What I Learnt from Laying Off 40 Staff

From my experience speaking to founders, managers and business leaders, laying people off is one of the hardest things a person will have to do during their careers.

It can be hard to work out what went wrong for this to happen, but generally speaking:

  1. The company doesn’t have the cashflow, is forced to restructure, and has to let staff go to ensure its survival (and the jobs of remaining employees)
  2. A staff member has had their role evolve, is no longer a good fit for the job (e.g., your Head of Engineering will need different skills to manage a department of 50 Engineers vs. a team of 5 as you scale) and there wasn’t a way to retain him/her in another role
  3. A staff member was hired, but they didn’t end up being a good culture fit
  4. A staff member was hired, but ended up performing sub-standardly

The emotional challenge is that, regardless of the reason, it is a failure of the business in some shape or form (although luck plays a big part):

  • Point 1 is a failure to optimally run the business.
  • Point 2 is a failure to upskill and support said employee.
  • Point 3 is a failure in the hiring process to identify the right person
  • Point 4 is a failure to support said employee in developing skills, helping them feel valued, etc.

When I moved to Australia in August 2017, I was appointed as the Operations Director (and later COO) of a scale-up (a start-up that had significant revenue and was in the process of expanding). However, the company hit a sizeable cash-flow barrier six weeks after I joined, so I was told the options were sadly either to:

  • Find a large sum of cash in the next two days (by bringing billing forward, pushing payments back, reconciling and billing unreconciled transactions, etc), or
  • Lay off a sizeable number of staff in the departments I was overseeing

We worked hard to find the money, but couldn’t find enough to prevent the lay-offs. These are some of the lessons I learnt throughout the process…

Laying people off represents a failure of the business, and is a hard pill to swallow

Lesson 1: Do it Quickly

When I was informed about the cash-flow situation, I kept it confidential between myself and a few staff who were working to find a solution with me and, once we couldn’t, we proceeded immediately. Delaying would have led to uncertainty, staff questioning each other, general agitation and panic. I wasn’t sure that we couldn’t salvage the situation, but the only thing worse than laying people off is laying people off with a shitty company mood and rumours flying around in the days before and after the official announcement.

Lesson 2: Do it the Right Way

When I executed the lay-offs, I had the option of firing the selected staff with minimal severance pay, or the selected plus two/three additional staff with better severance pay. I chose the first option because:

  • It would save two/three jobs
  • The business needed all the staff it could get to keep operating

I’m honestly not sure that I made the right call here, but I had to make a snap decision so that we could move ahead immediately. The staff that stayed ended up continuing to do great jobs afterwards but I couldn’t help but feel that, by sending people off with minimal severance:

  • I sent a message to the rest of the company that we didn’t truly care about them, potentially damaging company culture a little further (any lay-offs cause damage)
  • I was taking cash away from the people that arguably needed it the most (those being laid off)
  • I negatively impacted the relationship between the departing staff and the business. In fact, I was told by one ex-employee I wanted to hire back several months later that the minimised severance was “a bit shitty

What helped salvage the situation in the end was that, when we later outsourced the work to contractors, I had the contracting companies hire many of the staff that were made redundant back as part of the negotiations because it:

  • Saved them retraining new teams
  • Was the right thing to do

Lesson 3: Lead from the Front

A lot of the layoffs were staff that did not report directly into me, many of whom I’d actually never met due to my short time at the company. However, having the managers reporting into me do all of the layoffs would have been a weak thing to do. Laying people off is hard, and it was important that I stood tall and did the hard things alongside my staff.

Many of my staff had developed deep personal connections with the employees they were laying off so I gave them the option of choosing which staff they wanted to deliver the news to, and to give me the ones they didn’t want to do. Some wanted to deliver it to those they were closest to (this is ideal, as staff deserve their managers to have the courage to deliver them the bad news), but some couldn’t face the thought at all. We were all suffering, and it was important for everyone to do their part as much as they could.

Lesson 4: It Sucks

I found during the redundancies that I would get two types of reaction:

  • Emotional — the staff member would break down and tell me about their family, the kids they’d have to feed, etc. These were the hardest and I felt powerless to help.
  • Aggressive — either the company or myself would receive some form of abuse. These redundancies were easier to deal with as I could just close off all of my emotions, wait for the staff member to vent their anger and then close the chapter.

Closing Thoughts

It’s hard to execute transformations such as these. It is important to acknowledge that it happened, that it was a collective failure from the company, and then to learn lessons from the incident so it won’t happen again. If staff don’t feel they have security or are valued, performance will fall through the floor and then you’ll have lost the most important asset that your business has – its people.

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