The People Strategy Playbook to create Highly Attractive ‘Destination Career’ Companies (Part III) – "Sorry, we have to let you go..."

I know I promised you I would take you through the Start-up HR Playbook Essentials and cover the following items:

what to assess (why and how), (b) how to identify gaps and fix breakages, (c) how to engage with a people-first design approach, (d) and how to measure progress (hopefully success).

But the world has thrown up some serious challenges we all need to talk about. It’s the sort of thing that feels existential – like if we don’t do this well – we’re all doomed!! There is some truth to that, because we’re about to go through what is hopefully a petite mal (little death) and be reborn into a more positive, robust economic environment – we just don’t know when. Two years? Five years? No one can say for certain.

With all these economic headwinds, Brexit, interest rate rises, inflation, energy and commodities cost increases – it’s a full-on recession with few if any foreseeable fixes in our near future. Not to mention we’re changing Prime Ministers and Cabinet members as often as I do my weekly laundry these days. Cost-of-living issues are sending our infrastructure and health workers to strike, and all I keep reading is the major tech giants are letting go between 15% to 50% of their staff due to economic downturns. But you’re already way beyond this, likely having spent too many sleepless nights wondering when the bell will toll for thee (as in your staff). And if you think your well-being has been turned upside down – you can bet your Founder and her team are all feeling that same sense of impending doom at what is likely to come.

Let’s hit this hard, honestly and I’ll share some best practices I’ve seen work well. And mention those which ended in tears, agony or disaster – because we’ve all likely been there too many times and would like to avoid what is actually very avoidable – if only we take the situation by the horns and wrestle it to the ground. 

What I’m about to talk you through is more than just some legally clever HR tactics for managing through a downturn, layoffs, redundancies, or whatever you wish to call them. Instead, I’m going to speak to you as a senior practitioner – to both your heart and mind – as this is possibly the most human of endeavours and is all too often treated like some sterile surgical procedure, led by the Legal team, concocted by Finance and handed to HR to finish off the ugly deed. The Founder sends a heartfelt email to all affected (as approved by Legal and HR naturally), and once the ‘dirty deed is done,’ another Founder email goes out saying “Geez, that was hard, eh? Thanks for getting through this black spot – and hopefully soon we’ll be back on track, loving life!” The unwritten subtext is more like…” You were one of the lucky ones. You still have a job and a paycheck…for now. But you better get back to work and burn the midnight oil because even though your colleagues have left the building forever, their work hasn’t. You need to do more with a lot less until we have enough cash to get the machine churning on all cylinders. I’m watching you. Step up, level up and get tough – as this ain’t no easy ride for any of us.”

If you think that was cynical, yes it was. And aside from probably 2 employment experiences, that’s exactly how it went down in every other consultancy, investment bank, pharma company or tech company I worked for (as of today, 20 different organisations). 

Look – this sort of stuff sucks bad. I mean – like it makes your stomach churn, you lose sleep and you feel like an imposter, a traitor or a downright liar for having convinced so many great people to abandon their careers, lifestyles and predictable financial well-being – all so they could come and join your dream, as you so aptly convinced them to do. 

You ask yourself, “Did we hire too many? How many people do we need to layoff? Can we afford to operate as normal, or have our markets shrunk unexpectedly, and for how long? I’ve only just hired these people – and everyone here was deemed mission-essential! How can I possibly figure out who would need to go, and what will we do to cover that missing talent? How can I do this without creating anger, frustration, hatred, or dread across the entire company?” The voices in your head are asking all the right questions – but there is a way through this, so let’s start with the list of considerations you need to tackle:

1.     If you are connected to your Finance team, you should know well before the klaxon goes off that things are tipping out of balance, and to what degree. When you start getting denied approval to purchase a new, mission-critical system like HRIS or and ATS solution, or those 10 interim pay adjustments that the Founder agreed were suddenly pulled from Finance’s approval list – or suddenly get asked by your Finance Director to renegotiate all your vendor contracts, start recruiting in-house only, and to freeze all pay increases (or even hiring) for the foreseeable future – it’s time you kick into action. 

2.     Your interactions throughout the company are soon filled with whispered, worried questions about the health of the company. Both leaders and employees alike are looking to you for that crystal ball preview so that they can plan their potential ejections in advance of that dreaded conversation with you on a gloomy Monday morning. What do you say?

3.     If you received advanced warning from your senior leadership team meetings or special insights offered to you by the Founder or CFO – it’s time to jump straight into action. This is when your insight into the morale of the company, the brewing concern distracting people from performing at their peak, and your best ideas as to how to weather this storm come into play. This is when you can make a huge difference as bad news is coming, no matter what the company or its leadership does. And it’s going to hurt. 

