How Do I Announce A Layoff To My Team?

“Listen, we understand that you are not thrilled with your sales quotas.”

My company asked me to grow sales by 60% during a recession. It was accurate to say I was not thrilled.

My only comfort was that other miserable sales reps received equally unreasonable treatment. We were given a blunt reason by our managers, “The alternative to growing at this pace is that we announce a layoff to our field engineers.”

I sold expensive equipment but we differentiated with world-class design, service, and installation. Without our field engineers, we were just another commodity.

I sold for GE in Chicago. We lost several major accounts in Detroit and Pittsburgh the year before. To sustain the same cost structure, other cities would need to fill the void.

We had an exceptional year in Chicago but we were facing the same headwinds as everyone else. The dot-com bubble burst and budgets were getting cut to the bone.

My company had two choices.

1. Accept reality and rationalize expenses to match a realistic revenue forecast. This meant cutting talented and tenured engineers.
2. Raise the sales forecast to an unrealistic level and hope the economy recovered in time to save the field engineers.

Two Versions Of The Same Story

From this decision, two narratives materialized. The sales team was told that jobs were on the line if we couldn’t reach our quota. Hit your sales plan or your peers will lose their jobs.

The field engineers were told a different story. Spooked by the economy, our local engineers wanted answers about what would happen in Chicago.

Engineers were told that Chicago would hold up better than Detroit and Pittsburgh. We had a strong economy and a great sales team. Business as usual.

Aside from the economy, our competition was brutal. Smaller, more nimble service organizations were popping up in every city. They offered similar value to customers at half our price. In a recession, pricing can dominate the narrative and we weren’t budging.

One competitor in Chicago stole several of our field engineers. These defectors made life miserable on the sales team. They knew all of our weaknesses and took their customers with them.

One of our engineers turned down a lucrative offer from a competitor the year prior. Al was tenured and someone I considered a mentor. He was a genuine person who spent 25 years solving problems for customers 7 days a week. He told me about the offer when he turned it down.

“It pays well and they have more work. But I’m ten years away from retirement and I really don’t like the idea of working for the enemy.”

He spoke like we were soldiers instead of free agents.

Hope Gets Hit With Reality

That year was brutal as expected. We missed quota by a mile.

We were pulled, pushed and prodded to squeeze any incremental business we could. Reps heard about the ramifications of missing quota every week.

“You know what is going to happen if we can’t hit this quota. Good people are going to lose their jobs.”

As if declining income wasn’t enough, we had to shoulder the burden of an imminent reduction of workforce. Our engineers were good people that we ate lunch with. Managers held that threat over us like a loaded gun.

But oddly enough, our engineers had no idea. At lunch, they would say things like “Boss says you guys are gearing up for a heck of a sales month.”

We would raise our eyebrows, given that we just left a sales meeting thinking the world was coming to an end.

The audio didn’t match the video. No one wanted to scare the engineering team and risk losing them to competitors.

So they told the engineers that everything was fine.

It was not.

The Day Of Reckoning

The inevitable day came when five engineers were asked to leave. They received severance packages along with their “lack of work” paperwork.

My friend Al was thunderstruck.

We went out for lunch and he kept repeating how this came out of nowhere. Here was a loyal employee who turned down an opportunity to work for a competitor only to get this nasty surprise. Al made that fateful decision based on bad information.

Had someone been honest with Al, he would have taken that opportunity. If not, he could have skilled up and been proactive in his search.

I felt like my inability to generate more sales let him down. I could have told him how negative our sales meetings were but I wasn’t comfortable with that conversation. Al did not report to me and I was too inexperienced to know if the warnings were just a ploy to get us to sell more.

What Are You Hiding?

The company failed in announcing this layoff in several ways.

The inevitable miss in sales was obvious from the start. Managers hoped that the market would recover or the sales team might pull off a miracle. They postponed the pain and should have faced reality months prior.

I wrote about two critical variables present in most high-performing teams. In my experience, two themes dictate a team’s ability to grow:

1. How comfortable the team feels openly discussing failures, problems, and mistakes.
2. How many people consider their teammates to be “close friends.”

That team was tight personally. Many of us spent time together outside of the office and people routinely did favors to help others. But our leadership failed when it came to discussing the growing problems in our business.

As a result of hiding the truth, we did not make the painful cuts heading into the year, leading to an unrealistic sales forecast. We lost several top sales reps and engineers as a result of the over-inflated quotas and dishonest approach.

After managers called the meeting to announce the layoff, the remaining team was deeply wounded by what felt like a betrayal. Several of our top people left shortly after, which left us short-handed. It was a mess.

Managers should have used the same narrative with sales and operations alike. Sugar-coating the chances of a reduction in the workforce was self-serving and cruel. If we needed to sell more to save jobs, our engineers should have been given a chance to help the sales effort in any way they could.

Had our leadership team fostered a culture of candor and dealt with the market realities upfront, they could have kept their best people. At-risk engineers could have made other arrangements or focused on skill development.

Instead, management set several engineers up for a cruel surprise and blamed the sales team for not delivering on the fairy tale sales quota.

Recessions Force Candor

A recession can hit like a rattlesnake but in most cases, managers can hear the familiar rattle well ahead of their team. A leadership team has access to more information, reporting, and forecasts.

And when the spigot of revenue shuts off, the only path to solvency is by slashing expenses. To save your best 15 employees, you must announce a layoff to your bottom five.

This is a gut-wrenching exercise made worse if those five didn’t know where they stood against their peers.

Let’s say Sarah is someone who hasn’t been productive in years. She routinely delivers 30% less than her peers. Half of the problems that come across your desk originate with Sarah’s mistakes.

But Sarah is just so nice. She has been with your company for 11 years, works hard, and is popular with her teammates. Her peers are willing to take on extra work to cover for her inefficient work habits.

Over the past five years, sales were strong enough to carry someone like Sarah. Rather than confront the situation, you ignored it as her manager. After providing Sarah with little to no valuable feedback, you must now tell Sarah that her role is being eliminated.

Worse, you are keeping several employees with less than one year with your company. They don’t have Sarah’s tenure but they run circles around her from a productivity standpoint.

How will Sarah react when you hand her a severance package? She will be blindsided. You thought you were being kind by ignoring her obvious gap in skill but Sarah won’t consider it kind when you announce her layoff.

Candor would have encouraged Sarah to look for employment that better fit her strengths. She might be thriving in a better position today. Instead, she is packing a cardboard box, deeply hurt by what feels like a betrayal.

It Should Be No Surprise When You Announce A Layoff

As a manager, you can be both kind and candid. If you eventually must announce a layoff, it should never come as a surprise.

1. Face Reality — Recessions are unpredictable. You can’t possibly know if “everything is going to be alright.” Don’t make ridiculous generalizations like that. Instead, lean into how serious the challenge is. Use the headwind as a rallying cry to focus your team on what is in their control. Companies get through recessions one step at a time. Those who succumb stop taking steps at all.
2. Let People Know Where They Stand — This is especially important with those who are most vulnerable in a downsizing situation. It is irresponsible when some on your team feel as if they are safe because you lack the courage to communicate honestly. How will they feel when you announce the layoff?
3. Calm Your Stars — A business needs stars to survive a downturn. Calm your best people and shoot them as straight as everyone else. Tell them how serious the situation is and let them know the importance of their role. This sends a signal that if they are to lose their jobs, you would keep them until the very end.

People remember how managers behave in a crisis. If handled well, leaders can engender loyalty for years to come.

I originally published this article for Forbes on 3/27/20.