Downsizing, cutting back, letting go. Call it whatever you want, but firing someone from your team is the most painful part of being a manager. For those of us who have fired many people at once, the pain is multiplied.
Sometimes, there's not much time to prepare for the process. But more often there are weeks or months between first thinking about a layoff and actually doing it. During that time, like a storm threatening on the horizon, you feel the impending disaster, but you keep hoping it will blow past.
All too soon it's upon you, and there's no avoiding it. Handling layoffs honestly and responsibly tests the most well-meaning and idealistic manager. Microsoft's downsizing is one of the more notorious in recent memory, garnering a good deal of negative press for its poor form. The layoffs were announced in a cold, vague email. And they have dragged on--the last round will be complete almost a full year after the announcement.
For those of us aspiring to build better, more honest and more transparent companies, layoffs are the ultimate test. How should the affected employees be notified? How much severance should the company provide? What should managers say to the remaining team? How transparent should the whole process be?
To understand how companies balance the desire for transparency with the costs or fears of complete openness, I talked with Daniel Kraft, CEO of Sitrion, and Jeevan Kalanithi, Chief Product Officer for 3D Robotics and co-founder/former CEO of Sifteo (acquired last year by 3D Robotics). When their companies went through layoffs, they learned complete transparency doesn't work--but neither does no transparency at all.
Here are their personal strategies for finding balance in a difficult situation:
1) Use Your Team as a Resource
Doing a layoff is an enormous undertaking with equally enormous and often unforeseen implications. It's a mistake to approach this decision alone.
Jeevan Kalanithi's Take: Involving your team to solve your problems is crucial. They're probably smarter than you, and they know more about the problem--locking yourself in a room with your co-founder is not going to work. But it has to be structured: open up the problem to your employees and help set the context for how you expect the problem-solving to work.
Daniel Kraft's Take: When you involve people and ask them to prepare for this impact, they come up with really good questions. In our process, thanks to one executive's ideas, we actually carved out a couple hundred thousand dollars in savings. Those savings allowed us to be more flexibility and creative for both the company as well as the people impacted.
2) Be Open, Not Transparent
Keeping secrets about employee futures puts an enormous burden on a company's leadership. Leading up to a layoff, lots of effort is wasted maintaining a facade that everything is ok. But telling your whole team every detail is also a mistake--you are taking them on the roller coaster ride with you. Instead of an on-off switch, think of transparency as an adjustable dial.
Jeevan: There's a middle ground you have to find. Let employees know what's happening and let them know what you're doing about it, but don't share the details. The ups and downs are too crazy. Employees need to remain focused at work. But they also need a clear sense of what will happen. In our case, we said, 'Here's the deal: we're going to fundraise. By a predetermined date, if we don't have something figured out, we're going to make changes. We're not sure what the changes are going to be. Just know we are on it and we are taking care of the health of this company."
3) Prepare Yourself
Between the meetings, the arguments and the paperwork, actually preparing yourself emotionally for the team changes can get pushed to the side. Sometimes we use our busyness to avoid experiencing the fear or doubt that a layoff can generate. In order to effectively manage in a difficult situation, you must personally come to terms with the decision.
Daniel: It helped me tremendously to have the grieving phase done way before the layoff. That way, when we talked with the affected teammates, the management team could keep things in perspective. The impact on the people we let go was unchanged. Some took it well, others were mad and upset, but their reactions hit me when I was stable. If you go into a layoff emotionally unprepared, you're miserable, and people hit you with lots of anger in a moment when you're weak. An internally transparent process can strengthen you to be better prepared.
4) Unexpected Shocks are the Worst Kind
For both Jeevan and Daniel, talking about the layoff with their remaining employees wasn't as bad as they expected it would be, because they had prepared their teams with context beforehand.
Jeevan: We had a business plan, and everybody at the company knew the key points. They knew things weren't going well, but because we were transparent about our situation, they believed we were looking out for their best interests. So, when it came time for the layoff, they were actually sympathetic. Not one person was extremely angry. They weren't happy, but they understood why the layoff was happening.
Daniel: I found that when I communicated the layoff news and my reasons why, people were shocked for the first five minutes, interested for 10 minutes, and then we had 30 minutes of productive conversation about how we could build for the future. I thought it was going to be 50 minutes of calming people down, but they rationalized the events incredibly quickly.
5) Teach As Well as Share
Transparency is only useful if you support it with learning and understanding. It's one thing to be transparent about financials. It's another to explain those financials and illustrate them.
Daniel: Our company's revenue forecast used to be shared with five people--now it's shared with 20 people. I told managers they should not be shy. They should share the forecast with their teams but they should use their own words, not just pass around a spreadsheet. Forecasting is a complicated thing. If transparency is going to work, it has to come with knowledge about what the data means.
Jeevan: Giving people the opportunity to ask questions and engage with the process is so important. Transparency doesn't work without context.
This article is the second of a three part series exploring the benefits and potential drawbacks of transparency during periods of unusual company activity. Is transparency always necessary? Is there a "right" way to be transparent? Is there a time for not sharing information that impacts employees? Check out the first post on transparency during an acquisition and the next on transparency during fast growth.