- Many people around the world are going to lose their jobs in the potential new recession. The Labor Department reported that 6.6 million Americans filed for unemployment in the week ending March 28.
- Startups may be hit especially hard. But even a startup without a robust human resources department can still conduct firings and layoffs efficiently and compassionately.
- We asked startup founders and HR experts for their best advice on letting people go.
- For example, have a clear framework for deciding which positions to cut, and be sure to address remaining employees' concerns.
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The global economy is entering a recession, and millions of people are going to lose their jobs.
In the week ending March 28, 6.6 million Americans filed for unemployment, the Labor Department reported.
Startups — which are often built on bold, risky ideas — may be hit especially hard. The New York Times' Erin Griffith reported that more than 50 startups have laid off or furloughed about 6,000 employees in the last few weeks. Those companies include high-profile businesses like ClassPass, Bird, and Everlane.
Layoffs can be especially difficult at a small, scrappy startup without a robust human-resources department. It's not just the employees feeling the pain; as a founder or CEO, you don't want to run into any legal complications or tarnish your brand's reputation.
And yet it's hard to come by concrete guidelines, since the topic is so taboo.
Business Insider spoke to founding CEOs and HR experts about how to let people go efficiently and compassionately — plus the most common pitfalls to avoid.
Read on for their top tips:
Remember you're eliminating positions, not people
During layoffs, "everything is driven around the needs of the business," said Elaine Varelas, managing partner at career-management firm Keystone Partners. She said executives should base their human-resources strategy on the business' strategic direction and financial situation. "The positions are what's eliminated," she said — not the individual people.
Have a clear framework for deciding where to cut
It's crucial to outline how and why positions will be eliminated. Otherwise, you're vulnerable to subjectivity and bias seeping in.
Joel Gascoigne, cofounder and CEO of social-media management platform Buffer, said you should be able to "defend the approach" when employees inevitably get upset. Buffer cut 10 people, or 11% of its staff, in 2016, when the company ran into financial trouble. Gascoigne wrote a lengthy blog post about it, in which he acknowledged, "It's the result of the biggest mistake I've made in my career so far."
If staff cuts are performance-based, make sure you have documentation
In general, Gascoigne said, Buffer's leadership team used a last-in-first-out approach (i.e., the most recent hires were let go before the earliest hires). They also tried to retain people who had a "proven track record" of high performance, though they didn't have formal performance reviews at the time. "Maybe that part was open to bias," Gascoigne said.
According to Varelas, "performance can be so vague that, unless it's documented and communicated, then it puts the organization at risk legally."
Seek outside counsel
Another important way to make sure your decisions aren't biased is to consult outside counsel (assuming you don't have an internal HR expert). Varelas recommended getting in touch with a corporate-side employment attorney to "make sure that your organization is protected legally."
Yair Riemer, president of career transition services at CareerArc, said you don't necessarily have to consult employment lawyers, though it's preferable. "It's already an anxious moment," Riemer said. "The last thing you want is for it to be an additionally costly moment."
If your company can't hire a lawyer, Riemer said, "you can make up for that by being prepared, doing your research, and having a good communication plan."
Kim Taylor, founder and CEO of Cluster (which recruits for advanced roles in manufacturing), said you'll want to have a third person in the room when firing an employee, whether that person is the HR leader or someone else.
Taylor is also the founder of the online-education startup Ranku. She wrote to Business Insider that she's "had to part ways with individual people over the years when there was no HR" (though she's never conducted formal layoffs), and "it's never a pleasant conversation for either side."
Educate yourself
Sabin Lomac, cofounder of Cousins Maine Lobster, said every company leader should know the labor laws in their state. That's especially salient if, like Cousins Maine Lobster, you have franchisees or employees working in different parts of the country (or the world).
Cousins Maine Lobster started out as a single food truck with minimal staff in 2012; it's since expanded to trucks and restaurants across the globe. Lomac didn't share specific instances in which he let employees go, but he noted that a company founder can't say "Oh, I didn't know," or "I'll figure it out along the way" when it comes to terminating someone's employment.
Figure out how transparent you want to be
Buffer is known for its transparent culture: All employees' salaries are posted publicly, as is the company budget.
But Gascoigne said it was still hard for him to decide how much to share with employees and when. "The more you share earlier, and [the more] you involve people along that journey, you're going to gain some trust there," he said. On the other hand, "you're also going to completely destroy productivity for a period of time."
Of Buffer's strategy, Gascoigne said, "I think we landed somewhere in the middle of it." Leaders sent two memos to the team. The first described the financial challenges and how the company's leaders were addressing them, but didn't mention staff cuts. The second memo announced the upcoming layoffs.
Keep things confidential
Varelas said a common mistake she sees is not keeping information about layoffs confidential until you're ready to make the announcement. "Often whoever was going to be impacted ends up not being impacted," she said.
Don't delay if the situation is getting worse
"If someone isn't working out in a role," Taylor wrote, "don't wait to have difficult conversations and transition people."
It's more normal than you might think: "By its very nature, a startup is a temporary organization that is always changing. The people you brought in at the very beginning may no longer be the right people or evolve with the changing direction of the company."
Have the CEO conduct conversations with employees
"If I had to do it again," Gascoigne said, "I probably would have handled as many of those conversations myself as I could and just be there with them, really let people share any of their feelings and ask me questions."
Instead, Buffer's leadership team dispersed responsibility across different managers, who spoke to everyone on their teams individually.
Train managers to stick to a script
If it's logistically impossible for the CEO to speak with every employee individually, managers should receive training on what to tell their teams. That's what Keystone does when it works with companies conducting layoffs, Varelas said.
"We'll work to develop a script, developed by the organization, on here's what we're going to say. Here's the public statement. Here's the letter from the CEO to the whole organization about what's happening. And here's the script that we're going to tell the individual who's been impacted."
Riemer said he often sees this fall by the wayside. "A consistent message is something some entrepreneurs take for granted because they're moving so fast, they're so intelligent, they're so smart that they forget to make it a uniform message and clarify it for the rest of the team."
If you're firing an employee, be very clear with them that "today is their last day at the company," Taylor said.
Deliver the news with integrity
Varelas said it's important to show respect for the employees you're letting go. Leaders should have one-on-one meetings with every employee and have benefits information readily available. No one should be "escorted off the premises" or "treated like suddenly they're a criminal," she said.
Not only is it the decent thing to do, Varelas said, but it's also practical. For one thing, you might re-hire these employees in the future. For another, employees treated poorly on their way out might be inclined to speak negatively about the brand.
Another seemingly obvious tip is to avoid posting photos of yourself at a party on social media later that night. "Be smart about the way that you present yourself," Riemer said. "You just let go of 10 of your hardest working colleagues and you're going out and you're celebrating."
Address remaining employees' concerns
Riemer often sees companies make the mistake of "not walking through with your existing employees what the reasons were for this layoff."
Riemer added, "If you don't effectively communicate the reasons for the layoff and how it's going to affect the organization, you end up losing that talent anyway … They're going to start thinking about moving to competitors. They're going to start getting poached. They're going to start losing faith and confidence in your leadership."
Let people know when the worst is over
Gascoigne said one of the best pieces of advice Buffer received from an adviser was to "make sure you over-communicate that this is the end of the crisis" when the layoffs are over. "This is everything."
That's why it's important to "cut deep enough, cut enough costs that you can be confident that you are not going to have to do something else in three to six months."
Do a postmortem
Taylor recommended that founders conducting firings do a "postmortem on the employee and why it didn't work out, and think about how to be more effective about the people they hire."
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