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Why Organizations Need to Be Transparent About Layoffs

June 24, 2022 Talent Management
Kaya Ismail
By Kaya Ismail

Many company leaders have spoken about the efficiencies they've been able to unlock with a remote work model, in addition to supporting a happier, more engaged workforce. Yet, the reality of that work arrangement is crashing face-first into an economy that appears to be teetering on the edge of a recession. Some companies, particularly in the tech startup industry, have started laying off employees by the thousands. Others are calling for an end to the remote work experiment and asking employees to buckle down and get back to the corporate office.

When layoffs coincide with efforts to get employees back into the office, it creates an impression that employees who don't comply will be let go. Some leaders have actually told employees they'll be fired if they don't come back. Should organizations force workers back into the office under the threat of termination? Here are some considerations for how to be be clear and transparent about layoffs in a complicated economic environment.

The Tesla Example

Tesla, of course, comes to mind when discussing this issue. The company made headlines in early June when a leaked email to employees from CEO Elon Musk detailed Musk's intention to sack employees over the company's return-to-office policy, which not only put an end to remote work but also required an in-office presence for at least 40 hours per week.

Almost simultaneously, Tesla warned of global redundancies and upcoming job cuts. A few days later, Christopher Bousigues, Tesla's Singapore country manager, announced his role had been eliminated. To some, Tesla's move to cut its workforce by 10% was an excuse to rid the company of remote workers who refused to comply with the back-to-office policy.

The backlash was almost instant, damaging the company's reputation and sending the stock price down 8%. According to CommPRO, bad reputations could be costing companies $537 billion in the US alone. And yet, Tesla isn't the only company choosing that route. 

Related Article: What's the Right Amount of Employee Attrition in the Great Resignation?

Maintain Trust First

Trust is vital in an organization, and even more so when the workforce is remote. Employees who feel their employers have unscrupulous motives or are not being entirely truthful with them are more likely to become disengaged. The result is often a drop in productivity and greater turnover — both high costs for organizations. 

Employees need to trust that their employers will not suddenly let them go without a valid reason, and relying on remote work justification, or any other justification for that matter, to fulfill cost-cutting exercises can break the trust built with employees.

"Organizations are looking for ways to be more transparent in their decision-making because of one crucial element: trust," said Janet Clarey, director of HR research & advisory services at McLean & Company in Canada. "Employees want and deserve to know the truth."

So, how can leaders be more transparent with workers when it comes to a subject as sensitive as layoffs?

Related Article: 3 Ways to (Re)gain Your Team's Trust

How to Handle Layoffs

It's never easy for organizational leaders to announce bad news to their employees, particularly when the news entail laying off some of the workforce. But layoffs happen, and there are ways to handle them with tact, respect and transparency to preserve trust and engagement.

1. Be Honest with Challenges

The first step for leaders is to speak to employees about the current challenges the company is facing, whether that is the economic climate, a drop in demand or any other driver. Most employees realize when costs are spiraling out of control or whether demand has significantly dropped off. In fact, presenting the situation with transparency may spark ideas among workers on ways to circumvent the worst-case scenario.

2. Set Expectations

Companies should be clear in their communications about what comes next. Employees who don't know what to expect are likely to be distracted and disengaged. In their announcement, leaders should state how much cost-cutting may be needed to rectify the situation — and when and how this will unfold. Knowing these variables can help mitigate stress and reduce uncertainties.

Related Article: The Right Way to Offboard an Employee

3. Look for Volunteers

Amid the Great Resignation and a rethinking of the work-life balance, leaders may want to seek volunteers looking to move on early rather than laying staff off randomly. Some workers approaching retirement may already be planning their exit in the near term, and others may be contemplating going to a new field or role. 

Employers can arrange fair exit packages for employees who volunteer to leave. This can also help push out workers who were already disengaged and, most likely, not as productive as they could have been. Some employees may also prefer to work reduced hours in order to keep their job, such as parents who need to take on more childcare responsibilities or employees looking to transition into pre-retirement.

4. Consider Other Options

The costs of maintaining a physical office are high. Taking into consideration the research that repeatedly shows how remote workers can be more productive and happier than their in-office peers, companies may want to weigh the idea of letting go of the office altogether.

Tapping into the gig economy and contract workers can also be an option. These already-remote workers can be highly productive and motivated, without requiring the full investment of a salaried employee.

"Modern job seekers are looking for flexibility, ongoing learning opportunities and an inclusive culture that supports remote and hybrid work," said Shauna Chernicoff, vice president of employee experience at Seattle-based Panopto.

Related Article: Why Returning to the Office Is a Mistake (and 2 Reasons to Go Back Anyway)

5. Think Long Term

Any reduction in headcount should be planned. Laying workers off without a strategy can save money in the short term but backfire in the long run. If employees who are being let go are remote workers who choose not to comply with the company's return-to-office policy, leaders cannot hide their decision behind other justifications.

A study by PR Newswire shows that 80% of US workers would turn down a job that didn't offer flexible or remote work. Not providing clarity about the expectations for staff or the consequences of non-compliance will have a damaging effect on the company's reputation and, as a result, effect future recruiting and retention.

Laying off staff without a strategy can also restrict access to crucial skills. Losing access to their knowledge and experience may be more detrimental than having them work remotely.

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