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Straight Talk On Layoffs vs Performance Terms...

I've always been amazed at the dance we do when layoffs become a necessary part of the business.  I've worked for some big companies where large employee actions are almost an annual event, as is a hiring freeze towards the end of the budget year.

What's always intrigued me is the level of straight talk you should give employees.  The tired movie quote - "You can't handle the truth" - is always a subject of conversation.

Big questions on the communication front with layoffs:

  1. How do you give straight talk about the business without freaking your employees out?
  2. Are you willing to say that the weakest employees where asked to leave? (not always the case, but generally that's how it works)
  3. Why don't we say more often that we did it to make those that remain more secure in their roles at the company?

On my mind based on this article on layoffs at a co-working startup named WeWork:

"WeWork Cos., the world’s largest shared-workspace startup, plans to cut about 7 percent of its staff and has instituted a temporary pause on hiring, according to e-mails obtained by Bloomberg. The cutbacks come just three months after the New York company said it raised a round of $430 million led by Chinese investors.

Managers were instructed to begin dismissals this week, said one of the e-mails. The startup, which lets members rent desks in an open office, ballooned from about 230 employees early last year to more than 1,000 today, according to research firm Mattermark.

WeWork said it hired 175 people in May and expects to add about 500 employees by the end of the year. The company said it expects to lift the pause on hiring as soon as next week.

“WeWork's growth and expansion continues to accelerate and we expect to add hundreds of employees between now and the end of the year,” a company spokeswoman wrote in an e-mail. “Recent employee actions were part of the company's talent review process to ensure that we have the right teams in place that align with the company’s priorities.”
 
What's interesting to me is a couple of things in this story:
 
1. They talk about a "talent review process". That's code for performance, even if they pawn it off on a broader workforce management strategy game.
2. You don't say you're doing layoffs today - but you hired 175 in may and are going to add another 500 by the end of the year - unless it was performance.
 
This is a straight up low performer purge of 70 employees.  
 
The question is, are you better off just biting the bullet and doing performance terms or coding it as layoffs? They've got money in the bank, a huge valuation and are at the top of the current economic cycle.
 
What's better to do?  Do the performance terms or code it as reorganization?  What's better for the employees?
 
I'm guessing most of the employees would rather have the cover of a reorganization.  It might be the humane way to do this, but the cost is making your remaining employees just a little bit spooked.  That's what layoffs do.
 
Interested in your take.

Comments

Matt Landrum

The companies I have worked for have done a pretty good job with this messaging. Usually it comes in the form of

1. There are some businesses we are no longer emphasizing.

2. We do wish to upgrade our level of talent, so we are releasing some employees who rank low in comparison with other members their peer group.

3. We are HIRING! We will be replacing some of the people affected with new employees who are a better fit. We are looking to you to bring us some great people.

One final thing... Cut once. Cut deep.
Easier said than done, I know.

--Matt

AL

Honesty is the best policy. If you're laying off to performance purge, no one learns. Communicating when there is a performance problem benefits everyone and maybe the low performance employees would have upped the ante if they knew their job was on the line.

FStaffing

Foreign Staffing Inc., is unique because it collaborates with companies and organizations on a global scale. In order to better understand the diversity of the performance evaluation system in several countries, extensive research has been complied in this e-book representing our findings. What follows is a description of 23 different countries and how they use their employee performance evaluation systems..... http://goo.gl/QQUyhJ

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