Assessment & Planning
Organizational right-sizing is a difficult process at any stage of growth. While reducing headcount is sometimes unavoidable, leaders should always strive to lead with empathy and provide support for both impacted and remaining employees. You should aim to protect your business while preserving your culture and overall company function.
A clear and organized plan is key in making this difficult process run smoothly. In this guide we will provide an overview of a layoff process and several steps executives can take to mitigate employee distress and cultural impacts.
Identify the Right Plan
Determine Your Why
Before starting any planning process, you should be able to clearly articulate your "why", what is the business case for this decision and how will this change preserve the business over the short and long-term.
You should also consider if this reduction will prevent future reductions. You should seek to cut spend once; cut decisively and quickly. Multiple cuts (even if they are only budgetary/ non-salary) will result in an unstable employee environment and could cause unwanted attrition.
Focus on Dollars vs. Headcount
Always focus on dollars NOT headcount. Not all roles are created equal and there are many ways to reach an intended spend reduction.
Key Questions to Ask:
- What is my target cash runway (ex. 24-36 months)?
- What non-salary spend can you start with?
- When considering employee reductions, how can you reach your necessary spend reduction with the least amount of workforce impact?
- What departments will be most impacted by a reduction? Least?
Evaluate All of Your Options
There are many ways to reduce spend. Consider some of these non-layoff related options first.
- Hiring freeze
- Delaying comp cycles
- Delaying discretionary bonus payments
- Eliminating or repurposing employee perks
- Pay cuts and furloughs
Determine the Right Levers
If you've identified that basic budgetary cuts are not the right option to protect your business, there are 3 main workforce reduction levers you have available: pay cuts, furloughs, and layoffs.
Depending on the severity of the cost reduction needed, some companies choose to use a combination of the 3. Regardless of the levers used, ensure that the changes come as a single announcement and implementation; everything should happen at once.
Temporary Pay Cuts
- Reduction of pay for employees, especially executives and highly-compensated employees
- Can be done as a tiered approach; more highly paid roles (executives) receive a higher % pay reduction to maximize budget impact
- Unpaid leave of absence for a temporary period
- Company pays for full benefits
- Depending on the state, the employee is typically eligible for unemployment benefits through the government
- An involuntary separation of employment as a result of budgetary or operational changes
- Typically budgetary suggests it's temporary while operational is more permanent, but either way, employment is ending until/unless the person is rehired
Developing a Plan
Maintaining confidentiality throughout this process is critical. The working group should be small and on a need-to-know basis only. Discussions about staff reductions should not take place outside of the planned group meetings.
- Engage with legal counsel from the start
- Create secure communication channels
- Create a code name, so employees won't stumble upon calendar invites, Google Doc names, Slack channels, etc.
Form a Working Group
The core working group should be small and made up of leaders who will ultimately make the tough decisions. Once decisions have been made, form a "read-in" group of functional executives, key managers, Facilities/Security, HR, Legal, EAs, Investors/BOD, Finance, Payroll, and anyone who will be facilitating aspects of the staff reduction.
Create a Project Plan, Timeline, & Checklist
- Identify a Project Manager/Lead to track tasks and deadlines
- Ensure every task has an owner
- Schedule daily or twice daily meetings with working group leading up to notice date
- Hold a kick-off meeting so each member of working group can flag questions and concerns
- Check with your PEO or Payroll on the timeline they need to cut final paychecks
- Work backward from the notice date
Build the List
- Create a full roster of your entire employee-base; ensure this list is accurate
- Flag employees on leaves of absence
- Flag other sensitive circumstances (immigration status, employee relations issue)
- Determine selection criteria for who will be impacted
- Provide your functional leaders with selection criteria and request they make their impact selections within 24 hours; they should be as objective as possible
- Develop a plan for every employee. Along with impacted employees, there should equally be a plan to retain and communicate with top-performing employees
- Review the list for adverse impacts & WARN analysis (Legal Review)
- Anticipate gaps and put in business continuity plans
- Look at the future state org chart, where are the gaps? Orphaned employees? Who will step in?
- Does this plan help you meet your financial objectives? Are you making the necessary reductions to avoid any future cuts?
- When will you notify employees?
- When is their last day?
- Do you need time for project or sales meeting hand-offs?
Severance & Agreements
- What are current severance package benchmarks?
- What can you afford?
- Remember you need 2 versions of agreements; one for employees who are aged 40+ and one for under 40
- How and when will employees sign the agreement?
Equipment & Systems Access
- When are you cutting systems access?
- Will you allow employees to keep the equipment?
- Do you have a process for wiping devices?
