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You were there when it happened.
The meetings to discuss the need to hire recruiters. The job postings on LinkedIn. The applications. The interviews, the offer letters and the acceptance.
You were there when it happened. You, the HR.
The inductions, the training of hundreds of new employees. The promotions and the increments. The reaching of targets. Teamwork, hard work, commitment. And profits for the company.
The happy faces.
Two years later, you were there when it happened: the layoff
Time: 4 a.m.
The phone of Blair Bolick, a recruiter at Google, chimed while she was sleeping peacefully on a March night.
“We regret to inform you that, effective immediately, your position is being eliminated.”
.
.
.
And just like that, my entire world changed – Blair, devastated, wrote on LinkedIn.
She was locked out of her corporate account that morning along with 12,000 of her colleagues. “My boss didn’t know. Heck, my boss’s boss likely didn’t know.”
Blair blamed you, the HR.
She wrote, “We took the people out of People Operations yesterday…Don’t be evil. See you on the other side.”
How did we get here?
A wave of layoffs has struck companies across the world, especially in the tech industry, with 575 tech companies having already laid off 1,69,858 employees in 2023 (Layoffs.fyi).
The seeds of the layoffs were sown during the COVID-19 pandemic, which pushed a greater number of people online.
To meet the growing demand of the digital boom, overoptimistic firms made the HR hire in droves. Two years later as lives returned to normal, the growth did not sustain as projected. This has resulted in companies handing over the pink slips to thousands. Is Industry 4.0 fraying this soon?
1 to 100, according to Gartner
Even the loyal ones, like Justin Moore who spent more than 16 years at Google, were let go. “Live life, not work.” – he wrote on his LinkedIn profile later.
So, who is to blame for the mass layoffs? Those fired blame you, the HR; but you were just following orders from the top, right? And the CEO points to pressures of the economy.
“Streamlining” “Downsizing” “Optimizing” “Rationalizing” “Cost-cutting” – creepy words that have flooded the mailbox of the laid off. Empty words that brush aside accountability and transparency.
Inflation. Subdued demand. Supply chain obstacles. The COVID-19 pandemic. The Ukraine war. Digital boom that fizzled out. Non-performing employees. Automation. Redundant functions.
Too many reasons, no one to blame, everyone to blame.
At this point, it may be convenient to invoke ‘the invisible hand’, some unknowable force that is stealing away jobs and sinking businesses. But as the HR, the guardian of working people, can you allow retrenchments to continue unabated?
Or should you fix accountability to assess what alternatives could have been adopted and how you could prevent future mass layoffs and ensure smoother workforce transitions?
Each time, you stood in a corner, nodding to everything during the discussions to hire – and to fire. No questions asked.
Dear HR, are you accountable?
Layoffs are costly
A Harvard Business Review article suggests that job cuts don’t really help leaders achieve their goals.
“Too often, they’re done for short-term gain, but the cost savings are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation, which hurt profits in the long run,” write Sandra J. Sucher and Shalene Gupta of Harvard Business School.
Sandra believes that all too frequently companies do bad layoffs, do layoffs for the wrong reason, or worse, do both.
Layoffs often results in:
- Increase in voluntary turnovers
Academics at the University of Wisconsin-Madison have found that reducing the workforce by 1% was associated with a 31% increase in voluntary turnover rates the next year.
- Decline in profits
University of Texas at Arlington professor Deepak Datta found layoffs having a neutral to negative effect on the stock prices in the days following their announcement. Further, such companies witness reduced profits for around three years.
- Reduction in productivity among remaining employees
Magnus Sverke and Johnny Hellgren of Stockholm University and Katharina Näswall of University of Canterbury have found remaining employees experiencing a 41% decline in job satisfaction and a 20% decline in job performance. Layoffs can also hobble innovation and the rate of new inventions.
- Increase in probability of bankruptcy
Research in Journal of Business Research has revealed that downsizing firms were twice as likely to declare bankruptcy as firms that did not.
- Blow to diversity, inclusion
According to Alexandra Kalev, associate professor at Tel Aviv University, companies view those roles as expendable during layoffs which are part of the ‘non-core’ or ‘non-essential’ areas. Often, these are occupied by women and minorities. And as a result, diversity takes a hit during downsizing.