4.     Get connected to the facts. What’s happening with revenue, investment, expenses, and customers, and what are those trends and patterns signaling? Also – get smart about the estimated timing of the cycle coming ahead. Ask the hard questions of your CFO, Founder, and Investors – “When will we need to take action such that we can reduce the impact on our company’s financial health, and get to a point where we can manage through with minimal income or investment?” No one will like to talk about this, as it’s horrible to consider. But answers are needed because this will form the backbone of the rationale you will need explain to those affected. It will also inform you as to the next line of questioning and tactical planning you will need to undertake.

5.     If necessary, drive an urgent senior leadership team session to hammer out all of the key data points that will support as smooth a transformation exercise as possible. Check-in with your emotions surrounding all of this. It’s sadly normal in a weird way – and I’ve been through more downturns as I have upturns. Especially in the start-up and scale-up world. This is a business cycle. But one that will negatively affect the lives of many people – both those who are asked to leave and possibly more so, those who are chosen to stay. Everyone, and I mean everyone, will feel this pain, will suffer emotional trauma and will struggle to make sense of what’s happening, how they’ll get through it, and to get back to being productive again.

At your meeting – which you should pre-plan with your Founder and CFO to ensure a consistent approach – you will need to coach your leadership team on taking a highly resilient approach – one which recognises the emotional trauma they are about to undertake, but also one that reminds them that they were selected, promoted and are trusted to take charge during this crisis. They need to step up, level up and stay above the seeming shock, anger, denial and depression that everyone is about to go through. But they are humans and need to trust one another to act as a support-web for each other’s journeys. There will be a powerful mix of experience, emotion and discomfort with this process – so those who feel more confident and seemingly capable should be selected to coach and mentor those who appear shaky, wobbly or personally distraught. Work with your Founder to identify those coaches and get them onside early. It might seem an extra burden to them, but in fact, being identified as a ‘leader of leaders’ and being asked to assist in this manner may very well improve their sense of purpose and strengthen their resolve during this crisis.

Make sure that when you meet as an SLT, the ground rules are understood. Such as:

·       We are all in this together. This isn’t the Founder’s nor the CFO’s fault, nor is it avoidable as an exercise. This is one of the most critical leadership exercises any organisation undertakes and everyone is watching, both inside and outside the company. This needs to be done with care, consistency, focus, strength and compassion – and all of that requires this team to work as one body, no exceptions.

·       If you feel worried, are struggling to manage through this, or don’t feel you have the strength to effectuate this company’s life-saving moment, speak up, ask for help and never go it alone.

·       We all come to this moment and this meeting each having worked through our team’s ranks, trying to justify who is the best, who can’t I do without, who we should fight for till the end. That’s good – but it may come to it that we feel we’re cutting beyond the fat, and into muscle, if not into bone (horrific analogy, but that’s what it feels like for leaders of people).

·       We are data-driven – and will try to anticipate as best we can how the macro-economic, and our own personal challenges will require us to cut, to what level – and understand when we think this might all turn around again. But know that we’re not magicians nor fortune tellers – and this process may take place more than a few times over the coming years. We need to get smart about this, to get great at managing wholesale changes, and be seen to become more resilient and skilled as time moves on. 

·       Let’s always look at the facts, the data, and the finances first – but then let’s remind ourselves that every person affected is a living, breathing and vibrant human who we personally selected to be here with us. So, let’s never lead ONLY with the data or finances, but rather step up and think through the effect we’ll be undertaking with each person we choose to let go. 

·       Let’s also be cognizant of the fact that those left behind to do the work they were hired to do, are now going to be asked to stretch to cover the work of those who have left. They will suffer grief and loss. They will need time and support to heal. This situation won’t turn itself around in 24 hours, nor a week’s time. It may take a month of healing to get people back to feeling productive and focused again.

·       We can usher this process through faster if we undertake our decision-making well. If we can all take rational, logical and intelligent decisions – based on the data and finances, our best estimates and with deep compassion for all our employees – a major aspect of this coming shock will be mitigated slightly. If everyone can understand why we are doing this, that we feel personally and professionally upset at having to do this ourselves, but realise our duty is with those whom we ask to leave, as it is with those whom we choose to stay – and that we’ll do everything in our power to support them through this painful time – it’s possible for people to accept the difficulty of the situation, and to agree to work through it together. Let’s break this down a bit because this is critical (and leads into another subject entirely).

If I asked you today, who amongst your entire staff can you live without, if there were no other choice? How do you know that? Is it based on their actual performance? Over what period? Are they considered of lower potential, or impact to the company? Is it a personality thing – they just don’t align as effectively with others here? Or are they of a lesser experience level, and therefore don’t contribute as much to overall productivity? What about pay level? Are they considered to be ‘over-paid’ for the work they perform? Are they overpaid relative to your benchmarking data? If so, why? 

