Why so many companies keep messing up major layoffs

November 16, 2022

Even during a season of brutal layoffs, Elon Musk’s decision to unceremoniously fire half of Twitter’s workforce has been notable for its sheer audacity. In a company-wide missive announcing the layoffs on November 3—signed “Twitter”—employees were told they would be informed of their job status within the next day. Those who survived the cuts would be notified at their Twitter email address, while all impacted employees would be dismissed through their personal email accounts. Many of them didn’t need to wait for an email to learn their fate, as they preemptively lost access to Slack and other internal platforms. Within days, upon realizing the layoffs were too sweeping, Twitter leadership started asking fired engineers and product managers to return to their posts.

The tech industry is reeling as an economic downturn looms large, forcing companies that had been aggressively courting new talent to put the brakes on hiring and cut thousands of jobs. In 2022 alone, the tracker Layoffs.fyi has catalogued more than 120,000 layoffs across the tech industry. A week ago, Meta let go of more than 11,000 employees, while companies like Stripe and Lyft recently reduced headcount by at least 13%. And just this week, the New York Times reported that Amazon is planning to lay off at least 10,000 workers.

While the job cuts at Twitter were especially reckless, plenty of companies have struggled to strike the right tone and conduct layoffs with compassion. After all, who could forget what happened at Better.com? For every employer providing generous exit packages, there are others offering just one to two weeks of severance pay and limited healthcare coverage, according to data from Layoffs.fyi. Even when leaders are generous with severance and healthcare coverage, they often bungle how they break the news to employees, failing to take full responsibility for the decision or offer real transparency about why layoffs are necessary.

“The thing that I see CEOs do that drives me crazy is blame the macro when it’s truly their fault, and they are the ones that have been making the decisions that have led to this point,” says Nolan Church, the cofounder and CEO of Continuum, an on-demand executive recruiting platform that is also advising tech startups on how to navigate layoffs. “Tech companies for the past 10 years have been drunk on hiring, and now with the new market reality, everyone’s waking up to it.”

This approach to layoffs is, in part, a holdover from the era in which corporate leaders shored up more and more power, to the detriment of the worker class. “It became normalized to treat employees like this,” says future of work expert Sophie Wade, citing the legacy of famed former General Electric CEO Jack Welch and the laser focus on shareholder value that he helped usher in. In the tech and startup world, many leaders simply don’t have much experience dealing with mass layoffs and a serious economic downturn. “A lot of founders have lived in the largest boom cycle that we’ve ever had,” Church says. “I think a lot of people are doing it for the first time, and often when you do something for the first time, you make mistakes.” Depending on their size, some startups may not even have an HR department.

The pandemic and rise of remote work has also complicated how companies communicate layoffs to employees. “It’s already hard to be a human on Zoom,” Church says. “It’s especially hard to deliver bad news on Zoom.” And at a time when hundreds of companies are issuing layoffs, leaders aren’t exactly incentivized to go above and beyond. (It probably doesn’t help that some companies have set the bar spectacularly low by firing hundreds of employees over a single Zoom call.)

Why so many companies keep messing up major layoffs

But there are ways to soften the blow and make layoffs as humane as possible, despite the circumstances. While it’s hard to scale a more personal response, Church says it’s important that managers try to speak one-on-one with impacted employees, even if it’s after an official announcement or email notification. (This is, of course, dependent on company size and the scale of the layoffs.) Companies like Stripe have also formed alumni groups to help laid-off employees find new jobs, something Carta also did when Church helped oversee layoffs there in 2020 as its chief people officer. “When you leave a workplace, you’ve created relationships that you would like to maintain,” he says. “We left our Slack on at Carta for another 24 hours, so people could still communicate and exchange contact information.”

Stripe also acknowledged the impact on employees with work visas and took steps to provide “dedicated support” and help employees obtain nonemployment visas where possible. Though it’s not always realistic for startups that have less runway, a generous exit package can still go a long way with departing employees, giving them some cushion while they try to find a new job. Meta and Stripe both gave affected employees six months of healthcare coverage and at least three months of severance pay. 

Still, Wade points out that employers can and should give their workers more notice and transparency, rather than scrambling to blunt the impact when layoffs become inevitable. “It’s not just about giving them a better cushion,” she says. “If you’re looking at Facebook’s stock, it’s down 70% this year. Well, that didn’t happen (December 08, 2022), and it didn’t happen a month ago.” Employers should also do what they can to not only save jobs, but also try to move workers to other parts of the business where possible. “When you do a cut, you [should try] to do it once,” Church says, “so you’re not continually hurting an organization and making people feel like another one is coming—which has actually been happening more and more recently, because I think founders are not planning appropriately.”

The fallout from layoffs is particularly important to consider—an issue leaders often seem to underestimate. If the layoffs at Twitter, for example, were executed with little regard for impacted employees, an email Musk sent this week to address remaining staffers offered no more comfort; instead, Musk took the opportunity to scrap Twitter’s remote work policy, effective immediately, and warned employees that “the economic picture ahead is dire.” (There are also real legal repercussions when a layoff is mismanaged: A class action lawsuit has already been filed in California on behalf of former Twitter employees, arguing the lack of advance notice was a violation of employment law.)

It’s not just directly impacted employees who feel the weight of mass layoffs; studies show that following a layoff, the employees who stay are less productive and more inclined to leave the company. When companies don’t handle layoffs with care, they’re sending a message to both their existing employees and prospective hires. (It’s little surprise that Twitter has already seen a string of high-profile departures, along with blowback from advertisers.) Though it might seem counterintuitive, one way to mitigate that is to actually increase compensation for remaining employees, according to Church. “You need to tuck in your best people because after you have an event like this, the scariest thing is business continuity,” he says. “And the best people, regardless of the economic environment, will always have job opportunities.”

But the most important step leaders can take is to be open and transparent about how the company will move forward, and to acknowledge the loss of their former colleagues. “It’s on the CEO and the leaders to rally the team the day after, or potentially the week after, about why this was so hard, why it had to be done, [and] what [you’re] going to be doing moving forward—anchoring them in a future that is bright, even though an event like this had to happen,” Church says. Beyond raising morale for current employees, companies should also be thinking about how they’re perceived more broadly—and whether their handling of this moment could hurt them in the long run, when the economy recovers and they’re back to hiring. “People will always remember how you make them feel,” Church adds, “regardless of [whether] they are currently impacted or not.” 

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