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Imagine being called one day by your manager and hearing the dreaded news about being laid off. You are shocked and cannot believe any word of it. Why is it happening to you, and why so suddenly? Your mind is abuzz with questions. You are desperate enough to ask for more time to search for a new job, but you are tongue-tied. You have a thousand questions but are silent at the same time. If you understood how layoffs work, you would have a different perspective on this process and even be more accepting. Since HR rarely bothers to explain the process, this post will describe how it typically happens. The focus will be on US companies.
Typically well before any layoff occurs, the company’s CEO decides on a particular target, like decreasing operating expenses by 20% or improving revenue/employee to a certain number. The company typically works backward from there to decide a target number for each business division, geography, etc. The team targets are determined by talking to Vice Presidents (VPs) and HR Business Partners. Hence the first step of layoffs is a top-down approach in terms of numbers. The issue with this approach is that a bunch of average-paid (and low-performing) employees or a small number of highly-paid (and high-performing) employees could be laid off for the company to achieve the same targets. Recently Google was in the news for laying for high-performing employees. You can now understand why. These employees were also being paid way above what the labor market could support. I have seen scenarios where the VPs were fired without anything happening to the rest of the team. The reason here is that terminating the highly paid Vice Presidents is equivalent to removing 8-10 other employees in terms of pure compensation costs.
The following are 13 points on layoffs:
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