Layoffs are never easy, nor fun. But sometimes they are necessary. Following the intense hiring during the pandemic, there is probably a need to reduce staff head count in many companies that are now facing consumer spending slowdown and the impacts of inflation and rising interest rates.
Layoffs during 2022-2023 and the macro outlook
2022 and 2023 has undoubtedly been the year of the layoff. As seen above, as compiled by Layoffs.fyi. Trend wise we can see that 2023 has been a rough year for employees. No more quiet quitting, more overt layoffs.
All that being said, layoffs suck for everyone involved. For managers and for the employees affected. It is however, on the macro scale, needed to facilitate the creative destruction in the economy. Someone laid off from firm A will hopefully start working for the more productive firm B and thus create more value for the economy as a whole.
Doing layoffs the right way
I am not fan of the American style of layoffs, where you one evening get an email that you have been laid off and your access to company equipment has been shut off. There are business risks with allowing certain employee categories to maintain access after receiving a layoff notice but for the most part it is just demeaning and does not give a chance for the employees affected to say goodbye and leave in a dignified manner.
Europe, in many ways, has the opposite problem, where layoff notices can take a year to materialize. It is not good for anyone's sanity to drag it out. It really does kill motivation and productivity within a company and does not really shield employees from the negative outcomes.
So a few guidelines for layoffs (subject to local legislation)
- Be fair - provide a fair severance package that is, at least, in line with local standards
- Get it over with quickly - Soon the layoffs will be history, and everyone left can focus on the future
- Cut once, cut deep. It is better to cut once than cutting in smaller chunks.
- Use the opportunity to refocus the organization. Cut entire product, teams or initiatives. Refocus the staff left and secure they do not burn out due to scope of work largely staying the same.
Those are some of my thoughts on layoffs. What did I miss? Let me know!
Patrik
patrik[at]chrono.se