- Impact on people’s health
Most people must allow themselves two years to deal with the trauma of job loss, experts suggest according to The Wall Street Journal. A research paper found that for employees without any health conditions, the odds of developing a new health condition rise by 83% in the first 15 to 18 months post the layoff, says Harvard Business Review.
- Rupture of trust
Most people worried about job loss among all personal economic and existential societal fears, found the 2023 Edelman Trust Barometer.
Layoffs reduce the trust in hard work, education and skills upgradation to achieve a better life.
In addition, Stephen Mihm, an economic historian, believes these layoffs mark a revival of long-discredited corporate strategies. “If the trend continues, history suggests these tech leaders will leave their companies severely crippled, at best,” he wrote in Bloomberg.
HR the worst hit
You, the HR, the bullet proof jacket of every CEO.
Pushed aside from decision-making but pushed to the front to deliver the message each time. “Shoot the messenger!” And you go down.
They write bleeding letters, you mail them. And the floodgates open to sweep you first: the blame, the slander, the jeers – the layoffs.
How HRs are taking the worst hit during the layoffs:
- Centre of blame for the employees, the management, the laid off, the media, experts and society.
Take Shraddha Jain, a comedian, who in a video clip claimed she was laid off. “I feel very bad for the HR,” she says in a selfie video. “They had to go from diversity and inclusion to adversity and expulsion in a snap. This after all those employee engagement activities to keep employees happy. They couldn’t keep employees in the first place. Forget happiness.”
- Burnout caused by erratic, unpredictable firings. Layoffs often increase “employees’ levels of stress, burnout, and insecurity,” believe Anthony J. Nyberg of University of South Carolina’s Moore School of Business and Charlie O. Trevor of University of Wisconsin–Madison School of Business.
The responsibility of keeping survivors hanging on, resume work after the layoffs of their peers inevitably falls on HRs.
“It will definitely take a toll on the HR professionals because they also go through their emotional highs and lows,” Vinod Parur, CHRO, RR Kabel, told HR Katha.
- Worst victims of layoffs. Other functions within tech companies saw workforce reduced by 10-20%, while 50% of recruiter workforce was downsized, wrote The Wall Street Journal.
“A year ago, tech companies couldn’t hire enough recruiters to fill all of the open technology positions. Now, the same recruiters have become job seekers,” the magazine reported.
Being in a bellwether occupation, recruiters are hired en masse during good times and are let go as the crisis looms on the horizon. The digital boom during the pandemic created a recruitment frenzy which required more recruiters to keep up with the demand. According to Gartner, in 2022, organizations employed one full-time HR for every 69 employees as against a historical norm of 1 to 100.
But the ax fell the hardest on the HR department.
“Recruiting will be disproportionately affected since we’re planning to hire fewer people next year,” Zuckerberg wrote in a letter. Airbnb reduced 30% of its recruiting staff. Twitter cut 30% of its talent acquisition team. LinkedIn was no exception.
You bleed. Silently.
No one to blame – everyone to blame
- I got this wrong, and I take responsibility for that – Mark Zuckerberg, CEO of Meta
- I take full responsibility for the decisions that led us here – Sundar Pichai, CEO of Google and Alphabet
- I am accountable for these mistakes and the actions we take today – Eric S. Yuan, CEO of Zoom
The CEOs take accountability, but the blame is piled on you, the HR.
Companies cite several reasons for taking the ‘tough step’. But what led to it? And where does human resources management come into play?
Overhiring during the digital boom fueled by the COVID-19 pandemic
The pandemic-led digitization led to a surge in e-commerce and companies predicted that growth in the sector would continue.
Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected”
– Mark Zuckerberg, CEO of Meta, to his laid off employees.
Employees viewed as liabilities
In many countries, including the US, employees, along with investments in them are treated as expenses or liabilities, notes Peter Cappelli of Wharton School.
This makes them expendable. A similar sentiment was echoed by Justin Moore, laid off from Google. He wrote on LinkedIn: “This also just drives home that work is not your life, and employers — especially big, faceless ones like Google — see you as 100% disposable.”
Lack of robust internal talent management pipelines
With the HR’s involvement at the strategic level, internal talent management could have been strengthened through training and leadership development programs.
Further, building a leadership pipeline based on the model suggested by Ram Charan, Stephen Drotter and Jim Noel in ‘The Leadership Pipeline: How to Build the Leadership Powered Company’ could have helped.
