Char Stark Delivers the Do’s, Don’ts and Due Diligence of Tech Layoffs
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While layoffs have always been more prevalent in the tech sector, the past two years have seen a surge that has defied prior trends—with a nearly 650 percent increase in 2022 alone and 2023 tracking even higher rates so far. We sit down with Char Stark, a People Operations and Talent Strategist with Beacon HR to discuss the do’s and don’ts of layoffs, why the wave is pushing some into other industries and whether or not you really need to layoff at all.
- While layoffs have historically been an inherent aspect of the tech sector, the way they are handled is an increasingly important aspect for workplace culture and growth.
- Leaders need to acknowledge that there is a right and a wrong way to go about layoffs, as well as the impact of their actions.
- Leaders need to be looking at alternatives to layoffs, as well as the internal opportunities to be leveraged to foster succession and a strong culture in their wake.
While Char Stark, a People Operations and Talent Strategist at Beacon HR, is always reassured when an organization comes their way to guide a layoff instead of going it alone, she wishes there was a bit less of that business on the table coming from the tech industry.
“It seems that almost every company I have spoken with lately has gone through layoffs. We all saw the numbers from large companies over this last year, like Shopify, Microsoft and Hootsuite – but layoffs are everywhere. For smaller companies, it might be letting go of only two or three people, but they’ve definitely all started looking at the bottom line,” said Char. “For a lot of leaders, they are asking themselves, ‘How do we get ahead of this?’ because everyone is scared of why everyone else is doing layoffs.”
“Part of the issue is copycat behaviour. These smaller companies see the bigger companies doing these huge layoffs. Especially in the past two years, and they think, ‘Well, that’s what X had to do to get through the tough times, so that must be the solution.’”
Unfortunately, that solution has become particularly widespread in tech, an industry already known for carrying a greater percentage of layoffs for a variety of factors ranging from inflation to investor pressure to over-hiring.
“Within the tech industry, layoffs are always more prevalent than in other industries because tech is so reliant on adapting quickly to change, and humans are often hard to predict when it comes to new tech products. Additionally, with the pandemic, everyone was online, and all these digital services were in higher demand, so companies started hiring more—and a lot seemed to think the demand for their products was going to stay that way—but the space is always changing, and now we’re in a recession. Or so people have said.”
In an industry that thrives on people having money to spend—investors and consumers alike—this has led to unparalleled waves of layoffs within tech. As noted by The Challenger Report, layoffs in tech rose by 649 percent in 2022 from the year before and 2023 is already tracking higher figures yet.
“There is a lot of talk in tech about having an agile environment, so that ability to pivot is really built into everyone at the company. What’s unfortunate is that people are leaving the industry because of that fact. What I have heard from folks that have been laid off is, ‘Well, if tech companies don’t care about their people, I’m going to leave the industry, at least for now.’ So, it’s a loss of really great talent as well.”
“It’s tough because in 2023, the top reason people are choosing to join companies is that they align with their personal values. Versus due to money or anything else,” said Char. “So to have these companies in tech laying so many people off, that is very much not in alignment with what people are wanting because it doesn’t show you value your people. So, it’s really tricky.”
In fact, it’s tricky enough that Char wishes more companies in tech took the time to consider their people-first promises and look at the impacts and alternatives.
“I am not saying there is a silver bullet to not go into layoff mode, but before a company considers layoffs, it’s really important to challenge the notion of whether or not layoffs are really necessary. Are there other options? I am curious to know how often we are challenging leaders enough to think of alternatives,” said Char.”What if there was a cut in salary for people who were the highest paid in the company? OMG, heaven forbid! Or what if, for example, you cut 10 percent of everyone’s salaries up to a threshold of people making below $75K because that might make it an unlivable wage for them.
Char points out that a little shared suffering can be a huge win.
“We know, because research has been done on companies that have done such cuts, that if leaders do something like that, it actually increases engagement and loyalty to the company because employees know everyone is on the same page,” said Char. “So I think things like that are important questions to ask and really consider before we get to actual layoffs.”
Another thing to consider before laying off underperforming talent, Char points out, is whether or not poor onboarding and training is the culprit.
“Within fast-growing companies, there are often two-fold issues with training. One, individual contributors are often promoted to managers and not trained on how to manage people. Two, new employees don’t get the training they need to be successful in the roles they have gone into, and then six months down the line, they’re getting laid off because they’re not a high performer yet. Well, maybe it’s because they didn’t get the training from their manager because their manager wasn’t trained themselves,” said Char. “It is critical for companies to look at and own where their onboarding is letting people and their company down. There are people with strong talent being let go just because they didn’t get the needed training, and companies honestly can’t afford that anymore.”
And as for the do’s of layoffs, here are a few takeaways aside from bringing in professional HR or legal to guide the process and lead with the templated paperwork as provided by Beacon HR, Char has some pointed pointers to pass along to lessen the blow for those leaving, while uncovering opportunities to keep the core culture and operations thriving.
