planning and conducting a layoff are fourfold:

• Assess business needs and identify labor excesses
• Offboard impacted employees with dignity and support them towards rapid reemployment
• Reduce stress for the remaining staff
• Minimize financial, market, and operational risks and disruptions

Many of the risks associated with conducting a layoff involve legal or regulatory compliance issues. The federal WARN Act (Worker Adjustment and Retraining Notification) is supplemented in some states by state-specific versions. Other national, state, and local laws and regulations cover discrimination or disparate impact claims based upon age, gender, race, disability, and other protected characteristics. Furthermore, company policies, handbooks, offer letters, compensation plan agreements, and benefit plans constitute an employment agreement that must be reviewed and considered when conducting a layoff.

Legal obligations can also arise when conducting a RIF involving unionized or non-U.S.-based employees whose rights are codified and protected under often unique sets of termination requirements. Consultation with attorneys who are knowledgeable and familiar with employment laws and regulations in the jurisdictions where staff reductions are planned is essential.

Similarly, reputational risks can arise among consumers (who might sympathize with the unemployed), future job candidates (who can become concerned about longer-term job security), and markets and investors (who might view the staff reductions as signs of weakening prospects).

Exploring alternative options to conducting a layoff

While reducing staff costs or headcount is never a popular decision, it may become necessary to meet business requirements. However, as risk management is a key consideration in the decision, some alternatives should always be reviewed beforehand. For example:

• Voluntary separation incentives. These can be offered to more expensive, longer-tenured, or non-essential employee workgroups whose self-selection reduces legal risks associated with potential discrimination claims. Tactics such as service credit bridging and larger severance payments that allow for early retirements, or voluntary separation incentive payments (VSIPs) and “buyouts,” which are generous lump-sum payments that can ease the transition for those otherwise ready for a new opportunity. Outplacement services are sometimes offered as part of these arrangements.
• Furloughs. These are temporary, mandated leaves of absence that offer the organization financial relief while helping manage reputational risk by partially supporting workers’ employment status. These are often used during short-term economic or market conditions that are expected to resolve in the near future. The risk is the loss of highly skilled and performing employees who might find new jobs with competitors.
• Reduction in hours. This is another approach for maintaining reputation by “sharing the pain” across teams and avoiding the need to conduct a layoff. This tactic requires legal review, however, as working hours per week, month, or year directly impact employee eligibility for welfare and savings benefit plans, as well as some performance incentive programs.
• Transfers and job shifts. These involve moving people to jobs where skill transfer is reasonable and it meets another pressing business need. As they can sometimes involve a demotion (e.g., from management roles) to individual contributor status or lesser-paying jobs, they can be less attractive to some. Similarly, these might be considered a “must-take” option for those who cannot afford an unemployment period, which can make them subsequent flight risks as they conduct a job search for roles at the previous status and pay level.
  
  

Steps to planning and conducting a layoff

Conducting a layoff that simultaneously meets the needs of affected workers and remaining employees, manages risk, and achieves financial and operational goals requires a structured, comprehensive, and measured approach. This should be guided by the enterprise leadership team, led by HR, overseen by legal and finance, and conducted in accordance with stated corporate values and operating principles. Internal and external stakeholders and other interested parties will watch and evaluate how the reductions are managed and communicated, and will make value judgments about the company culture as a result. The stakes are high, as a layoff can be a highly visible, public action. With impacted workers sharing stories and impressions as part of their job searches, competitors, community leaders, and members of the press will take note of (and further share) what they hear.

When planning and conducting a layoff, include the following steps as actions and considerations in the design and implementation.

Pre: Define the strategy

Establish the purpose, rationale, standards, and responsibilities that will guide the required preparations and execution of the layoff. Clarify the business issues and conditions that are driving the need for change. Identify the specific business units or functions, job roles or levels, facilities, and locations targeted for reduced staffing. Create a plan of action that defines the steps to be taken, the checkpoints and milestones to ensure consistent adherence with the plans, the criteria and methods to be used to assure fairness and equitable treatment, and the tactics to manage ongoing operational sustainability.

1. Formally reconsider the company's mission

Consider this an opportunity to reset, reestablish, or revise corporate values, direction, and strategies, and to assess how layoffs or restructuring might shift priorities. Describe how these changes will impact the purpose, direction, operations, values, and standards moving forward. Seek to answer the questions, “What are these designed to produce?” and “In what ways do we expect these reductions to change and improve us?”