The pipeline is bent in various places which represent changes in the organizational position depending on the hierarchy. Each change demands a corresponding change in skills, time applications and work values.
Time to speak up is now
Dear HR,
You were there when it happened, at the proverbial business table when the recruitment decision was made.
Take accountability now! This is not about the blame, but an empowering acknowledgement of your duty. To make every employee count. To nurture a culture of trust and performance. To be humane.
Preventing layoffs starts with hiring mindfully.
For this, you must enquire with your leaders before they decide to hire for particular roles:
- Why now? What for? What next?
- Show me the data to prove the need.
- What value will it add to the company?
- Does the demand take into account the external market, social, political and economic condition?
- How does the required number fulfill the business need?
- How will the hirings aid the company in its long-term strategic goals?
- How well are the company’s finances? Are they sound enough to recruit, train and pay new employees?
- Can’t the need be fulfilled internally by upskilling, promoting and rotating existing employees?
It is never too late
But when layoffs seem inevitable, there are alternatives you must suggest:
Job Sharing
In this arrangement two employees share a job. They divide their pay and time, leaving them with the opportunity to pursue alternative livelihoods. The company saves their jobs and cuts costs.
Furloughs
These are mandatory temporary leaves of absence during which employees are not paid but retain their jobs. They may be called back to work later.
Salary freeze, rollbacks and cuts
In this case, the burden of cost reduction is dispersed and shared by all the employees. You can ask the leadership to take greater cuts for significant reduction in costs and inspire confidence in the workforce.
As for rollbacks and cuts, you may offer to pay retroactively or return to the previous pay levels when the conditions return to normal.
Remote work
Working remotely can cut down fixed costs and save jobs. “Ultimately, embracing remote work and asynchronous communication is a great way for companies to not only reduce costs but also increase productivity,” Syed Balkhi, a marketeer and founder of WPBeginner, told Forbes.
Sure, remote work can boost productivity. Yet, it’s important to explore the hybrid option first. According to research, remote employees were 32% more likely to feel anxious during layoffs and this affected their productivity. Whereas those who went to the office at least some of the time suffered lesser impact on their productivity.
Reducing discretionary spends
These include food coupons, team meals, trips and merchandise. The challenge for you here is to retain the company culture and productivity while cutting down on these offerings. This can be achieved by recalling the company vision and story in everything you do.
But do not compromise on diversity, equity and inclusion (DEI) within your organization, which might seem like superfluous expense during a crisis.
According to Bloomberg, cost-conscious organizations amid layoffs are reducing their budgets for “workplace programs including diversity, leadership training and wellbeing”.
This can backfire as long-term DEI initiatives can help develop a resilient culture immune to economic pressures and offer continuity and trust to employees who survive the layoffs.
Investing in cross-training employees
This involves training employees to take up roles in different departments and can prove useful when a function is seen as redundant.
“A team with diverse skill sets and abilities is a must-have for business leaders across all industries who want to ensure maximum productivity and job security,” Chris Christoff of MonsterInsights, a Google Analytics integrations platform, told Forbes.
Build workforce change strategy
Having an effective workforce change strategy can help you find alternatives to layoffs or minimize their fallout. Further, this can enable workforce transformation smoothly.
According to Sandra J. Sucher of Harvard Business School, an effective workforce change strategy has three main components: a philosophy, a method, and options for a variety of economic conditions
An effective workforce change strategy should be characterized by goals against which success can be measured, believes Sandra.
A philosophy
Have a workforce change philosophy that aligns with the company’s values and vision. This can serve as a “compass for senior leaders.”
A method
Finding a method will aid you in finding alternatives to layoffs, and in case they are unavoidable, minimize the harm they cause.
To establish one, firms need to address three questions:
- How will we plan for workforce change on an ongoing basis?
- Who will be accountable for managing and supervising it?
- What metrics should we use to determine whether our actions are effective?
Options for a variety of economic conditions
This is to anticipate different scenarios and prepare responses to them.
- A healthy present: Sandra believes this involves leaders practicing “disciplined hiring and using stringent performance metrics to build a strong organization that can weather change.”
- Short-term volatility: Managers here devise alternatives to reduce costs without resorting to “destructive layoffs.”
- An uncertain future: Market disruptions can require restructuring of the workforce. If layoffs are inevitable, companies must ensure that “employees are treated fairly.”