Loaded questions I know. Life in the start-up world in HR is fraught with systemic immaturity – too few tools and processes in place to accurately and consistently measure performance (personal and relative across the company), organisational network analysis (who is trusted, a critical communication hub, an informal influencer), or total compensation benchmarking (base salaries, bonuses, ESOP allocations, benefits provided). But in truth – these should be the critical points of data you are bringing to the SLT meeting – showing multiple graphical depictions as to who falls into what categories, and lay the groundwork for a more strategic, objective discussion about who should go and who should stay.  Other considerations include key customer relationships, mission-critical project ownership, and the all-important perception of whether or not a member of staff are seen as vital to cultural or tribal morale. I’ll cover this off in a few weeks’ time in another article.

Absent solid and accurate data from the above focus areas, you and the SLT are left with opinions. Each person’s ability to convince others using verbal arguments – and generate useful debate amongst the other leaders – will determine who stays or goes. Very quickly this will lead to a list that won’t be based on solid, irrefutable truths, but rather the product of the collective tolerance and individual negotiation skills of each functional leader. Not to mention their relationship and political power with the Founder and/or CFO. Not ideal. It can also lead to serious legal trouble as you should always imagine yourself defending these decisions in front of a Tribunal jury. You need to think about the perceptual optics here – not just whether Steve who leads Development says that Tina, Sherry and Grace aren’t nearly as ‘good’ as other developers and should be on the list. Data that backs this up is essential to reduce risk, improve optics from every angle, and frankly to show you’re doing the right thing as a moral, compassionate, and balanced executive making hard decisions based on a consistent measurable (hopefully provable) reality.

Always remember this (and remind your SLT regularly), laying people off will cost you BIG. You and the SLT will set off an earthquake of psychological shock, anger, concern, and instability. The damage that will be done if your process and decision-making are anything short of rational, logical and well-supported with good data can be huge and long-lasting. Laying people off is a sunk cost you will never recover – as you will need to pay notice periods, unused holiday pay, pension and benefit extensions (if offered), and in some cases, leadership may deem some people critical, but also eventually expendable – so will seek to keep them on for say 6 more months before enacting a redundancy. You will have legal costs as every one of your decisions, as well as the paperwork, process and occasional legal challenge will need to involve your corporate employment solicitors. The knock-on effects of engagement scores, eNPS, and the difficult stretch everyone left has to manage will be exhausting. And on the back of an already brutal 2-3 years of the pandemic, Brexit issues, supply chain challenges, shifting commutation requirements and working remotely – it’s been a very emotionally taxing time. 

If you MUST undertake redundancies and there is no other financially viable option left – then I beg you to do it well. Get tucked in with your Founder, CFO and SLT tightly. Make sure you’re driving the data gathering and use as much ‘objective source data’ as you can collect. Measure across roles, departments, levels, and across the entire company, as comparing data such as this is essential to seeing this from many lenses (to get the best holistic picture). 

Ensure everyone is in the room when decisions are made about redundancies – and that you’ve asked the right questions. Be especially hard when diversity is involved – as you likely fought hard to build it – and tearing it down in a matter of days can denigrate your hard-won efforts. Do careful legal reviews on every aspect of this process. And then, though they’ll all be exhausted and frustrated (if now outright panicked about having the discussions), make sure the entire SLT is onboard with the Why, What, How, When, Who and specific individual data points they will need to explain in every conversation with staff – affected and staying. As the HR leader, your challenge is to carry this process through like you’re holding a test tube of nitroglycerine whilst running up and down the hallways. You need to ensure this goes well, and that everyone understands why and how it will affect them. That they are still loved but things are beyond the financial control of your company – as no one would choose this path, if they could help it. 

And make sure to be there for them. Offer CV reviews, and point them to internal and external networks where recruiters will pick them up and get them settled somewhere quickly. Be a solid reference wherever possible (and be careful about your under-performers – keep it basic and honest). Lavish those who are staying with support. Talk, talk, talk about what happened, keep them informed as to progress (or otherwise) as news is essential for feeling a level of control. Make sure the SLT is staying emotionally connected with their people. Focus on the work at hand, on building back to a stronger position. Don’t sugar coat anything, but rather keep it real, and offer insights that people can attach to, get excited about and don’t forget to embrace every little win, every life or family event, every little green shoot. Re-balancing your tribe and lifting them up after such a powerful loss is essential to a successful redundancy exit. Avoiding it altogether is obviously even better – but that takes a whole new level of resilience and rather creative problem-solving. 

I’ll leave you with these two versions of how to handle a redundancy…You decide which will have the greater success rate:

An abject lesson in how NOT to perform a company-wide downsizing, brought to you by Elon Musk via Twitter…

Have a look at some other, rather enlightened approaches to painful downturn moments, as explored by Simon Sinek.

Have a good weekend!

Jeff Wellstead, Founder & CEO Big Bear Partners, Ltd.

jeff@bigbearpartners.com

+44 7921888558