To say we’re in interesting times is probably an understatement.
Jobs growth is more than healthy right now. The number of new jobs added to the economy in recent months has been double some experts’ estimations, while the once-inevitable spectre of a recession now seems to be abating.
But despite both these positive factors, layoffs are still a very visible feature of the business landscape right now.
In January alone, job cut announcements increased to their highest level in 10 months – reaching 82,307 – representing a 136% compared to December 2023’s 34,817.
By the end of February the number of tech sector layoffs was outpacing the number of terminations in 2023 [780 layoffs per day compared to 720 layoffs each day in 2023]. And as artificial intelligence continues to take jobs off people, it is now being predicted that jobless rates could now rise to 4.1% by the end of the year.
Managing the human cost of all of this is likely to be the biggest challenge CHROs will face this year.
Those that are left behind
But while handling a layoff is never an easy process, there seems to be a new feature about recent terminations that is likely to make CHROs’ jobs much harder.
If you look at most of the announcement news this year, there is one phrase that seems to be the repeated time and time again: ‘right-sizing’.
This is significant.
For whereas job losses can often be justified by a collapse of demand, or due to wider economic pressures, or even a corporate event that shatters reputation, the term right-sizing (what Alex Chriss, CEO of PayPal used at the end of January to justify his layoffs), is admission that he company got its recruitment disastrously wrong.
It’s a proper tail between the legs excuse; an admission that recruitment got too carried away; hiring with alacrity and not thinking about the people who gave them their trust to be taken on.
It’s a proper slap in the face those people it hired – people who may have left decent, well paid and more stable jobs to join them.
According to Carly Holm, a longtime labor strategy executive and founder of Humani HR, this creates brand new ‘trust’ issues, because not only are people let go that should arguably never have been hired in the first place, but the guilt/mistrust felt by those left behind is exacerbated to an even greater level than usual.
To hear more about it, TLNT decided to sit down with her, to understand more about what she means:
Q: Layoffs are a normal part of business, so what do you think is different this time around?
A: “Lots of companies are doing layoffs, there’s no disputing this, but typically HR tends to think more about the people they’re letting go. What’s becoming more of an issue now, I feel, is the situation facing the people that are left – the impact of which is huge, and often overlooked still. The need to focus on those left behind is critical – whether it’s bringing people together in town halls, to being better at communicating what exactly is happening.”
Q: What’s the key impact you see on those left behind?
A: “I think it’s a vulnerability thing. When a cut happens, people are feeling very exposed, because they’re still there when a close colleague (possibly doing a very similar job), might have just been removed. Not only is there the loss of the colleague to get over, but it makes things very unsettling for those left behind, as they’ll probably be thinking that maybe they’re next. We just worked with the CEO of a technology company where literally 50% of the workforce was being let go. The first piece of advice I gave him, was that it was the CEO’s job (not HR’s), to take ownership of the disaster that over-hiring had created. When it comes to percentage culls like this, there is only one thing companies can do – which is over-communicate, share the new vision of the company for those left behind, and for them to also expect that there will now be a cooling off period, where left behind staff will obviously not be as highly productive, or motivated as leaders might think they should be. Staff are essentially grieving, and they need to be given time for that mourning process to occur.”
Q: Is this moment in time the greatest ‘risk’ a company is likely to face?
A: “Without doubt, yes. There’s lots of emotion flying around. There’s anger, a sense of loss, bewilderment, and anxiety from employees that they could soon loose their job. This is the most likely window where those left behind may wish to leave – for self-preservation, if they fear they’re getting laid off next. This could be a big problem for employers, because the people that are left behind are most likely to the ones the boss will want to stay. They’re likely to be their star employees; the best talent they have to take them to the next phase of the company’s development. I’ve seen big pay rises being given to people who remain – just to prevents an exodus happening – but this too can be confusing for staff, because if not communicated properly, they’re left thinking ‘well if they can afford this massive rise for me and others like me, why couldn’t they have kept a few more people on?’.”
Q: Is there any way CHROs can manage a layoff situation better to minimize these issues?
“Layoffs should ideally be short, and sharp, and not protracted affairs. The worst thing a company can do is trickle out exists over a long period of time, because that just lengthens the whole period of instability. For one company we recently worked with, the layoffs were all done in literally a matter of hours – humanely, but also as quickly as possible, so the bad news could be dealt with, and the process of moving on could start. But just because the actual layoff themselves are speedy, that doesn’t mean the planning to get there should be rushed too. Firms need to carefully look at their organizational design, look at all their roles assiduously, look at whether there are still any duplicating roles left, and whether culling x-team member might reduce the internal skills needed for the next phase of that company’s existence. The bigger the percentage loss of people, the bigger the blow to people, and the greatest risk to the company posed by those left behind. Leaders must also plan-in the adjustment process that will naturally happen.”
Q: For those left behind, is trust irrevocably broken, or is there hope it can (eventually) be repaired?
A: “I think CHROs all need to accept, that when companies do dramatically massively downsize, then sometimes that company is never quite the same as it was before. For those for whom trust has been broken though, I would always argue it can be restored. I think it takes time, but it can be repaired if companies communicate better and then start delivering on their promises. The ones that get it right are those who have properly studied their organizational design, and have stepped back, and worked out where people now fit in, and what skills are likely to be needed going forward. In other words, they’re being thoughtful. Really good companies are even able to present a cull as good for someone’s career path – as the people left are more visible, often have greater responsibility earlier, and don’t have to compete with tens of other internal people for the next promotion or opportunity. In other words, things can be couched as given those who are left more room to grow.”
Q: So what would your passing piece of advice be?
“Remember that terminations are a fact of life, but this doesn’t mean you can’t do them as humanely as possible. When done well, the pain for those left behind should be minimized. A lot of the current fallout is coming from over-hiring, and I would now hope organizations have learned from this, and will henceforth be more aware of getting the right people in the right seats to start with.”