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5 Questions to Ask When Considering Layoffs

September 2022
William Brewer, CCP
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When economically tough times strike, many leaders turn to a classic form of budget trimming: layoffs. The boogeyman of the work world, layoffs are harsh, demoralizing — and often unnecessary. In fact, layoffs can undermine the very reason they exist (saving money) when applied in the wrong situation.

There are economic and political debates and arguments about whether we are in or facing a recession; the important strategic reality is that we have experienced two-quarters of negative GDP growth and that hiring momentum has slowed. Recessions tend to last 12 to 18 months. If you lay off an employee with six months’ pay, your company doesn’t save money until halfway into the crisis. Then, when things pick up again, you need to spend copious amounts of money rehiring and training workers—which can undo all of the savings.

If you’re considering layoffs for your company or your team, here are a few key questions to ask first.

1. How Will Layoffs Impact the Rest of Your Team?

Layoff survivor’s guilt, layoff survivor sickness, workplace survivor syndrome—whatever you want to call it, it’s real, and it’s not a good thing.
When economic pressure led to mass layoffs as recently as the early days of the pandemic, a third of the workers that survived the employment-ending devastation felt guilty after the fact. If you’re considering layoffs, think through how it will negatively impact your remaining team’s attitude, loyalty, and productivity.

2. What is Your Motivation for the Layoffs?

If you’re thinking of layoffs due to a genuine lack of the need for a certain position, it may make sense. For instance, laying off cashiers after installing self-checkout kiosks is justified.
However, if your layoffs are purely budgetary, that may be a red flag. If certain positions need to exist for you to remain profitable over time, how will cutting them out now really help you?

3. Are You Thinking Long-Term?

Are you focusing on minimizing payroll expenses in the present? Is your mindset stuck on meeting short-term performance goals?
If so, make sure to take a moment to consider what the future looks like, as well. Remember, recessions and economic troubles tend to play out fairly quickly. What position will you be in when the current crisis ends if you let a significant portion of your staff go?

4. Is an Employee’s Skillset Redundant or Unique?

Another concern is the value of an employee’s skill set. If you have a dozen accountants with duplicate knowledge, you may be able to let some of them go.
However, if you have highly skilled tradespeople or experienced C-suite executives that are invaluable to your operation, you need to be darn sure it’s the right call before laying them off.
Ask yourself, how easily you can replace each employee you’re thinking of letting go of.

5. Are You Taking Advantage of Opportunities?

Along with avoiding unnecessary layoffs, think about ways that you can capitalize on the opportunities that a layoff-prone environment can create.
Recessions and market pullbacks are scary. But they can increase the talent pool as other employers shed quality workers. Are you adding to that problem or are you taking advantage of the wider selection of quality candidates to reinforce your own team’s talent and skills?

The Most Important Takeaway: Layoffs Come at a Cost

If you feel pressure to lay off a portion of your workforce, don’t assume it’s the correct course of action. Instead, consider alternative options.
Can you upskill and retrain weak performers to make them more valuable? What about temporarily eliminating things like overtime pay or reducing the work week? From encouraging sabbaticals to freezing and even reducing pay, there are many less catastrophic ways to reduce payroll than laying workers off.
Many see recessions as a time to let employees go, but that advice couldn’t be further from the truth. Economic struggles are times to invest in and retain talent. Keep your team unified and loyal in order to position your company to excel when things pick back up again.

“Economic struggles are times to invest in and retain talent.”

As you navigate the twists and turns ahead, remember to keep a quality recruitment partner by your side. The Stanton Chase Los Angeles team can help you take advantage of hiring opportunities as other employers slash budgets and let go of high-quality workers. If you can preserve your current staff and add quality players into the mix, you’ll be ahead of the game when the economy recovers and businesses start competing in a healthy economy again.

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