S4E10 Grit & Growth | Leading Through Layoffs: A Masterclass

Introduction and Context

• A common mistake during negative or adverse change is when CEOs quickly decide on what needs to be done, call in HR, and have them implement and communicate with the people, making HR the face of change (5s).
• Visibility of leaders is extremely important during this time, and it's not ideal for HR to be overburdened and handling all the pressure from the team (28s).
• The podcast "Grit and Growth" from Stanford Graduate School of Business focuses on tackling challenges and growing businesses, with insights from Stanford faculty and global experts (1m0s).
• The episode discusses the challenges of downsizing, layoffs, and workforce reductions, with guest AC Ana, executive director of the Center for Leadership at Aesi University, providing her perspective on navigating these complexities (2m6s).
• AC Ana has a background in HR and consulting, and she also runs her own HR consulting company, AIS Human Capital Limited, which provides organizational development, recruitment, and training services (2m41s).
• AC Ana believes that context matters when it comes to phasing layoffs in stages to minimize disruption to the company, and that sometimes it's necessary to do so, but not always (4m8s).
• She also disagrees with the statement that after a round of layoffs, remaining staff will be so grateful for their jobs that it will result in higher productivity and morale, citing this as false (4m41s).

Common Pitfalls and Data Importance

• Small companies with less than 30 people generally don't need HR policies, but they still need to follow government policies, and poor performers usually know who they are and won't be surprised to get laid off (4m45s).
• The more staff understand the challenges facing the company, the better it is for times of crisis (5m13s).
• Downsizing is one of the toughest challenges any leader can face, especially in small businesses without structured processes in place (5m42s).
• AC, with 15 years of HR Consulting experience, was consulted to uncover the most common pitfalls leaders encounter when downsizing and how to avoid them (6m1s).
• The biggest common mistake is the lack of data and documentation, making it difficult to justify decisions during downsizing (6m22s).
• Gathering data and documenting everything, including performance evaluations, is crucial before downsizing becomes an option (7m0s).
• Having a track record of performance evaluation is useful in determining which employees to let go, especially in situations where a whole product line is being eliminated (7m5s).
• Companies often try to build a record of performance issues frantically when deciding to lay someone off, but this is not a good practice and can be seen as last-minute shenanigans (7m27s).
• Small companies tend to have their systems in place less often than big companies, making them a higher risk group for not having enough data to justify downsizing decisions (8m40s).
• Being honest and giving tough feedback, as well as documenting performance issues, is probably the hardest part of downsizing (8m57s).
• In smaller companies, leaders often assume that managers already know who's performing well and who isn't, which can lead to poor decision-making when downsizing becomes necessary (9m3s).

Building a Case and Communicating the Need for Change

• When downsizing, it's essential to build a strong case for it and articulate the reasons clearly to employees to avoid shocking them with the news (9m20s).
• Leaders may avoid telling employees the full truth about the company's struggles to prevent fear and panic, but this can come from a place of good intention (10m10s).
• A sense of urgency is necessary when communicating the need for change, and leaders should be transparent about the company's financial situation (10m30s).
• When discussing potential cuts, leaders should ask employees for their input and ideas on what to do next (11m3s).
• A face-to-face conversation is essential when discussing performance issues or letting someone go, and documentation of these conversations is crucial (11m8s).
• The role of documentation and intentional communication is vital in making tough decisions, such as letting people go, to ensure the company's survival (11m46s).
• Communication is often a challenge when it comes to downsizing, and leaders should be open and transparent about the reasons behind the decision (11m52s).
• Helping employees understand the "why" behind the decision is crucial, and there are various reasons why a company may need to downsize, such as discontinuing a product or losing a major customer (12m7s).
• When communicating bad news, best practices include using a communication ladder, being transparent, and showing empathy and support (12m41s).
• Transparency is essential when communicating bad news, as employees are likely to know what's going on in the company and can't be misled (12m49s).