- Determine how many months you will provide COBRA
- Consider providing cash as a one-time payment in lieu of COBRA
When reducing headcount, it’s important to develop a communication strategy that leads with empathy and clearly outlines to those who are losing their jobs why you are taking this specific action.
Develop Your Script & FAQ
- Nail down a single core message that will inform all your communications
- Develop a FAQ, email messages, an All-Hands script, and manager scripts
- Use a consistent message across all communications
- Develop an email alias for questions
Set the Right Tone
- Acknowledge uncertainty
- Express empathy
- Be honest and authentic
- Use clear, concise language
- Don't overpromise
- Don't make it about yourself
- Create a day-of-timeline
- Ask all employees to attend a critical All-Hands (do not mention restructuring in the invite)
- Communicate in rapid succession
- Contact impacted employees before talking to non-impacted employees
- All meetings should be done 1:1
- HR should participate in all the meetings
- All-Hands with Q&A the day after restructuring
- Severance agreements should go out right after 1:1s
- Legal/HR notices should also go out on the restructuring day
Example Layoff Timing
Monday: Prep Meeting
- C-Suite to come to an alignment around messaging
- Manager training for meetings/calls with impacted employees (should happen no later than Tuesday afternoon)
- Review severance package, employee FAQ, exit checklist, etc.
- Finalized list provided to CEO and HR to review
Tuesday & Wednesday: Finalize Paperwork
- Finalize DocuSign paperwork for impacted employees
- HR to provide managers with all impacted employees' phone numbers
Thursday: Restructuring Day
8am - CEO Sends Invite for Company All-Hands at 10am
- All-Hands should be communicated as a company update, and that it's important for everyone to attend
- If an employee is OOO or unable to attend, instruct them to inform their manager immediately. Managers should inform HR about any OOO employees
- Managers should ping each one of their employees to make sure they are online as an extra check
10am - All-Hands (via Zoom)
- Thursday All-Hands is all about focusing on the impacted employees
10:30am-1pm - Manager 1:1s
- Communication to impacted people by managers. Contact all individuals separately via Zoom and have a video conversation (video on). If unable to connect via zoom, use the individual's personal phone number to connect with them (not a conference line)
- For OOO employees, managers should ping/text unaffected employees after All-Hands. Impacted people should be notified via text, Slack, or meeting invite. Always follow up from All-Hands and notify the OOO employees directly rather than thru the grapevine
- After 1:1s are complete, managers/Execs notify the CEO via a dedicated Slack channel
1pm onward - Follow Up & Logistics
- CEO email to be sent to the whole company after the impacted have all been notified
- IT will turn off services once they are notified via a dedicated Slack channel that the impacted employees have been notified (e.g., AWS, Twilio, Salesforce)
- Managers to ping remote impacted employees again towards the end of the day to check in. Text or Slack to ensure they received the DocuSign package, get what they need off their computer, feel supported, etc.
Friday: Aligning on the Future
- All-Hands with remaining employees
- Friday is all about aligning on the go-forward plan and strategy
- EOD: Post-Mortem Management Meeting
Please follow these guidelines and suggested language for communicating these changes to your team members.
- Be quick: Repeat the same simple messaging versus going into more detail. Aim for approx. 5-7 mins per meeting
- Be human: Avoid reading from or rapidly running through the script, which can appear robotic.
- Be honest: Convey thoughtfulness, apologizing for the need, not the action. When in doubt on benefits, defer to FAQ vs. giving incorrect information.
- Be respectful: Zoom is the preference with video on; however, it's all about being respectful, so if video off is preferred, that’s OK. Use the phone as your backup, and when in-person, invite employees to sit with their back to the door (so other employees cannot observe facial expressions)
Your Role (Manager/ Department Head)
As a best practice, the manager closest to the individual being terminated should conduct the meeting. If that's not possible, or appropriate, the message should come from the department head, CEO, CFO, or a manager with a previous relationship.
Prior to the Meetings
- Review the manager materials, including the FAQs, and have access to the impacted employees list with phone numbers
- Plan for post-meeting communication to your remaining team and other partners
- If your employee has big customer/sales meetings, be prepared to jump in and take their place
During the Meetings
- Slack and/or text the person and provide them with a unique Zoom link; connect with your video on
- Deliver the message; be direct and empathetic.
- You can use a message like, "I am so sorry to have to tell you, but you are one of the people affected by this change. I recognize this may come as a shock and I am so sorry that your job has been impacted. I want you to know how much I have appreciated you being a part of my team and the company. I as well as everyone at the company are here for you and want to do whatever we can to open our networks and help you. In the All-Hands, you heard the why, and truly it is the only reason we are sitting here."
