Dozens of tech firms announced layoffs recently, and others declared hiring slowdowns or freezes. Over the past decade, many companies have invested more into diversity, equity, and inclusion (DEI) initiatives. Layoffs are where the rubber meets the road for organizations claiming a commitment to creating inclusive cultures. How leaders and their companies navigate the economic downturn in the coming year will speak volumes.
Best-in-class modern leaders understand the links between inclusive cultures and the bottom line. Up until recently, the goal has been attracting and retaining employees — especially talent from diverse backgrounds — in a tight labor market. Our clients tell us that when recruiting, most potential hires want to understand the company’s DEI story. That tracks with recent data: 76% of job seekers and employees consider diversity and inclusion when sizing up potential employers.
Savvy companies need to embed DEI into every stage of the employee lifecycle — including separations. A company that has invested time, money, and effort into building an inclusive culture does not want to have its employer brand story compromised. And more importantly, the last thing a company genuinely committed to inclusion wants to communicate is that its leadership targets marginalized talent in the layoff process.
Here are five ways for leaders and their companies to establish layoff practices rooted in inclusion and belonging, just as they’ve done with other elements of the employee lifecycle.
Approach with empathy.
How to separate with employees has not historically been a focus for businesses. It’s no surprise that leaders find themselves ill-equipped to navigate this phase of the employee engagement lifecycle and struggle with how to be inclusive while being forced to exclude a portion of their workforce structurally.
It starts with the obvious: Employees are people, and letting people go is never easy. Whether you’re the CEO or a team leader, when meeting with an affected employee, showing humility and vulnerability will convey that you’re not taking the situation lightly or only care about the health and welfare of the business. Demonstrating that you’re human will enable you to better connect with employees — both those who are leaving and those who are staying.
In May, for example, unicorn company Cameo laid off a quarter of its workforce. CEO Steven Galanis made an effort to demonstrate his pain at making the difficult decision about the layoffs publicly via Twitter. “Today has been a brutal day at the office. I made the painful decision to let go of 87 beloved members of the Cameo Fameo. If you’re looking to hire hungry, humble, smart, kind, curious learning machines who love to win — and you see Cameo on their resume — look no further.” The employee reactions on social media validated Galanis’s approach, indicating they felt valued and honored, despite the unfortunate circumstance.
On the flip side, when Carvana cut 2,500 employees earlier this year, many were informed they were being laid off via Zoom. And Vishal Garg, CEO of unicorn mortgage lender startup Better.com, was universally criticized for his cold and unfeeling approach after he informed 900 employees that they were being laid off on a Zoom call right before the holidays in 2021. He also added insult to injury days later by publicly accusing affected workers of “stealing” from their colleagues and customers by being “unproductive.” When the economy rebounds and these companies want to hire again, we don’t doubt prospective employees will remember how they handled these layoffs.
Consider demographics when determining which roles to eliminate.
While there’s no one-size-fits-all approach to determining who will be impacted by downsizing, decisions often occur at the top of the organization, driven first and foremost by cost-savings goals. By focusing on cost savings at the expense of inclusion, leaders risk undermining the great work they’ve done to build trust and connection with their employees, particularly women and employees of color.
Being intentional about deciding who gets laid off is not just about protecting the company from lawsuits — it’s also about maintaining an inclusive culture. Who gets laid off can have long-term unintended consequences for the people who remain.
If you’ve recently hired diverse talent to increase your pipeline and then decide on a “last hired/first fired” policy, you’re likely to disproportionately impact women and people of color. Longitudinal research reveals that Black employees have historically been particularly affected by this type of policy.
Another place leaders often turn to first to cut costs is reducing their contractors rather than full-time employees. According to a study done by Pew Research, Latinos, Black people, and employees from other excluded groups are much more likely to be gig workers and therefore more likely to be impacted when a company reduces its contractor pool. Netflix recently took this approach and was rightly criticized when it came to light that the reduction affected many workers with marginalized identities.
We recently consulted with a startup that tried to be fair when it conducted layoffs. Rather than making decisions at the top, company leaders delegated the decisions of whom to lay off to managers in an effort to empower them. The net result? The layoff list included a significant number of employees of color. The leaders were astonished when they discovered why. Within each group, the numbers weren’t skewed, but they added up across the organization, and the company went from being relatively diverse to increasingly white and male.