2. Specify targets for headcount, cost reductions

Establish goals for reductions and associated savings by business unit, function, location, job type, and level. Identify the purpose and value of cuts in each targeted area of the organization, as these will differ and likely drive the extent to which jobs are targeted for reduction. This also enables a clearer vision of the operational impact of initially proposed cuts to the forefront.

3. Assess the impact on operational efficiencies and effectiveness

Have targeted organizations, functions, and teams assess the extent to which the reductions will affect their ability to meet operational requirements, ensuring that production, support, and customer requirements can be met. The key is to make cuts only to a level that will not reduce strategically or operationally critical capabilities. Once those are decided, assign teams to plan the redesign of processes and individual and team responsibilities.

4. Conduct a cost-benefit analysis

Engage HR and line leadership in establishing the realities of staff cuts, as those involve up-front costs that simultaneously support and incentivize laid-off workers to accept their departures. It is essential to determine how the costs of severance, benefits continuation, outplacement, and legal risk reserves will impact budgeted headcount savings from salaries, benefits, and facilities. The goals of labor expense reductions can only be realized over months (or years) after the release date.

5. Establish clear layoff selection criteria

Defining the reasons for staff reductions is critical from the perspectives of legal defensibility and fairness, and those reasons largely center on legitimate, non-discriminatory business needs, along with objective, documented comparisons of individual performance, skills, and experience. The need for reductions can legally stem from financial or operational underperformance, redundancies, or technological changes. Individual employee decisions can be further based on documented lower production volume or quality, as well as on obsolete or deficient job knowledge and skills.

Similarly, the critical skills and experience requirements the organization needs to retain must be defined, including those each employee has developed and used during and prior to their tenure. Skills from prior jobs with other companies are too often overlooked when assessing large groups of employees in a targeted job or job family for reduction.

6. Facilitate the selection process closely and carefully

When conducting a layoff, the process used for making individual decisions is a critical moment that can differentiate success from subsequent challenges. Use a multi-evaluator process, such as a structured talent calibration review, to incorporate different perspectives and enhance the credibility and defensibility of these decisions. Rely on measurable performance criteria where available, and review prior performance histories to avoid mislabelling due to personal biases or more recent or uncharacteristic occurrences.

In addition, take care to consider demonstrated adaptability to new responsibilities, tasks, roles, and requirements. Consider also other factors (as minor differentiators only to avoid bias), such as “culture carriers”, value influencers, informal leaders, coaches, and advisors. Consider conducting an organizational network analysis (ONA) to identify such individuals.

7. Perform an impact analysis

Once initial decisions have been made, a non-discrimination test must be conducted to assess the potential impacts on protected classes of employees, such that inadvertent and “disparate” impact does not occur based upon employees’ age, gender, race, disability, and other protected traits. This should be performed and evaluated with legal counsel at multiple points in the process as the list is drafted, presented, and finalized.

8. Secure external outplacement firm(s) support

Consider engaging an outside firm early in the process to provide outplacement job-search preparation and support, for inclusion in the strategy and planning, as well as its own subsequent resource identification and allocation. The more experienced and credible firms can help develop useful strategies and tactics for integration into the organization’s approaches, while allowing sufficient time for them to gather their resources and prepare tailored insights and materials.

9. Coordinate closely with legal and regulatory experts

Engage internal or external legal experts immediately to oversee the planning and execution of layoff criteria, decisions, and activities to manage risk and expectations. Have them co-develop the necessary communications, update policies, and create separation agreements that exchange employee acceptance of layoff benefits for non-disclosure agreements (NDAs), waivers of legal claims, and other critical documentation.

10. Plan and activate change management

Rely on best practices in strategic change management to support leadership, non-affected employees, and other critical stakeholders with tailored communications, training, and outcome measurement. Train and coach managers who must deliver the news to affected employees and to the teams that remain. Communicate respectfully and honestly with impacted and remaining employees, and clarify how work will get done with fewer people, along with the related actions that will make those impacts a reality. Plan press releases and public statements across platforms (e.g., investor relations, public and industry news outlets, social media) to effectively manage the company's reputation and employment brand.

11. Coordinate local government and community support

Consider reaching out to local agencies (e.g., unemployment bureaus) and reemployment sources (e.g., employment agencies) to secure their support and prepare them for potential upswings in activity. Similarly, reach out to local social and religious support leaders and organizations to alert them about the layoff and request their support.