- Answer employee questions with answers from the FAQ, and communicate what they should expect to receive next (DocuSign or follow-up paperwork)
- If an employee asks "why me, why this, I don’t understand, is this decision final?" patiently listen, pay attention, console, and again reiterate that it is for business reasons and nothing else
- If an employee becomes openly hostile or confrontational, listen silently and empathetically and simply state, "I’m sorry, I know this must be very difficult for you."
- If an employee asks who else is being affected, and wants more info about others on the team state you can answer, "It is not appropriate for me to discuss other employees. I am sure you would want the same privacy and consideration extended to you."
- In the final minutes of the meeting, transition to "How can I help you move forward?"; discuss paperwork/FAQ and the next steps
CEO Email Asking for Company-Wide All-Hands
Subject: Important Mandatory All-Hands [X Time] TODAY Via Zoom
We will be having a mandatory All-Hands at [X] today.
Please make sure to join as we will be covering an important update.
All-Hands Meeting Messaging
The All-Hands meeting should be run by the CEO (not HR). Managers should closely review Zoom attendance, check who attended, and notify HR about anyone from their team who is OOO, absent, or on leave.
STATUS OF BUSINESS - Why
Thank you for making this All-Hands meeting on such short notice.
This is a conversation I would have much preferred to have in-person, but given the circumstances, we had to make do with Zoom.
I regret to inform everyone that we will be going through a restructuring today and that multiple positions are being impacted. These changes are being made to align with our [X] and [X] strategy that we will be rolling out based on [X] (ex., learnings from 2020).
Before going into what to expect over the next couple of hours, I want to start by sharing why we had to make this incredibly challenging decision.
While we were able to [X], we fell short of our initial target on [X]. I know this has prompted a lot of questions and created confusion.
- We also fell short of our goals last year, which means we fell behind on our plan.
- Going into this year, we had a lot of conviction. We accomplished a lot over the course of the year... As a result, [X] and [X] which impacted X and ultimately has led us [X].
- Coming out of [Q2], we have a much better understanding of what is working and the changes we need to make to our [X] and [X].
- As a result, we have made the tough decision to make some changes to our team structure to align with that new strategy.
WHAT'S HAPPENING NEXT? Who, What, When & How
Regrettably, we have [X] positions (within the [product, sales, marketing, engineering, G&A, and EMEA] teams) that are affected as a result of this restructuring. The individuals in these positions will be notified that today is their last day.
What this means is that the next few hours will be very tough. Once this current All-Hands is over, managers will be reaching out to those affected via Slack and contact them over Zoom. Any individuals affected who are on PTO or OOO will also be contacted via text or Slack.
Once everyone has been notified, I will be sending out an email to the company stating that the communications are completed. We are hoping to have all of that completed within the next couple of hours. I know how difficult the unknown of these hours will be, and please understand that we are trying to be as mindful as we can of those affected.
WHAT WILL WE PROVIDE:
Those impacted will be provided [severance, extra health coverage, and their work computer].
JOB SEARCH ASSISTANCE AND STAYING CONNECTED
All executives, managers, and colleagues, including myself, are making themselves available to help those affected in any way possible.
The Talent Teams at [X] (VCs) will also be assisting them with job searches and have set up a contact email provided in the FAQ. [You should hear back within 48 hours].
We are incredibly saddened by this. These individuals have contributed to [company name] and the [company name] culture in numerous ways, and we are going to deeply miss them. Once everyone is notified, we will take the day to really honor them, who they are, and their contributions to [company name]. Let’s spend time with them as we thank them for all their hard work. Also, as a company, we will be opening up our networks to help these individuals in any way possible.
Finally, tomorrow we will regroup at [X] with a separate All-Hands and have a much more in-depth conversation about the decision we made and our plan and strategy going forward. However, today is all about those individuals impacted, and we ask that we all help each other. Let's all tell the story of our amazing team members to our networks to help them.
Again, we expect to complete this in the next few hours and we will notify everyone as soon as all of those communications are completed. I know the next few hours will be difficult.
Appreciate everyone’s patience and understanding in this process.
CEO Email POST 1:1s with Impacted Employees
Subject: Follow-up from Today’s All-Hands
Per our All-Hands this morning, I am notifying everyone that those impacted by this restructuring have all been notified.
Regrettably, we had [X] positions affected (within the [product, sales, marketing, engineering, G&A, and EMEA] teams).
We are incredibly saddened by this. These individuals have contributed to [company name] and the [company name] culture in numerous ways, and we are going to miss them. Today is a day to really honor them and their contributions to [company name]. Let's take the day to thank them for all their hard work. Also, as a company, we will be opening up our networks to help these individuals. Lastly, I wanted to remind everyone to keep today's event and details confidential.
