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'Cut once and cut deep': This CEO shares 7 best practices to managing layoffs effectively

By Deanna Cuadra
August 8, 2022 3:14 PM
Tesla will lay off 3.5% of its total workforce.

Between record-breaking inflation rates, supply chain disruptions and the Fed hiking interest rates up, many are concerned that the U.S. economy is headed toward a recession — and that its arrival will bring along a wave of layoffs.

The U.S. has more than a 50% chance of a recession within the next 18 months, according to financial services company TD Securities, and companies like Netflix, Robinhood, Glossier and Lyft have already laid off workers this year. Tesla is laying off 229 data annotation employees, and shutting down their San Mateo, California office. 

While there may be no way to stop layoffs from happening, that doesn't mean companies have to add salt to the wound by engaging in poor termination practices, says Nolan Church, co-founder and CEO of Continuum, a talent marketplace for freelance, executive roles.

Read more: Here's what the tech layoffs could mean for the industry's DEI efforts

"Unless you've been through it, you have no idea what it's like to create a list of people that are about to lose their jobs," says Church. "Continuum wants to help companies through this time because I've been through it, and I know."

Church was the chief people officer at software company Carta, where he led the April 2020 layoffs, losing 16% of their talent. For tech companies considering layoffs, Continuum is offering one free hour of advising with experienced HR leaders — for those who need more assistance, they can opt for a 10-hour package that includes advising, as well as a DEI impact analysis. Church hopes his, along with other executives' experiences, can inform leaders on how to humanely approach layoffs. 

"In April of 2020, nobody really knew what was happening," he says. "And it's very hard to understand what the right thing is when you can't predict the future."

Although predictability is hardly a guarantee during economic upheaval, Church shares his seven best practices all employers should keep in mind if they must undergo layoffs.

Have the right meetings

Every employee impacted should have an individual meeting with their manager and HR representative. Three to four days after the layoffs, the CEO should then lead an all-hands event in which they share the company's trajectory and why they still believe in its future success, explains Church. 

Read more: How job candidates can spot employer red flags before accepting an offer

"You need to decide how to orchestrate the event in such a way to where you are not being a robot," he says. "This is just one of those things where time is the only thing that will heal it, but you should still be as human as possible."

Cut once

Church advises companies to never engage in multiple rounds of layoffs. The company should account for all the employees they need to lay off to keep the company afloat in one go, he explains. 

"The best advice I got, which is the advice I followed, is to cut once and cut deep," says Church. "Doing it once is already painful enough, but doing it twice or three times is further draining and kills morale."

Do not cut salaries

Church argues that cutting salaries will not help companies reduce their layoffs and retain remaining talent. "The reality of what happens when you cut someone's salary is that you kill their morale in a way that is actually even worse than running a company-wide layoff."

Offer benefits

At least four weeks of severance and an extension of Cobra (a health insurance program that allows employees and their dependents continued coverage when an employee loses their job) are musts for laid-off workers.

Read more: 10 staffing companies hiring remote HR talent and recruiters

"Anything less than that, I do not believe is humane," says Church. "Do what you can to take care of employees while also taking care of the business."

Church recommends that pre-IPO tech companies allow employees to receive equity in the company, even if they have worked there for less than a year — something Church had done during the layoffs at Carta.

Care for your best performers

While small to medium-sized companies that engage in layoffs are likely suffering financially, Church emphasizes how vital it is to invest in the remaining workers.

"Your best people are going to help you navigate this challenging time," he says. "It is important that they know that you have their back financially, even though the company is going through a hardship." 

Read more: Top 10 remote and freelance jobs of 2022

If companies have cash constraints, Church suggests companies offer equity refresh grants, which gives additional ownership to an employee who has already received an initial equity grant.

Run a DEI impact analysis

Church encourages employers to examine who is being laid off and who is staying to ensure there is as little identity-related bias as possible in the decision. Companies should be keeping their best performers and need to be aware of any anomalies to company-wide data that say otherwise.

CEOs must take ultimate responsibility

The last thing a company wants to do after laying off workers is the blame game, underlines Church. 

"The CEO must take ultimate responsibility — it is their fault that this happened and they have to be the owner of the decision," he says. "The company can move forward much faster this way."
Deanna Cuadra
Senior Reporter, Employee Benefit News
Workforce management Employee retention
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