Such an approach can yield a desired outcome. Deepak Datta of the University of Texas at Arlington has found that companies secured better financial results after a layoff when employees thought it was handled “equitably and done for strategic reasons rather than cost cutting,” according to Harvard Business Review.
Take the reins
If you do not take the reins now, worse things could happen – to you, the company and people.
How bad could it get?
1. Vishal Garg, CEO of Better.com informed his employees on a Zoom call: “If you’re on this call, you are part of the unlucky group that is being laid off.”
No reasons given, no dialogue. Later, he even called his employees “dumb dolphins”.
Positive employee experience?
2. Bird Global, an electric transport company, relied on a robotic voice on a video call to fire its employees, according to dot.LA.
No human had the guts to do it.
Employees are our greatest asset?
3. Twitter wrote to its employees on mail:
“If your employment is not impacted, you will receive a notification via your Twitter email.
If your employment is impacted, you will receive a notification with next steps via your personal email”
Dear HR, do you still wish to play silent? Isn’t your inaction an admission of complicity, of your hand in glove, of guilt?
Aren’t you seething with rage at what could have happened with your active involvement? What about your people-first promise?
Are you what everyone wants you to believe you are? The attendance reconciler. The rangoli maker. The birthday party organizer. The trip planner. The follow-up king. The payroll manager.
HR is the center stage
HR, you have the center stage in any organization. You are the center stage. Claim that space now. Of strategy, impact and value.
You drive people, enable them to make businesses happen. Can business even exist without the HR?
As a long-term strategy, manage a workforce sustainably without going for the painful option of layoffs by:
→ Planning human resources management from the outside in, as suggested by the ‘father of modern HR’ Dave Ulrich. This involves you being a credible activist, a strategic positioner, a capability builder, a change champion, a human resource innovator and integrator, and a technology proponent.
Had you considered HR from outside in:
1. You would have understood the drivers of the COVID-19 fueled digitization, participated in growth projections with the leadership and hired mindfully.
2. You would have gauged the political, social and economic environment along with the company’s vision.
In fact, rising inflation and interest rates foretold a slowing growth rate. Your knowledge of it could have prevented mass hirings.
3. An awareness of the history of mass layoffs would have allowed you to learn from past episodes and replicate workable models.
- Layoffs in the 1970s-80s, including at Boeing Co. and General Motors Co., did not lead to profits as anticipated but caused productivity to decline.
- Layoffs during the great recession of 2008: A study titled “Dumb and Dumber” suggested that layoffs impacted profitability especially for industries having low levels of physical capital but greater investment in workers.
This includes tech companies, which have resorted to mass layoffs yet again in the current wave.
→ You could also embark on the systemic HR model, suggested by Josh Bersin, a talent management expert. This is a combination of recruiting, retention, reskilling, and job redesign in a continuous process.
Such companies move people from low growth to high growth areas, create a culture of growth and improve employee experience continuously. They also look for ways to reduce routine work and automate processes, says Bersin.
“If you grow more slowly and constantly focus on increasing productivity,” you can often avoid mass layoffs, he suggests.
→ Or you could follow the transparent separations approach of David Siegel, former CEO of Investopedia. You can encourage underperforming employees to leave on their own by letting them know they will be “let go in time and need to start looking for a new job ASAP.”
Transparent separations are more humane and better for the company culture and the business, Siegal writes in Harvard Business Review.
“The best approach to layoffs is to know how to avoid them in the first place – without repercussions to your business,” reads Human Resources Kit For Dummies by Harold Messmer, Jr.
Further, the HR must continually consider the company’s strategic priorities and determine their staffing implications, the book advises.
“All staffing decisions should support the company’s strategic priorities.”
Automate talent management to prevent
layoff scenarios
Keka’s thrust on creating a positive employee experience echoes the systemic HR model of Bersin. The performance management system – 360 degree and one-on-one feedback and the bell curve – can improve productivity of employees, thereby creating internal talent pools.
Further, the applicant tracking system facilitates skills and data-based hirings. This automated recruiting platform does away with the reliance on gut feeling only. So, you get the right people on the team for the right purpose, and redundancy is reduced. This may prevent the possibility of mass layoffs in the future.
The expression wall on Keka, where employees can share and like one another’s work, can create a positive work culture for you. This can sustain your culture and business through uncertainties, including layoffs.
Begin your HR transformation journey today with Keka. Gift your employees happiness.
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