- Plan and Communicate Ahead: The number one problem with layoffs is poor planning, just not really figuring out how it’s going to be executed, not figuring out how everyone is looped in. A lot of times, not even the managers know it’s coming, and you should be meeting with your managers to make sure everyone is onboard beforehand—not too long beforehand. But a day before at least gives them the heads up so that they know how to support their team so you can come at it from a unified front.
It also really comes down to being honest throughout the entire process up to layoffs, with an open conversation centred around an honest look at where the company is at. You don’t want to be telling a story of doom and gloom so everyone is terrified for their jobs, but transparently sharing that the company is not doing so great right now and that some tough decisions might be coming. That is okay to do.
- Maintain Your Diversity: When you are looking at who is being let go, ask, “Who are these different people? What does that mean for the people who are left?”
One of the first things you need to look at in any layoff scenario is the demographics of who is impacted. As much as we say that’s not a decision-making factor, you should look at, whether there are specific demographics being let go. Looking at who is going to be affected by layoffs is the first way to avoid losing diversity of your workforce. You don’t want to lose a whole subset of your people and the perspective that group brings.
For example, talent acquisition and HR is a field that is predominantly dominated by women, so if you are letting go of a lot of people in talent acquisition or HR, you may be losing a lot of women on your team. Or you could look at your Support team, this is often made up of a young demographic, so if you are letting go of support folks, understand how age demographics will be impacted in the aftermath.
Without a doubt, you should be looking at more than demographics, but they should be considered. We need to think about the impact of each individual on the team as a whole person. For everything they bring to the team, from their job skills to their cultural perspective.
- Create Internal Opportunities for Succession: I think the biggest positive of layoffs is that there is a lot of opportunity for internal talent. Reallocating those job tasks to people who make sense and who are left needs to be planned beforehand and really communicated well. That’s a really big thing companies can do right—and tie into development and succession—if they do the planning ahead.
I think these are really good opportunities to leverage internal talent because that’s when people can thrive despite feeling a bit scared at the moment. They want to step up and make sure they have job security and can still thrive in the company. So giving people an opportunity to leverage their skills or add to them is invaluable.
But also remember, if you are asking people to do more, you should also pay them for their work.
- Keep Your Values and Actions Aligned: If you say you value your people and you are a people-first company, what does that mean when you are going through a layoff? Does that mean you provide a 2-month severance? Does that mean that afterwards you are providing coaching and support for people who are still there? Does that mean you are providing career services for people?
Whatever it means you should have that defined before you go into layoffs.
- Know What to Say on the Day: Poor communication from leadership on the day of is the ball that is dropped most often in layoffs. Everyone is human, and we can’t expect leaders to get it right every time, but if you haven’t planned enough or prepared, there is likely a perceived lack of sensitivity towards everyone—including those who are staying. I actually had one leader use the, “You have to break a few eggs to make an omelet” line. That is an example of a line you don’t want to say.
Those little sticky notes you can make before you make a speech —make them. As a leader, you might have the desire to speak from the heart, but that’s not what people need to hear unless you know you are going to get it right. You need to be strategic in how you are communicating about layoffs. You need to be transparent AND set realistic expectations. That’s the hardest part.
- Take Care of Your People: Making sure people have good severance packages and are taken care of makes a difference. It gives people the chance to say, “Alright, I’m going to be okay when I walk away from this,’ while showing those remaining at the company the worth of the people laid off.
Companies that provide career support and connect people afterwards are really showing good faith to those values for those leaving and those left too.
Internally, you need to be engaging those people who are your culture champions to keep those values alive. After all, they are usually the people who are going to be forwarding people projects and fostering inclusion moving forward.
- Encourage Reaching Out: This is another big do. Encourage your team to reach out to people who were let go. I know some in more traditional spaces will say, ‘Don’t reach out to people. You want to respect their privacy.” Sure, sometimes, but a lot of people want a community. Most people want to feel like they were liked within an organization, so reaching out to people is a good, not a bad, practice.
As for the don’t of layoffs, they are as apparent as yet prevalent, but summarized thusly:
- Don’t go it alone: Work with a People professional who can guide the process.
- Don’t information hoard: Bring managers into the loop.
- Don’t misjudge the day of the announcement: Be the leader your employees need.
- Don’t let your DEI DIE: Bring demographics into your decisions and know who is impacted.
- Don’t think things will go back to business as usual: They won’t.
Beyond the do’s and don’ts of layoffs, Char looks to the ongoing challenge of leadership roles in a still maturing industry.
“One of the things tech did really well at first was convey this really fun and innovative energy, but the thing is, that energy has to be authentic. Heads up to folks our there still doing these activities, but that typically does not mean pizza parties or spirit weeks. It’s that warm and empowering approach you feel when you work with good leaders. Now that’s one of the biggest things that we need to look for in leaders today—not promoting the people who are the best in coding or sales or any specific task,” said Char. “You can be a great individual contributor, but that doesn’t make a great manager, let alone a leader.
“What companies need are leaders who are actually honing leadership as their primary skill, and they’re coming in authentically and empathetically to care for their people. We need to ask ourselves when we hire leaders, ‘How do they authentically show up for their people? And how does that look when things are tough?’ This topic gets me so excited to dive into and watch as the industry matures.