It’s hard to ignore the headlines lately: layoffs are definitely on the rise. In fact, recent reports are saying there’s been a Forbes jump in corporate downsizing compared to just last year. That’s a lot of people and families being affected. These decisions send ripples through communities, leaving folks feeling understandably anxious and uncertain about their jobs.
Having been in the trenches of HR and organizational management for years, I’ve seen firsthand how tough these choices are for companies when they need to restructure. I’ve also witnessed the stress and confusion that comes with layoff announcements. I get the need to understand the “why” and “how” behind these decisions.
That’s why I wanted to write this – to give you a look behind the scenes at how companies select who’s let go during a layoff. My goal is to give you the knowledge and strategies you need to take charge of your career, and hopefully feel a bit more secure. By understanding what companies look for and what they value when making these calls, you can take steps to shore up your own position and gain control of your career path. Let’s jump in…
The Layoff Landscape: A Harsh Reality
Let’s face it, layoff announcements have become all-too-common. The news paints a pretty grim picture of where the economy is. You see major tech companies trying to get leaner, retailers changing to keep up with how we shop, and even manufacturers struggling with supply chain problems. It means pretty much every industry is dealing with job cuts. [Cite a recent news article or report showcasing specific companies and industries affected].
This whole wave of downsizing? It’s due to a bunch of things happening at once, the big one being this uncertain economy. Companies are trying to cut back on costs, be more efficient, and honestly, just survive in this market. That means they’re making really difficult choices about staffing levels and how they spend their money.
Before we get into exactly what companies consider when making these decisions, let’s cover some basic terms. “Workforce reduction” is a general phrase for any time a company cuts back on employees. “Restructuring” is a bigger deal – it’s when a company overhauls how it’s organized, and it often leads to layoffs. Understanding this vocabulary helps us understand the situation both company leaders and their employees have to deal with.
Finally, it’s helpful to be familiar with the terms associated with leaving a company during a layoff. A “severance package” is generally compensation, benefits, and other support offered to departing employees. “Outplacement services” are simply resources to help those who have been laid off get new jobs. Understanding these terms will help you navigate the process.
Behind Closed Doors: Common Criteria for Layoff Selection
Okay, so the big question is: how do companies really decide who gets laid off? Most people think it’s all based on seniority – “last one in, first one out.” But honestly, while seniority can be a factor, it’s way more complicated than that. Companies look at a ton of different things, weighing them carefully to make sure their layoff decisions lined up with their overall plans and budgets.
So, what are these factors? While the exact list varies from company to company, some common themes pop up. Things like an employee’s performance, whether their skills are in demand, the importance of their role in the department, and how much money or value they bring to the company. The relative “importance” assigned to each of these criteria is often a secret that is up for debate depending on the company’s situation.
For example, a tech company that’s shifting its focus, might want to hang on to its employees with knowledge of newer technologies, even if those employees are younger and less experienced than their colleagues. Another example is that a manufacturing company that’s struggling to sell their products might reduce costs by laying off employees whose positions are less essential to their core operations.
Also, these decisions are rarely made by one person. A team of HR people, department heads, and executives usually work together to look at the workforce and figure out where they can cut positions without messing up the company’s performance too much. The whole thing is delicate, and the decision process is usually well documented for business reasons and so the company has a legal right to the layoffs.
At the end of the day, it is a complex process, and each organization will consider many unique factors. Let’s take a closer look at a couple of these key criteria.
Skills and Redundancy
One of the most important things companies look at is an employee’s skills and whether those skills are still useful to the company now and in the future. These days, skills can become obsolete quickly, which creates a “skills gap” in the workforce. Besides that, some employees might have skills that are redundant, meaning several people can do that job, which may render certain roles expendable.
Take a marketing department that’s pivoting from the tried and true marketing that they’re used to for digital marketing strategies. Employees with experience in the old way of marketing might be at higher risk compared to employees who know search engine optimization, social media marketing, or data analytics. The need for employees with digital marketing skills is more important than experience with out-dated marketing tactics.
Similarly, automation and AI have affected how much companies need employees for certain jobs that were once essential. Jobs such as data entry clerks, manual laborers, and some customer service representative roles may be cut as companies adopt new technologies. Identifying in-demand skills and proactively developing those skills is essential to maintain job security. You need to adapt and ensure you don’t let your skills become out-dated, because if you do your risk increases substantially.
Performance and Productivity
Apart from skills, how well an employee performs on the job is an important factor. Companies will carefully analyze performance reviews so that they can determine who is meeting expectations, versus who is struggling. It’s not just about the output of the employee, trajectory of the employee also plays a factor. Is the employee improving? Are they receptive to feedback?
Here’s another example, let’s say a company is restructuring their sales team. Employee A and Employee B are both relatively similar when it comes to experience at the company. However, employee A constantly lands new sales, gets positive feedback from clients and actively attempts to help the company overall. Employee B often misses targets, and receives bad feedback from the client. Therefore employee A is much more valuable to the company.
What leadership thinks also matters. I observed a circumstance where two people made similar sales, but person A made sure that everyone above them knew what they were doing and how important their work was. Due to this person A was much more valuable to the company.
