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Have You Considered These Alternatives to Layoffs?

October 13, 2022 Talent Management
Virginia Backaitis
By Virginia Backaitis

Layoffs can be ugly. One day, you’re a happy employee who has recently been promoted. Perhaps you’re planning a long-awaited family vacation, or you're relocating to the big city so that you can work from your company’s corporate headquarters.

But then one morning your computer refuses to let you sign in for work, no matter how many times you reboot it. Next comes a text inviting you to a Zoom call in 20 minutes. There you find out that you and 20, 100, 3,000 or even 90,000 have been laid-off. When you check your email, there’s an empathetic letter from your CEO.

Maybe it’s from Peloton co-founder and former CEO John Foley:

"Team with a culture as close and tight knit as ours, saying goodbye to teammates at any level is hard. We aspire to be the best place to work and we know that doesn’t only mean making Peloton a great place to be at, but it also means ensuring Peloton is a place you are proud to be from. And while today is one of the more challenging ones in our history, we are doing everything we can to ensure you can remain proud of what we have done together. Let me be clear about one thing: this team has built Peloton into what it is today. And this means YOU. Brick by brick, this team has developed the hardware, software, content, delivery and retail experience that is helping improve the lives of millions of Members. This is rare and powerful. Building Peloton is something that has always been, and will always be, a part of each and every one of us. And how hard these layoffs are to make.”

Or Shopify CEO Tobi Lutke:

“All this makes this email so much harder to write: the next part of the journey will involve fewer teammates than we have picked up along the way. Shopify has to go through a reduction in workforce that will see about 10% leave by the end of the day.”

Or maybe it’s from management at any one of the more than 1,100 companies that have laid off in 2022.

No matter how heart-felt or how nicely your layoff letter is phrased, at least 179,000 workers lost their jobs this year. Their lives been disrupted, as have those of their families and others who depend on them.

Isn’t there an alternative solution, or even a better way? The experts in human resources, compensation, business strategy and workplace that we spoke to seem to think so.

Related Article: CEOs: Should You Be Publicly Weighing-in on Layoffs?

Instead of Layoffs, Consider ... 

Skilling Up Employees

"There are many other people (than the CEO) who also work on workforce planning. While I'm not pointing any fingers, I'm saying that there are other people who could step up and say hey instead of laying off, why don't we consider skilling up employees so that they might soon fit the current job postings on our careers page. If we just took the time and effort to change what they do or what they know we might be able to get them to do that work instead," said David Turetsky, vice president, consulting at Salary.com.

That might be something that someone like Ford CEO Jim Farley, who laid off 3,000 workers in August, could have considered. "We absolutely have too many people in certain places, no doubt about it. And we have skills that don't work anymore ... and we have jobs that need to change,” he said during an earnings call last July.

Business consultant Ram Charan, a noted author and CEO advisor on business strategy, 21st century leadership, corporate boards, and succession said management should think carefully before laying off. “People are precious …. If you have good people, restructure their jobs. Good people are hard to find." And if retraining is expensive, cut costs elsewhere to pay for it. "First things first. Every manager must start identifying and reducing risks. Every company has risks. Every company has non-people costs. Eliminate them," he added.

Cutting Costs in Other Areas

When it comes to eliminating costs, author, leadership coach and former Fortune 500 CIO Daphne E. Jones has a seemingly endless list of possibilities to consider, ranging from hiring freezes, eliminating company travel or paid overtime to eliminating raises for senior executives, raises for management and so on.

“People will understand that a company is going through hard times. We all go through hard times and have to tighten our belts. An employee might want to suffer a pay cut or no raise at all so they can keep their job and have some level of consistent cash coming home,” she said.

Jones also noted, "Doing a layoff still costs money but is able to be an expense that is written off."

Candy Valentino, author of the forthcoming "Wealth Habits: Six Ordinary Steps to Achieve Extraordinary Financial Freedom," said that layoffs often include continuing to pay for benefits and unemployment compensation. She added there are other costs that don’t show up on corporate ledgers. “The knowledge and value to the company that is lost when letting go of seasoned employees — it's not just about cost now, it's about unseen costs now and later —  hiring/training or securing new staff will always cost far more,” she said.

Companies can win when they are transparent with their employees. “When you’re cutting costs, there’s always going to be a tradeoff, but it’s worth weighing the risks of these alternatives that protect workers’ employment. When companies are able to pursue some of the alternative options with their employee population about their company’s current financial position, they’re more likely to be a sought after employer by both customers and their employees,” said Lexi Clarke, vice president of people at PayScale.

Consider the Long-Term 

Finally, leaders should note that layoffs can have implications later. “When a company is through the financial hardship and needs to hire again, it will likely regret not having adjusted salaries or reduced expenses elsewhere,” said Valentino.

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