12. Engage top leadership in formal governance

Have top leadership actively involved in the planning and execution of plans and activities to ensure their managerial teams’ compliance, their own direct support, and effective communication. Activate their oversight to drive the associated post-layoff process and job redesign across the enterprise, ensuring downsizing is addressed through more efficient processing and workload distribution without disrupting the business value chain or customer/market propositions.

Managing the post-RIF recovery proactively

Once the former employees have departed after conducting a layoff, the work continues with a recovery strategy. Consider the strategy analogous to managed forest clearing. Many of the trees have been taken away, leaving sunlight shining down in new places. In a similar vein, as employees leave, new voices, leaders, processes, and standards can emerge. Taking the opportunity to make changes to increase efficiencies and effectiveness can introduce fresh perspectives, heightened hopes for long-needed improvements, and surges in energy for better outcomes.

 As this is a critical part of the employee journey, and as a result, employee experience (EX), send surveys to capture former employees' perspectives on how the process worked, the quality and sufficiency of support and resources, identify pain points, and capture lessons learned for future reductions, which are inevitable over time. Track those responses over time and establish benchmarks as the utility of any outsourced support provided is evaluated. Other actions to build momentum towards a rapid recovery and reimagining of possibilities include:

• Monitor remaining employee sentiment over time, including attitudes, trust in management, alignment with business values and goals. Use this to identify hot spots for turnover, disgruntlement, or lack of understanding that require attention.
• Measure signs of employee stress and overwork through objective measures such as timecards (for OT, hours worked), badge swipes, network log-in activity and timeframes, mental health and stress-related benefit claims, absenteeism, or use of sick leave.
• Measure and track individual, team, function, and business unit performance on productivity, production volume, and quality, customer focus, and support.
• Track and document any negative outcomes related to conducting a layoff, such as lawsuits or regulatory complaints, customer or supplier losses, and social media ratings (e.g., Glassdoor, Comparably, and Kununu).
• Communicate success stories to the employee population related to revamped processes, generating greater efficiencies with less effort, and role models for adapting to the new reality.
• Actively engage remaining employees in improvement projects and actions, quickly but gently steering their attention away from the trauma that a layoff often triggers, and towards the promise that the changes were designed to create.

The goals of recovering from conducting a layoff are to bring the organization back to full operational capacity as quickly as possible, have former employees as alumni ambassadors, engage the remaining workers as productive contributors, create more efficient and effective work processes, and drive increased financial, operational, and stakeholder outcomes.

Relevant Practices & Tools

Core Change Management Practices to Engage Stakeholders and Drive Sustained Adoption. >

Simply put, Change Management is a set of activities to help people understand why changes are being implemented, communicate how different people or groups will be impacted, and prepare them to be successful so that the company can minimize resistance to change, garner support for change, and accelerate value realization... more »

Assessing, Selecting, and Placing People into Roles to Leverage Employee Capabilities in the Organization. >

An organization is much more than boxes on an organizational chart. Once a structure is in place, the top priority is placing people into roles within the organization... more »

Facilitating Networks Inside and Outside the Organization to Foster Informal Collaboration. >

Informal relationships—those that are outside of a formal hierarchical structure—can be highly influential in determining how work gets done and therefore how value is created in an organization... more »

Conducting Robust and Impactful Group Talent Reviews for Increased Equity and Fairness. >

A Talent Review process is a formal, structured, tiered progression of meetings that increases the objectivity, transparency, awareness, and fairness of employee capability and potential assessments... more »

The RACIS Matrix Tool: Define Role Assignments and Approval Requirements Across Key Process Activities. >

The RACIS matrix provides a clear framework to help organizations define and assign roles and responsibilities within processes, ensuring accountability and transparency... more »

About Wowledge

Wowledge is the implementation-first platform designed for lean HR teams and consultants who need to design and scale strategic HR programs efficiently—without starting from scratch.

Our members gain access to continuously updated best practices, step-by-step guidance, expert-built tools, and customizable templates—all structured to accelerate the development and implementation of key HR programs.

Recognizing that every organization operates at different levels of sophistication, Wowledge’s scalable system of best practices follows a stage-based approach—Core, Advanced, and Emerging—ensuring HR professionals can implement solutions tailored to their organization’s unique needs and goals.

Your Shortcut to Amplifying HR Impact!

Get started for FREE! Learn more.