Layoffs In Trying Times: Are You A Good Un-Employer?

Three steps to ensure you and your employee part with dignity

Layoffs. They’re an uneasy subject for many leaders, and it’s no wonder. An unsettling study revealed that people take longer to recover from unemployment than they do from losing a loved one or experiencing divorce. According to Bloomberg Economics, we’re in for a second wave of pandemic-related job cuts that may affect close to 6 million more jobs. Given the upheaval layoffs can create, it’s imperative that those of us who are shouldered with communicating the bad news be compassionate about our approach. 

Sadly, we’ve already seen some poor examples of how employers have gone about sharing these distressing announcements. From mass firings via brief Zoom calls to mysterious webinar invitations where hundreds of attendees are let go in minutes, the insensitivity is frankly shocking. These painful presentations signal just how much some leaders wish they could minimize the moment when, in reality, they should do precisely the opposite: They need to give their people compassion, dignity, and plenty of runway to prepare for a landing elsewhere. 
 

I was inspired by Danny Meyer, a New York City restaurateur and CEO of Union Square Hospitality Group, when he was asked how his company was handling the pandemic. Meyer and his leadership team made the agonizing decision to be among the first restaurateurs to close locations. The leadership team adopted the mindset of, “Okay, if we cannot be good employers right now, how can we recast ourselves as being really good un-employers?” The answers that followed translated into raising a sizable employee relief fund, providing robust job-placement support, and assisting employees with emotional counseling services, including weekly access to Meyer via “Coffee with Danny.”

The intense weeks that led to Meyer’s difficult decision struck an emotional chord with me. In fact, his story gave my stomach a reminiscent churn while reflecting on my own experiences with layoffs at Prologis. When I was asked by the Prologis board to become its CEO during the Great Recession, the company had suffered greatly, experiencing a 95 percent stock market drop in less than a year. Our return to organizational health would require some tough financial choices and a dramatic change in our culture. 

We knew layoffs would be inevitable, and, like the current downturn, the Great Recession was tough on a wide range of companies. In fact, 65 percent of U.S. companies surveyed by McKinsey during the recession and its aftermath also laid off employees. When we took a hard look at the recession’s depth and our financial position, we decided survival was only possible if we cut our workforce by 30 percent. It was one of the most difficult decisions during my executive career. Looking back, it was also a defining moment for us because the way we treated people was critical to our ultimate success. There were three steps to our approach that I feel contributed to the longevity of our company and the culture of trust we wanted to create. 

Step 1: Let your values guide your actions: Harvard Business School’s Sandra J. Sucher says companies that develop a workforce philosophy reflecting company values help leaders abide by their priorities and answer important questions when the environment calls for change. Prologis had never gone through massive cuts, so I began the process of writing the playbook with my team. 

We framed our workforce philosophy with questions like, “How do we create a culture of trust when we’re about to conduct layoffs?” More specifically, “How do we ensure people feel treated fairly and with dignity when they’re let go?” and “How do we evoke respect for the company from those who stay?” Among these considerations was when to tell people what was on the horizon. Despite the fact that it would take 45 days to determine who to terminate, we decided to announce it immediately before we had all of the details. We recognized the value of complete transparency and saw it as an essential ingredient to building a culture of trust. 

Step 2: Provide timely honesty and “ownership”: Research tells us that, “most people prefer directness, candor and very little—if any—buffer.” Recall the times when you’ve been let in on protected information. You have more reaction time, reduced anxiety, and often the ability to participate in the solution by being included early on. Our people wanted to understand the problem and they deserved to know as much as we could share. Though there was little employees could do to change the course our company was on, understanding the problem allowed them to process and own it, which gave them a greater sense of control.

After making the announcement, we held a companywide town hall meeting where we walked everyone through the math behind our decision. We told them what we knew and what we were still unsure of. We gave our employees as much airtime as they needed and answered everyone’s questions with no set time limit. 

To our surprise, people embraced the situation—even with a dose of sympathy for our difficult decision-making process. Not having all the answers in our town hall meeting actually demonstrated the priority we placed on sharing information throughout our organization in a timely manner. Allowing employees to speak freely and ask questions also showed them we cared. Ultimately, it was an illustration of how much we valued our people—another key step in forming a trustworthy culture. 

Step 3: Conduct conversations with compassion: Every employee deserves empathy. Our leadership team felt strongly that we needed to spend as much time with our terminated employees as they needed in one-one-one meetings. These were not five-minute chats. Some staffers asked for follow-up meetings to ask questions after they had time to process their thoughts, and our leaders honored every request. We would learn later that we received high marks from former employees on how we handled those meetings. 

Today, I serve on the board of Iron Mountain, a company faced with the need to downsize, in part, due to the pandemic. I’m proud to say that the leadership has taken diligent care with their workforce in the overall process. In fact, leaders who conducted the employee termination meetings completed advanced sensitivity training so they could learn how to share distressing news with the utmost care and respect. Employees were even encouraged to speak with someone higher in the organization or from human resources if they wanted a broader perspective on the layoff decision. 

Like Prologis, Iron Mountain views compassion and empathy as crucial ingredients to maintaining a culture of trust. Author and Stanford Science Director Emma Seppala underscores this idea by explaining that “compassion makes you trustworthy … we’re especially sensitive to signs of trustworthiness in our leaders. We prefer leaders who are warm to those who project tough characteristics.”

Bonus Step: Ask, “What’s more than fair?” At Prologis, helping people process their loss also meant providing outplacement services for everyone, including financial advice, emotional support, and counseling, much like the Union Square Hospitality Group and Iron Mountain. When we initially faced the prospect of layoffs, we asked ourselves, “How can we be more than fair?” One of our answers was presenting severance packages above what the market was offering. While it was incredibly difficult as a company on the brink of bankruptcy, we still managed to put our people first. News naturally spread and our remaining employees recognized the way we treated their colleagues, which increased their trust exponentially. 

“People today grant their trust based on two distinct attributes: competence (delivering on promises) and ethical behavior (doing the right thing and working to improve society),” according to the 2020 Edelman Trust Barometer. Unfortunately, this year’s barometer reveals that none of the four institutions they studied—business, government, media and NGOs—is seen as both competent and ethical. As leaders, we have an opportunity to change perceptions and a duty to ask, “What’s more than fair?” 

When making choices about human capital, proactive leadership means reflecting on what guides your decision-making—whether it’s deciding on a benevolent mindset or asking culture-based questions. Both ensure your later judgments measure up to your initial standards. Values grounded in transparency, time-sensitive honesty and compassionate interactions also form a critical foundation that allows you and your employees to part ways with dignity. 

Stephen Covey’s second habit is a fitting call to action: “Begin with the end in mind.” Be a compassionate un-employer by asking yourself what’s fair from the start. Your actions will reflect this guiding principle and your staff will appreciate not only the longer runway you’ve provided, but time to consider new opportunities and destinations.

Walt Rakowich is an author, leadership speaker and former CEO of Prologis, a global real estate company that is the world’s largest owner of industrial distribution facilities. His first book, Transfluence: How To Lead With Transformative Influence In Today’s Climates Of Change, is scheduled for release in September. Walt works with several nonprofits, serves on the board of directors of Host Hotels and Resorts, Iron Mountain, Inc., and Ventas Inc., and is on the board of trustees of The Pennsylvania State University.  Connect Walt Rakowich Follow Walt Rakowich