Best Practices for Communicating Bad News

• Empathy and support are also crucial when delivering bad news, and leaders should be prepared to provide support to affected employees (12m56s).
• When anticipating pushback, especially in situations involving unions, it's essential to communicate the reasons behind the change to avoid problems (13m12s).
• Instead of waiting until all decisions have been made, start sending out feelers and soft communication to prepare employees for the change (13m49s).
• Once a high-level discussion has taken place, start letting employees know that a review is underway, and a plan is being developed (14m13s).

Strategies for Avoiding Panic and Maintaining Transparency

• A key strategy to avoid panic is to have one-on-one conversations with employees, reassuring them about their roles and the future of the company (14m52s).
• Talking to individuals and asking how they're feeling about the change can be helpful in addressing their concerns and anxieties (15m17s).
• Assuring high-performance employees that their support and expertise will be needed, regardless of the changes, can help them feel more secure (15m43s).
• Staggering communication and using data to support the decisions can help avoid speculation and assumptions about why certain departments or product lines are being affected (15m59s).
• Providing a clear plan and regular updates can help employees understand what's happening and what to expect (16m31s).
• Encouraging employees to speak up and ask questions can help address their concerns and create a more open and transparent communication process (16m49s).
• When dealing with layoffs, there's a delicate balance between sharing information and maintaining confidentiality, with the goal of being transparent while also protecting the company's interests (17m10s).

Legal Considerations and Labor Laws

• Labor laws vary by country, but many regions require notifying regulatory bodies when layoffs are planned, especially for large numbers of layoffs, to ensure fairness and due process for both employers and employees (17m58s).
• The National Labor Commission serves as a regulatory body and provides a formal avenue for recourse outside of the courts, with a chief labor officer who oversees labor issues and can provide guidance on the layoff process (18m21s).
• Companies are not required to provide a specific number of months' notice or severance pay, as this is typically left to negotiation, but they must follow the proper procedures and inform the Labor Commission in a timely manner (19m10s).
• If an employee feels they have been treated unfairly, they can go to the Labor Commission, which has an enforcement mechanism and can require the company to pay compensation if it is found to have been unfair (20m1s).
• When communicating with the Labor Commission, companies should provide at least 3 months' notice and inform them of the number of people who will be affected, as required by the labor act (20m53s).
• Keeping performance management data and communicating with the team at a high level can help demonstrate that the company has been transparent and fair in the layoff process (20m30s).

Post-Layoff Support and Negotiations

• Downsizing is a difficult process, but there are strategies to handle it, including support, transparency, and clear communication, which help reduce tensions and minimize the shock factor (21m51s).
• In large corporations, layoffs are often swift and impersonal, whereas in smaller businesses, especially in contexts like Ghana, relationships are more personal, and the process can be more complex (22m32s).
• In smaller businesses, laid-off employees may return with family members, such as older relatives, to negotiate or request assistance, as a sign of respect for elders in the culture (23m10s).
• Companies can structure the downsizing process better by having policies in place, but it's not unusual for employees to try to negotiate or find alternative solutions after being let go (24m2s).
• Employees may take the initial offer and then consult with family, friends, or lawyers before returning to the company to request more compensation or support (24m21s).
• The finality of the layoff and the level of support provided can depend on how the situation is communicated, and it's essential to be clear and transparent while still offering support (24m58s).
• Providing a standard package for all laid-off employees can help, but it's also important to have a conversation with each individual to discuss their specific situation and offer support (25m4s).
• Clear policies and transparent communication can minimize the need for messy post-layoff negotiations and create a path for supporting employees through their transition (25m35s).

Career Transition Programs and Support

• A three-part exit program, or career transition program, can be implemented to support employees, including those who want to go back to school, move into another job, or start their own business (26m4s).
• A hands-on, personal approach to helping laid-off employees in their transition can be more effective than a generic, outsourced career coaching session (26m42s).
• Employees who want to start their own business can be encouraged to start small, such as building a freelance profile, to test the waters (27m1s).
• When handling requests for references from employees who haven't performed well, it's essential to provide constructive feedback and be honest about their performance (27m19s).
• Providing thorough, detailed references for employees who have added value can help them in their future endeavors (28m10s).
• A direct and consistent approach to feedback, even after employees leave, can help them understand their performance and areas for improvement (28m34s).

