Organizations Must Follow Five Crucial Steps When Implementing Layoffs In a Recession, Says HR Advisory Firm McLean & Company

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Nov 30, 2022, 11:02 ET

Though layoffs should be used as a last resort, they are sometimes the only viable option and must be handled with great care by HR and organizational leaders.

TORONTO, Nov. 30, 2022 /PRNewswire/ - With signs pointing toward an economic recession, many organizations are finding themselves re-evaluating costs and resource allocation. McLean & Company, the trusted research and advisory partner for HR and leadership professionals worldwide, is recommending that organizations and their HR teams explore opportunities to upskill or redeploy employees wherever possible instead of relying on layoffs. However, to support leaders when layoffs are unavoidable, the firm has released research insights to provide business and HR leaders with the tools and best practices for laying off employees when all other options have been exhausted. The published research is an industry blueprint titled The Complete Manual for Layoffs.

Layoffs should be a last resort and come with organizational risks that must be considered. (CNW Group/Mclean & Company)

When layoffs may be the only viable option for an organization during a potentially difficult economic period, there are certain considerations and steps McLean & Company advises HR professionals consider to ensure the process is done with as much objectivity, humility, and sensitivity as possible.

"The remote work environment many organizations find themselves in adds a layer of complexity to the already sensitive process of laying off employees," says Karen Mann, vice president, HR research, learning solutions & advisory services at McLean & Company. "Layoffs and terminations are not easy for anyone involved, and the element of remote and hybrid employees can make things feel even less human and more detached. Acting with empathy throughout the process will be key in maintaining mutual goodwill and supporting both short- and long-term strategic goals."

When considering layoffs, McLean & Company recommends HR teams and leaders follow five key steps to best navigate the complex processes of reducing headcount as a means of cutting costs in response to an economic downturn:

Prepare for layoffs – HR and leadership must work together to evaluate internal and external factors that will impact the organization's viability. These factors include the degree of risk involved in continuing operations and remaining profitable and the impact of layoffs on the organization. It is also important to investigate cost-cutting options at this stage, such as upskilling, redeployment, and temporary layoffs. If permanent layoffs are the only option, HR guidelines for layoffs and termination based on local legislation, norms, and culture need to be created. Once guidelines are in place, the development of an overarching plan to communicate timelines and actions to departmental leadership is the next crucial step requiring prep work.
Objectively identify employees – The criteria used to identify those who will be laid off must be objective and clearly documented to avoid unfair bias. Leaders need to use criteria such as knowledge, ability, experience, measurable performance, potential, and cost when making these tough decisions. They must then identify essential skills and the availability of those skills in the workforce to help prepare managers for team changes and the transfer of critical responsibilities.
Prepare to meet with employees – The way layoffs are handled impacts exiting employees and signals to remaining employees the value the organization places on its people. Depending on the country or region, there may also be legal requirements to provide advance notice of layoffs to staff. Because laying employees off is a delicate process that demands balancing sensitivity, employee relationships, strategic goals, and legal requirements, those responsible for communicating the layoffs must plan what will be covered in the communication and train managers to deliver the message effectively. Arranging for knowledge transfer and the return of company property are additional considerations during this step.
Meet with employees – Those involved in communicating the layoffs should liaise with key departments such as IT, legal, and payroll, to ensure all proper documentation is in place and both internal and legal processes are properly followed. Additionally, there may be specific considerations for laying off remote employees and transitional staff. Regardless of the type of employee(s) being laid off, it is best to deliver the news in person whenever possible. If this option is not viable or the employee is remote, video must be used.
Monitor and manage employee and departmental effectiveness – Taking the step to reduce an organization's workforce may result in an impact on performance due to fewer employees available to complete tasks, as well as an increase in voluntary turnover, so it is critical that the organization manages the post-layoff period effectively. This can be achieved through maintaining support for employees, monitoring and regularly reviewing departmental performance, and being prepared to respond quickly and methodically to an evolving situation.

McLean & Company's research emphasizes the importance of remembering that layoffs should be pursued as a final course of action, because even when handled with extreme care, there remains a risk of damaging the employer brand and the long-term relationship an organization has with its past, present, and future employees.

To learn more about what to do when layoffs are the only option, HR professionals can download McLean & Company's research-backed industry blueprint The Complete Manual for Layoffs.

Additional resources:

For more about McLean & Company or to download the latest industry research, visit hr.mcleanco.com.

About McLean & Company

Through data-driven insights and proven best-practice methodologies, McLean & Company offers comprehensive resources and full-service assessments, action plans, and training to position organizations to meet today's needs and prepare for the future.

McLean & Company is a division of Info-Tech Research Group.

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SOURCE McLean & Company