Examine internal employee resource groups (ERGs) to ensure they have leaders and representation following layoffs. Another client recently laid off a significant portion of its ERG members and a number of their respective executive sponsors. This left the remaining ERG leaders rightfully questioning whether their company was genuinely committed to DEI and led them to wonder whether devoting their time to the ERGs was worth their investment.
Design inclusive severance packages.
Inclusion should be at the heart of the design of your company’s severance offerings. Here are four key pillars to consider:
- Rather than just offering one to two weeks of pay per year of service, offer a base package and then consider credit for seniority on top of that. Employees who joined recently likely left good jobs behind to join you. They shouldn’t be penalized for business decisions. Follow the lead of savvy companies like Airbnb, which offered a base package of 14 weeks to all terminated employees and then added one additional week for every year of service when Covid forced it to downsize in 2020.
- Offer a minimum of three to six months of COBRA to help provide continuity for employees’ medical needs. (Airbnb offered 12 months in 2020.) Also consider allowing the employees to take their COBRA distribution all at once, which enables them to manage their finances based on what they and their families need.
- Offer the same severance package to candidates whose offers you have rescinded. Coinbase recently offered two to three months of severance at full pay to the not-yet-started employees.
Don’t place the burden on the employee.
Every employee who is laid off deserves to hear directly from leadership how the decisions were made and why. They also deserve a one-on-one conversation to hear from a fellow human that their role has been eliminated and what support they will receive from the company. Plan to create the shortest wait between announcing that your company will be conducting layoffs and the subsequent one-on-one conversations. Both conversations should happen on the same business day, at most.
Ensure all information is provided in multiple formats — at least verbal and written — and provide multiple avenues for former employees to ask questions. Follow up a day or two later with key information in an email.
If your workplace is in person, ensure that laid-off employees can get home without having to suffer indignities. Having couriers take boxed desk items to employees’ homes and paying bus fares and/or rideshare services for those who don’t drive can go a long way. If possible, give your laid-off employees time to gather electronic files, contacts, and other items before leaving.
If your workplace is remote or hybrid, make it easy for employees to return company equipment. Don’t require them to pay out of pocket to get reimbursed. Find ways to pre-pay for shipping or other costs.
Don’t forget your “survivors.”
One of the most common missteps is believing everything is back to normal immediately following the announcement. Never forget that the people staying with you are watching how you handle the communication about the layoffs, how you treat employees who are leaving, and how you support employees after they leave.
Each retained employee will have an individual process and timelines as they adjust to the new normal. Dealing with a workplace version of “survivor’s guilt” is common. In a study by Leadership IQ, 74% of employees who kept their job during a layoff reported that their productivity had declined since the layoff. Facilitating and formalizing ongoing communications will help rebuild trust.
Encourage retained employees to connect with former employees, offer to make introductions, share LinkedIn recommendations, and provide references. We frequently hear from laid-off employees who feel the most lonely immediately after a layoff because former coworkers don’t know what to say, so they frequently stay silent.
Here’s the good news: When the downsizing process is over, leaders have the opportunity to reset the culture, making DEI foundational to the company’s future. We advise our clients to do the following after layoffs:
Refocus and align around a new purpose-driven strategy.
Sometimes, downsizing requires the company to focus on a refined purpose-driven strategy. Distilling the information and getting the strategy to a single page that aligns the entire team can help the organization move forward with renewed enthusiasm.
Evaluate your culture.
Conduct a culture assessment to determine areas that require improvement. It’s likely not feasible or necessary to do a comprehensive culture overhaul, but conducting a post-layoff assessment can target specific areas to be addressed and help lay a path to the inclusive culture you’ve always wanted and your business has needed.
Partner with employees.
Having to “do more with less” comes with many real challenges, and leaders should engage employees in addressing them in order to create the foundation for renewed enthusiasm and motivation. Don’t just tell them what to do — invite them to participate.
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The data is unequivocal: Companies that treat people with empathy and embed inclusivity into all parts of the organization translate these actions into sustainable growth and profits. As we shift to separations, it is essential to remember that how we let go of people is as important as how we hire and promote them.