Impact on Remaining Employees and Building a New Vision

• The impact of layoffs on remaining employees should be addressed by providing a blend of support and forward momentum, including a compelling initiative or vision for the firm (28m57s).
• After a layoff, it's essential to balance counseling support with new projects and initiatives that can invigorate the remaining employees and take their attention away from the layoff (29m8s).
• Honest conversations between leaders and employees can help identify how the company can add value to the employees' experience and how the employees can add value to the company (30m8s).
• Leaders can have employees write an essay on how they intend to add value to the company and how the company can add value to them, which can help set a new season in motion and create a mutually beneficial relationship (30m30s).
• The company should be better off because an employee has passed through it, and the employee should also gain something from the experience (31m10s).

The Role of Leadership in Managing Change

• The role of the leader, such as the CEO, is crucial in the process of managing change, and they should be visible and upfront with employees, rather than relying solely on HR to communicate the changes (31m32s).
• A common mistake is for CEOs to decide on changes and then have HR implement them without being visible or involved in the process, which can put too much pressure on HR and make them feel overburdened (31m44s).
• The visibility of leaders is extremely important during times of change, and they should be willing to walk the floor, talk to people, and answer questions to the best of their ability (32m11s).
• Leaders should be upfront and transparent about the challenges the company is facing, even if they don't have all the answers, and explain what they can manage and contain within their context (32m45s).
• A leader's visibility is crucial during difficult times, such as layoffs, to inspire and engage employees, rather than just appearing to deliver bad news (33m8s).
• Being present and visible is not just about showing up, but also about listening to employees, understanding their concerns, and providing context behind decisions (34m18s).
• Leaders should not just dictate a new direction, but also ask questions, listen to feedback, and empower employees to come up with solutions (34m21s).
• Listening is not just about hearing, but also about understanding the context behind every decision, and being able to explain and justify the decisions made (34m54s).
• Clear direction is not enough; employees need a vision for what lies beyond the downsizing, and a sense of what the organization is evolving to do differently (35m57s).
• Once the vision is clear, the next step is to invite everyone to be a part of that journey, empower people to come up with solutions, and celebrate successes (36m28s).
• Sustaining the change is the biggest challenge, and leaders should focus on making an impact, making a difference, and ensuring the organization is still thriving (36m49s).
• A leader's role is not just to deliver bad news, but to engage people, provide context, and inspire employees to work towards a common goal (34m44s).

Building a New Culture and Communicating with Customers

• An example of poor leadership during layoffs is the CEO of a technology company who fired 600 people over Zoom, without being present or visible throughout the process (33m46s).
• When building a new culture, it's essential to involve employees in the change process, making them more willing and able to adapt to future changes (36m51s).
• Involving employees in the change process helps them feel more connected and informed, making it easier for them to accept and adapt to future changes (37m4s).
• Downsizing is not just a process to manage, but an opportunity to lead with transparency and respect, genuinely supporting those who leave and creating clarity for those who stay (37m17s).
• When downsizing, it's crucial to build a vision that everyone can connect with or at least feel informed by, to maintain a sense of unity and direction (37m32s).
• Communicating with customers is also vital, especially if some of the people let go were the face of the company, to ensure they understand the changes and to underscore the commitment to keeping their business (37m38s).
• The key to coming out stronger as a business and respected as a leader after downsizing is to find strategies that prioritize transparency, respect, and communication with both employees and customers (37m54s).

Podcast Credits

• The episode was researched and developed by Erica Amak, AJ, and VN Virgin, with production coordination by Kendra Gladich and executive production by Tiffany Steves (38m7s).
• The episode was written and produced by Nathan Tower, with sound design and mixing by Ben Cranel at Lower Street Media (38m16s).
• The host of the episode is Darius Terer, and the podcast is titled "Grit and Growth" (38m23s).