Make sure to prioritize work that would bring value to the company, and make sure to also bring value to leadership’s perception of you.
Decoding the Data: How Performance Metrics Influence Layoffs
Companies rely on data during decisions and performance metrics are at the center of it. Performance can be assessed by completing performance reviews, as well as assessing key performance indicators. Data can provide an unbiased way to compare various employees.
It’s critical to see the potential bias within these systems. KPI’s can offer a snapshot, but they don’t capture the full picture. Quality work such as teamwork, problem-solving, and mentorship often go unmeasured.
Performance reviews can be subjective. Therefore there will be unconscious bias amongst the evaluations of its employees. Inconsistent performance standards can lead to an unfair comparison. One manager’s exceeding expectations might be another’s simply meeting expectations. This is basically never an objective measurement.
I saw a company consult relied only on performance reviews to determine layoff candidates. A highly valuable engineer received a slightly lower score and based only on this single point in time they were laid off. The company had engineers who were less experienced, but still employees with the company. This is an excellent example of why you can’t rely on any single point of data and why it fails to showcase an employee’s contributions to the company.
Beyond Performance: Other Factors at Play
Layoff decisions rarely hinge on individual performance.
One key consideration is skills redundancy. Even a high performing employee can be a risk if their skill set overlaps significantly with others. This is particularly relevant during digital transformation where skills become less critical.
Department restructuring can also lead to layoffs. Companies often reorganize departments to improve efficiency, eliminate redundancies, or align with new strategic priorities. During these restructurings, entire teams or divisions may be eliminated, regardless of individual performance.
Cost reduction initiatives are always a driving force behind layoffs. Companies may target positions with higher salaries or benefits costs, regardless of the employee’s performance. The rise of remote roles has, in some cases, led to companies outsourcing positions to locations with lower labor costs, impacting even high-performing employees in higher-cost areas.
I saw this firsthand when a company decided to consolidate its marketing department. Despite consistently exceeding expectations, several talented marketing specialists were laid off simply because their roles were deemed redundant after the restructuring.
The Legal and Ethical Minefield: What Companies Must Consider
Layoffs are not simply about cutting costs. They are fraught with legal compliance and ethical considerations. Companies must navigate a complex web of regulations and moral obligations to ensure fairness and avoid potential legal challenges.
One of the most significant legal risks is discrimination. Layoff decisions cannot be based on age, race, gender, religion, disability, or national origin. Companies must carefully document their selection criteria and demonstrate that layoff decisions were based on legitimate, non-discriminatory factors.
The WARN Act (Worker Adjustment and Retraining Notification Act) is another critical consideration. This federal law requires employers with 100 or more employees to provide 60 days’ advance notice of plant closings and mass layoffs affecting 50 or more employees at a single site of employment. Violating the WARN Act can result in significant penalties.
Companies also have an ethical responsibility to treat employees with respect and fairness during layoffs. This includes providing adequate severance packages and outplacement services.
Layoffs can be handled well, and the way that the company handles the layoffs speaks volumes about leadership’s character.
Protecting Yourself: Strategies for Navigating Layoff Risks
While you can’t completely get rid of the possibility of getting laid off, you can be proactive so you can get the most out of your job. You need to understand company’s value and enhance your position in that company.
- Honest Assessment. Evaluate skills, and determine if you are meeting exceptions.
- Identify what skills gap, and attempt to fill those. Learning is crucial to staying relevant. Consider taking online courses, attending workshops, or getting certificiations to broaden skills.
- Network Actively. Networking is essential for building relationships. Reconnect with old friends.
- Accomplishments. Keep a log of accomplishments, contributions, and feedback. Use metrics to demonstrate to the company how good of a value you are.
- Improve Performance. Receive feedback and actively attempt to improve your areas of opportunity.
- Finances. Make an emergency fund for yourself.
- Up to Date. Keep up with company news and potential restructuring plans.
- Prepare Resume. Ensure that your resume is up to date.
Assess Your Vulnerability
Ask yourself the following questions:
- How strong are my recent performance reviews?
- How easily replaceable am I with my skills?
- Am I just doing my job or adding value?
- Am I prepared for potential job loss?
Improve Your Performance and Visibility
- Exceed Expectations. Work to go above exceptions.
- Seek Feedback. Implement suggestions.
- Volunteer. This allows for you to step out of your comfort zone.
- Document Successes. Show value to the company.
- Mentor Others. Share your expertise.
- Network. Build and nurture relationships.
- Build an Online Presence. Share your journey.
The Human Side of Layoffs: Managing the Emotional Impact
Layoffs are not inherently only difficult for those who lose their jobs, but they are also hard for the company. The emotional impact can lead to stress. It’s good to connect with those who you have lost connections with, and remember that your employees are likely feeling the stress about the future with the company.
If there is an emotional impact remember that you are not alone. Reach out to mental health professionals.
Here are some resources that may be helpful:
- Stanford.edu
- Employee assistance programs
- Mental health help lines
Conclusion: Navigating the Future of Work with Knowledge and Resilience
Layoffs are a reality of today’s job market, understanding the factors that influence these decisions can help you increase your value.
Adaptability is key. Don’t forget that knowledge is your greatest weapon.
Connect with me on LinkedIn for further guidance for career advice.