Tomorrow, we will regroup at [X] time with a separate All-Hands and have a much more in-depth conversation around the decision we made, and our plan and strategy going forward.
[Company Name] is currently in a time where we have [strategically re-aligned our business, we are on a new path] - [what is going on and why]. As part of this restructuring, we will be letting go of (# or %) employees, effective [X] day. We’re doing our best to take care of every single employee and their families.
Next Day All-Hands Meeting
Key points & light PowerPoint presentation (if any slides at all):
- What led us to this decision- Why
- What now - Roadmap
- What to expect
Frequently Asked Questions - For Manager Use Only
Limited Access (do not distribute)
What is happening? What led to this decision?
There are several job eliminations occurring throughout the company today. This action is intended to help the company conserve cash during the current economic downturn. Due to an anticipated revenue reduction, [#] positions are being eliminated across our team. However, we expect that revenue will rebound later in the year and that we will experience a return to revenue and headcount growth in the future.
Are other businesses and teams impacted by this announcement?
Yes. Approximately [#] team members will be displaced from their current positions throughout the [group name] today, and [#] team members across our company. I know this will likely be a difficult time for everyone as we go through this transition. In the meantime, I’m confident you will continue to provide the necessary service to our customers during this transition.
Is this the last reorganization? Could we have more layoffs in the future?
We made all the changes that we think we need to do to respond to the current situation. However, we can’t predict what the future may be. As the situation develops, we will communicate openly and honestly with you.
Have my managers known about this decision, and if so, why didn’t they tell me sooner?
Certain leaders were told as necessary to assist in the communication and planning of the reorganization. They obviously could not share this information prior to all of the details being finalized. Also, we wanted to be sure that everyone had the opportunity to hear the message and rationale from senior management and to have the severance and transition support information readily available to impacted people immediately following the announcement.
Will I be placed in another position?
The best course of action is for any displaced employees to self-select by applying for any open jobs that might interest them. This will ensure the best fit possible for each person as well as for the business. If you are interested in finding another position inside the company, please inform your manager and apply online. That’s where you should find all open positions at any given time.
How were team members selected for job elimination?
There was a detailed assessment process, which involved both management and Human Resources. Selections were made in a fair and objective manner, based upon our cost constraints and the headcount needs of each group. Remember, today’s action is a reduction in force, not a termination “for cause” due to poor performance. As a result, this action resulted in the elimination of the positions of some very good employees that we are sorry to lose.
May I see the job elimination rating results?
No. Rating materials contain highly sensitive information about a number of employees, which would not be appropriate for release.
How will this change impact the projects that I’m working on today?
You should continue working on your projects as usual. If you have any questions about changes to projects or priorities, please discuss them with your manager.
I am out on a Leave of Absence (LOA). How does that affect my transition?
Active employees, including those on LOA, vacation, or sick leave, might have been affected by this realignment. If you have questions specific to your individual situation, Human Resources can provide you with more information.
Will displaced team members receive severance?
A severance plan has been approved for eligible team members [and includes a minimum notice period]. Severance pay is based on [years of service]. [Details of the plan will be provided to impacted employees].
How much severance do I get?
The amount of your severance will depend on [length of service]. If you are impacted by a job elimination, a severance letter with the details of your severance benefit will be provided to you. If you have questions, Human Resources can provide you with more information.
If I terminate prior to my release date, will I receive severance benefits? (Applies to team members who are notified of a job elimination prior to their last day of work)
No. To receive severance benefits, you need to be an employee in good standing on your release date. Between today and your release date, you are expected to continue to perform in your current job and continue to conduct yourself in a professional manner. To receive severance benefits, you must successfully complete your job responsibilities during this notice period.
How will I receive my severance?
Generally, severance is paid as [a lump sum] as stated in the Separation Agreement.
What happens if I do not sign and return the Release within the time limit specified?
You will not receive any of the severance plan benefits.
What are the directions on sending in the Separation Agreements?
Included in your packet there will be two copies of your separation agreement. One is for you to keep, and the other copy is for you to sign and submit all pages to [HR contact].
After I sign and send in the Separation Agreement, how long will it take to receive my Severance payment?
Generally, it takes about [15-18] business days for processing before you will receive a check at your home address. If you do not receive your check after this time frame, please contact [HR contact].
If my position is eliminated, do I qualify for unemployment?
Generally, yes – but each state is a little different. You should apply for unemployment through your local state unemployment agency. [The State of California Employment Development Department website is https://edd.ca.gov/en/claims.]