Making Layoffs Suck Less: How to Announce Job Cuts and Retain Top Performers

8 min read March 8, 2023
Business Building

This article was originally published on on February 23, 2023.

There is no way to sugarcoat it: For many founders, 2022 was a tough year to be a boss, and 2023 is not shaping up to be any easier. The tech industry layoffs may have slowed, but they haven’t abated and there will certainly be more to come.

Staff reductions have become commonplace, but that doesn’t make cutting jobs any easier; especially if you’re the founder of a startup. Of course, all job cuts are difficult, but at a startup, they can feel personal. Founders are laying off people who have helped them build the company from scratch; the people who assembled IKEA furniture in the first office and who pulled late nights and long weekends. Layoffs at a startup can fracture the motivation and trust of those who remain.

Over the past 15 years, I’ve had to preside over layoffs at previous jobs, and I’ve also worked with some founders in the past year who’ve had to let team members go. There is no perfect way to handle such situations, but I have learned a few things that might be helpful for founders facing potential layoffs.

Letting people go will never feel good, but with some thought and planning, founders can manage the process well and come out the other side stronger.

Before the layoffs

When layoffs are necessary, it is important to manage the situation with compassion and clarity. You must treat each job loss with the empathy it deserves. Here are four strategies to consider:

Don’t delegate fully

Yes, your head of people will be your key wing person, but you should never dump the layoff process on others. You’re the founder, so you own the process and the outcome. Care about the details, work closely with your team, and if the company is small enough, have the tough conversations yourself.

This may feel like one of the worst moments in your company’s trajectory, but your team will respect you when you take responsibility for overhiring or any missteps that led to this point.

When employees hear they’ve lost their jobs from a CEO or another respected leader, they leave feeling valued. Also, remember to make one deep round of layoffs instead of several over many months. A slow, repeated process saps morale and makes everyone feel unsafe.

Don’t do mass layoffs on Zoom

This idea always sounds nice on paper. It’s efficient!

It’s also one of the worst ways to announce bad news. No one wants to learn they’ve been laid off in front of their co-workers and be forced to react to the news in real time. That said, sometimes group notifications are required given the size of the team impacted.

Consider if you have the capacity to handle the layoffs with one-to-one conversations — it is your best option. If that isn’t feasible, you can use Zoom or send an email first. But you should still follow up one-to-one if you can.

You need to do what’s right for your business, but don’t lose sight of the power of a personal conversation for showing the people you’re letting go that you respect them. They’re going to walk out the door and tell their friends what working at your company is like. Make that last impression the best it can possibly be.

Create a communication plan

You don’t need a head of communications to do this, but it’s vitally important for you to think through all the lines of communication needed to those impacted, those staying, your board, investors and other stakeholders.

Communication doesn’t involve only talking points; you also need email templates, Slack messages and maybe even slides for an all-hands meeting. All your employees will judge you and the company by how you treat the people who just lost their jobs. Step into the shoes of a top performer who just lost their closest work friend: How do you want them to feel about your leadership? Answering that question will help guide your announcement strategy.

It’s also important to keep your circle small and only discuss the layoffs with those critical to making the right decisions and executing your plan. The worst outcome is when news about the layoffs “leaks” before you’re ready to announce it.

Be generous where you can

You may not be in a position to offer FANG-style severance packages, but opt to be generous where you can. Some easy (and relatively cheap) ways to support departing team members include: allowing them to keep their laptops and at-home work setups, dropping cliffs on equity grants for employees who didn’t make it to the mark, extending the option-exercise window so people don’t have to scramble to buy within 90 days, and offering any recruiters you have left to help them find their next roles.

After the layoffs

It may seem obvious that you should be thoughtful about layoffs, but many founders neglect to make plans for the following days. What you do in the aftermath of layoffs is almost more important than how you manage the job cuts.

Your objective is to make sure the employees you want to retain are feeling valued and supported, and to communicate with them in a transparent way. Here are four steps to take:

Keep showing up

Your first instinct following layoffs may be to go heads-down and execute to steer the ship through the storm. Instead, you should make time to be fully present for the remaining employees during the “mourning period.”

Hold a quick all-hands right after the announcement to acknowledge the loss of their colleagues, and be available as a sounding board. Preview the go-forward plan, but don’t dwell on it, because the team won’t be ready to hear you just yet. The following week, take the time to walk the company through what’s next.

Focus on the top performers

For the top 10% to 20% of your staff, pull out the stops to make them feel wanted and secure. Money is one lever, as meaningful equity retention grants can go a long way, but it is not everything.

Your best people need much more than money to be motivated. Figure out what would make each top performer feel valued. It could be a change in scope in their role, a more challenging project or more face time with leadership. You have many more levers than you think, and now is the time to get creative.

Articulate your go-forward plan

The layoff is a moment in time, but founders and leaders need answers for all the days that follow.

Before announcing layoffs, create a detailed plan for the months ahead. This plan should clearly define what’s going to happen so that every remaining employee can trace their work directly to what the company needs after this shift.

You can’t give everyone a bonus or a promotion, but you can make them feel secure in their jobs and appreciated. Meet as many employees as you can and talk through the critical roles they will play in your plan.

A simple “How can I support you in the transition?” can go a long way in demonstrating empathy. Your job is to help remaining team members move forward with purpose.

Take ownership

You’re in charge, for better or for worse. This may feel like one of the worst moments in your company’s trajectory, but your team will respect you when you take responsibility for overhiring or any missteps that led to this point.

Now is the time to be transparent, honest and lead with clarity. In all your communications and meetings, skip the “but” that comes after, “as CEO, I’m responsible … ” Your team will thank you in the long run.

I have one last piece of advice: Remember that no founder has to manage layoffs alone. Ask for help. Few early-stage companies have an internal communications leader, but you may have a marketer who could leverage their skills to help you craft your plan. Or an ex-colleague or adviser could review your plan for any gaps.

It’s OK to share the bad news with trusted advisers such as your investors, board members or other founders. The key word here is “trusted,” but this network can prove invaluable as you navigate a difficult situation. Unfortunately, many people have had to lay people off recently. Ask them what they wish they’d done differently.

You’re not alone; so don’t go it alone.

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