The Human Resources Debate: How to Fire Employees

In Cavuto: Coast to Coast, Tom Gimbel, founder and CEO of LaSalle Network, analyzes the health of the job market following layoffs in Wall Street and the tech sector.

Executives considering downsizing are currently struggling with the same problem: finding the most effective way to lay off employees.

Is it better to get through layoffs all at once, even at the risk of cutting too deep? Is it more humane to get fired over Zoom than to make an employee come to the office to lose their job? How much severance pay is fair?

As well-known employers like Amazon.com Inc., Salesforce.com Inc., Goldman Sachs Group Inc. and others lay off workers, executives elsewhere say they are closely monitoring different approaches to the process.

Goldman Sachs Group Inc. Chief Executive Officer David Solomon during a Bloomberg Television at the Goldman Sachs Financial Services Conference in New York, U.S. on Tuesday, December 6, 2022. Solomon predicts “rough times” for the global economy , m (Photographer: Michael Nagle/Bloomberg via Getty Images/Getty Images)

Some HR departments create spreadsheets to track how many positions colleagues are cutting and what they are saying to employees during the cut. Laid-off workers, meanwhile, are comparing severance agreements and pushing back when they feel terms are falling short, which has sometimes led to tense all-hands meetings.

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“I’m not sure there’s a recipe” for a layoff, said Katy George, senior partner and chief people officer at McKinsey & Co.

The stakes for business are high. Although the job market is cooling, the unemployment rate was at an all-time low of 3.5% in December and many employers say they are still facing challenges in filling some positions.

It’s also one of the first job declines in an era of increasingly empowered and vocal employees using Slack and other tools to amplify their criticism. Companies say it’s important to handle layoffs carefully to protect employers’ reputations and keep morale up among those who stay.

Employees have become increasingly vocal and organized, often using modern technologies like Slack to get support. Angelika Maldonado, right, chair of the Amazon Labor Union (ALU) workers’ committee at the Amazon Staten Island warehouse, Brett Daniels, cen ( (AP Photo/Bebeto Matthews) / AP Newsroom)

Some companies are telegraphing weeks in advance that layoffs are to be expected, a tactic that can warn employees while stoking uncertainty about whose roles will be eliminated, recruiters say.

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When Salesforce co-chief executive Marc Benioff announced on Wednesday that the cloud software giant plans to cut about 10% of its workforce, he urged employees to check their emails within an hour to determine whether their roles are affected. Other corporate leaders, like video technology company Vimeo Inc., which this week announced it would lay off about 140 employees, have issued company-wide announcements after individual employees were contacted.

Many companies wrestle over whether to make a major layoff or a series of smaller cuts over a period of time while assessing a company’s financial health, advisers and executives say. Both carry risks. If a layoff is too big, a company can inadvertently lay off key units or employees, executives say. However, multiple layoffs in a short space of time can create lasting instability at a company, McKinsey’s Ms George said.

“You don’t want two shoes to fall,” said John Chambers, the former CEO of Cisco Systems Inc., noting that one layoff that followed quickly after another can erode employee and investor confidence. “My answer is you do it once, you do it very aggressively, but you also communicate which is most important.”

The era of hybrid work only complicates matters, executives say. Bosses once insisted on breaking bad news face-to-face, a practice the pandemic has changed. Some executives are now debating whether it’s easier for employees to learn about a layoff via Zoom than in person, said Andy Challenger, senior vice president of outplacement firm Challenger, Gray & Christmas Inc.

“It almost seems cruel to ask someone to commute to the office just to let them go,” he said.

Recently, executives have debated whether it makes sense to fire employees over Zoom. (istock / iStock)

While some companies used to choose Friday as the preferred day for downsizing, thinking it would give people a weekend to process a difficult situation, many now see a midweek layoff announcement as more humane, Lorna Hagen said , a longtime chief people officer. A layoff on a Wednesday, for example, could give affected employees time to speak to staff representatives or top performers during business hours in the following days, she said.

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In previous roles, Ms Hagen said she worked with colleagues to create a “show run,” laying out minute-by-minute how a layoff should go. The document outlines when managers should speak to affected employees and when leaders should communicate with the remaining workforce and the public. Pre-fire training can give managers a script and guidance for navigating difficult conversations.

Many managers often screw up the conversations by saying, “This is so hard for me,” said Mr. Challenger. This phrase can irritate employees who are facing a job loss. “It just hits people the wrong way,” he said. “It’s not about you.”

Some companies, like payment processor Stripe Inc., have been hailed by employees and others for how they’ve handled layoffs. Stripe cut about 14% of its workforce in November; In an email to employees, CEO Patrick Collison said he and other executives were “fully responsible” for the decisions that led to the layoffs. The company said it will provide severance pay for at least 14 weeks and will accelerate or remove the cliffs on employee stock exercise.

Other employers have met resistance. At online education provider Coursera Inc., which laid off dozens of employees in November, some remaining employees engaged in all-hands sessions about how layoffs were being handled, while laid-off employees emailed detailed requests to the company for a makeover sent termination agreements, according to interviews with current and former employees, internal city hall records, and documents obtained by the Wall Street Journal.

Some laid-off employees wrote a summary letter to Coursera CEO Jeff Maggioncalda and executives in December, detailing how workers felt Coursera’s separation periods were too short compared to layoffs at companies like Meta Platforms Inc. and Stripe. The group cited the company’s decision to waive some cliffs for stock vesting or to expedite vesting for stock-based compensation issued to employees. The letter is signed by unnamed “dismissed employees”.

Rich Jacquet, Coursera’s chief people officer, responded and recommended that employees contact Human Resources. The group responded that HR had refused to allow workers to be contacted.

Both Elon Musk and Mark Zuckerberg have laid off thousands of employees from Twitter and Meta.

The company offered workers four months’ salary plus more depending on function or tenure, along with health insurance and outplacement assistance. “We recognize that this decision is impacting the livelihoods of employees, and we have endeavored to provide what we believe to be meaningful transitional assistance,” said a Coursera spokeswoman.

A number of recruitment consultants say companies should offer at least a month’s severance pay to laid-off workers. Many companies are also now waiving stock exercise requirements, though policies vary from company to company, said Matt Hoffman, partner and head of talent at venture capital firm M13.

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“Take accountability, recognize the problem, be more generous than you have to be and be as transparent as possible,” Hoffman said. “This is the playbook.”

Ruth Simon contributed to this article.