Venture Hacks

“If you handle a restructuring well, the word gets out that you’re a good place to work.”

– Ron Thomas, Martha Stewart Living Omnimedia (past)

Bob Sutton from Stanford has great advice on how to do a layoff with compassion in Layoffs: More Evidence on Costs and Implementation Practices:

“John E. Pepper Jr., who was then P&G’s chairman, explained that they had learned plant closings do far less damage, in terms of lost productivity, retention of employees who are offered jobs elsewhere in the company, and lost sales in the city where the closing is done, when:

1. Prediction: They explain how the plant closing will unfold in detail to both employees and members of the affected community. In particular, they announce the closing date and specific milestones well in advance.
2. Understanding: They explain the business case for closing the plant in detail to both employees and the community.
3. Control: They give affected employees choices over how they experience the closing, in particular giving them options about when and in what ways they find a job inside the company, along with other options such as help with finding a new job (or new career) outside the company.
4. Compassion: They express human concern—both in public and private—to affected employees and community officials.”

Four Guidelines

Bob’s article includes:

“Four guidelines to making [layoffs] in as humane a manner as possible:

1. Prediction: Give people as much information as you can about what will happen—to them as individuals, to their workgroups, and to the organization as a whole—and when it will happen. This makes the layoff real for people and helps them prepare for the future.
2. Understanding: Explain why you believe the change is necessary. Human beings have consistently negative reactions to unexplained events. This effect is so strong that it is better to give an explanation that people dislike than no explanation at all—so long as the explanation is credible.
3. Control: Giving people influence over what will happen is often impossible, but giving them influence over how it happens and when it happens is often possible.
4. Compassion: Senior executives should express human compassion, and when appropriate, sorrow, for the consequences of their business decisions.”

Layoffs at Martha Stewart

Here’s another example of a layoff from Managing layoffs with tact, timing:

“When Ron Thomas, [formerly] vice president of organizational development at Martha Stewart Living Omnimedia, coached managers during two rounds of layoffs, he advised them on what to expect from themselves and from those getting the bad news. The company cut about 100 employees when it closed the catalog business in 2002 and then eliminated its television show in 2004. On both occasions, “I told managers they weren’t going to sleep the night before” they had to announce layoffs, he says.

“He urged them to “try to envision that one day you may be on the other side of the table — so you should treat people the way you’d like to be treated in this situation,” he adds.

“Thomas advised managers not to “sugarcoat” the news. He told them to say, “We’re closing something down and restructuring — and unfortunately your job is being eliminated.” They should then move quickly to discussing how the company plans to help with severance and other benefits, he says.

“He also has arranged help for the terminated employees. “We make sure people who are losing a job know someone will call them to start helping them within a day,” he says. He will often use his own network of contacts to help them land new jobs. When the catalog business was closed, he says he called every catalog company he could think of to inquire about job openings.

“These efforts fostered loyalty among current and former employees and helped the company recruit new talent. When Martha Stewart Living launched a new television show, it hired back some employees who had been laid off in 2004. “If you handle a restructuring well, the word gets out that you’re a good place to work… If we post a job opening today, we’ll get 1,500 resumes tomorrow,” Thomas says.

Startups

In a startup, make sure you tell those who are staying and going that (1) there are no plans to do any more layoffs, (2) exactly how much runway the company has after the layoffs, and (3) the plans to extend the runway.

More advice

There’s more good advice in How to Manage a Layoff, Layoffs and Creativity: Are You Expelling the Innovators?, and The Art of the Layoff.