Chicago Booth Review Podcast How to Make the Best of Layoffs

Lisa Stefanac: ... to receive it from your manager because that person knows you. If you are that manager of me and laying me off, I would want to hear it straight from you. There's kindness in the directness and there's kindness when it comes to allowing the relationship to be forward in the conversation in addition to the message from the company.

Hal Weitzman: A conversation in which one person informs another that they're being laid off is never welcome, but trying to avoid it can lead to poor planning, unclear messaging, anger, and frustration. Is there a way to do it better? Welcome to the Chicago Booth Review Podcast, where we bring you groundbreaking academic research in a clear and straightforward way. I'm Hal Weitzman, and today I'm talking with Chicago Booth's Lisa Stefanac, an expert in interpersonal dynamics, about that tricky layoff conversation. What's at stake? How should you prepare? And what should you do if you find out that you are being laid off? Lisa Stefanac, welcome to the Chicago Booth Review Podcast.

Lisa Stefanac: Well, thank you very much, Hal. It's great to be here.

Hal Weitzman: We're here to talk about layoffs, not everyone's favorite topic, but it is important. It's important for companies, it's important for managers, and it's important for the people who are getting laid off. So we're going to talk about all those perspectives. But let's start maybe by thinking about why do big companies so often screw up layoffs. We've all seen videos online that have gone viral of people being laid off in a very inhuman, sort of robotic way that alienates them. Why do big companies persist in doing it like that?

Lisa Stefanac: I mean, you just said it right now. It's oftentimes done as a transaction, you could say, instead of understanding that people are humans first and foremost. The workforce is made of humans and we have feelings, and too often it's a strategic initiative that is meant to allow for the company to thrive, unfortunately at the expense of others. So preparation, communication strategy is the first biggest one. I would say that they often fail to anticipate how layoffs are going to be received or even put themselves in the shoes of those getting laid off. I would say a company really needs to expect the aftermath and the reverberation of the layoffs amidst those that are surviving, the survivors. There's oftentimes survivor guilt, and so that often gets missed. And then finally, there's a failure to provide actual support. So too often layoffs will happen and there is very little aftermath for the support of those actually getting laid off.

Hal Weitzman: So those are the things that they do, but the reason you think is because they're thinking about why do we need these layoffs for the company, not how's it going to land with the people who are actually getting laid off.

Lisa Stefanac: Absolutely. Because they're in the big picture and it makes sense. Any of the leaders that are determining we need to move forward with a layoff, they're going to be already well down the road before the announcement actually takes place. So too often when they're starting to deal with their own emotions over the fact that a layoff might be imminent, that process that they're going through is months before the actual layoffs. So in a sense, by the time the layoff is happening they're already moving forward, and so too often it gets missed, the actual act of the layoff is this day one of the employees.

Hal Weitzman: So the big decision is shall we lay off or who are we going to lay off, not how.

Lisa Stefanac: Correct. That's what often gets missed is the how.

Hal Weitzman: Okay. So what are the consequences of getting it wrong? Why does it matter for the company? I mean-

Lisa Stefanac: I mean, if you think about it, you get cultural erosion, loss of trust. Even when, for example, Twitter, when they laid off, gosh, 2022 I think it was, it by an email, and the lack of trust that created reverberates through the whole culture and makes for distrust of leadership which of course is going to have a huge consequence. That's one. Productivity decline and turnover. If you don't address the actual emotions that are for the survivors as well as those that are departing, there is a productivity decline that is going to certainly touch shareholder value. And then of course, reputational damage. If you think about those who have gotten it right, I mean, can you get it right is a good question, but I would say those that are leaning towards getting it right. Brian Chesky and for Airbnb, when he needed to make that decision to lay off in 2020 because of the pandemic, he was front and center in giving that address to all of the employees. It's 25% layoff, and they did it really well in addressing the emotional tone in the room.

Hal Weitzman: I see. And so the difference there is what? Just let's just outline what the differences are from a bad layoff. So the CEO you said sort of explained the rationale for it.

Lisa Stefanac: Oh, well, yeah. So I'll start right away with one of the most important pieces around layoffs in the communication is the need to speak three different languages. What I mean by that is, and this comes from the work of Dr. David Kantor, K-A-N-T-O-R, over at Harvard, and what he talks about is the importance of getting language of care. So really understanding from the human level how this is going to be received, and this is not fun and this is hard. Number two, language of meaning, the why. What is going on? What is it in the market or the pandemic or whatever are the external or internal issues that are at play. The why is really important to some. And then the language of action. So what is actually happening, how is it going to unfold, what can you expect, when is this all happening, all of that is the language of action.

Those three languages are so important to put in any big message, whether it's layoff or something, a big change in the organization. But with those three languages, you're going to hit any individual that speaks that language first. Whether it's language of care, they'll hear the why, they'll hear the what is, what's happening, but what happens is they'll mostly need to know but what about me, whereas other people just want to know what can I expect, what is next, what are the next steps. So having all three languages present is going to be the best practice way of delivering the news.

Hal Weitzman: Okay. And I'm thinking as you're speaking, you talked about the CEO being front and center and explaining the rationale for-

Lisa Stefanac: The leadership team as a whole, I would say.

Hal Weitzman: The leadership team.

Lisa Stefanac: But the CEO, particularly for Airbnb, that was a very good...

Hal Weitzman: Something that I've observed, and I don't know if this is common, is that there is a tendency for managers to hand over that layoff conversation to an expert. We think of the, it was the George Clooney movie, Up in the Air, the idea that there's an expert who does the layoffs, a consultant or whatever, or a HR person that you've never seen before who appears only in order to fire you or lay you off and that the manager takes a... for whatever reason, does not want to be involved, understandably. That sounds like, from what you're saying, that's not good practice.

Lisa Stefanac: I would not recommend that as best practice. I would say there are some moments where that might be warranted, particularly from a legality standpoint or some major issues that only the company at the top knows. So in those instances, maybe that is the route to take, particularly if it's being legally advised. My worry around that is that, again, we get into where companies get it wrong is in the aftermath. So that kind of layoff, the Up in the Air version, is one that's going to have an aftermath of reputation and definitely low morale of those that are staying behind.

Hal Weitzman: Okay. And the other thing that occurs to me is you can put a lot into these conversations, but people, someone who's getting laid off, are they actually going to hear it? Is it, I mean-

Lisa Stefanac: It depends on the person who's listening. And so first of all, for anyone here that's listening that's recently been through a layoff or is, knock on wood, hopefully not in the future, but what's really important first and foremost is to hear the news as something that the company has decided for your role, not about who you are. I think that's where most often those receiving the layoff, the news that they're being laid off oftentimes go to, "Well, it's a reflection of who I am," and that is exactly not the place to go because that will make you go into a place-

Hal Weitzman: It's natural because you think-

Lisa Stefanac: Yeah, sure.

Hal Weitzman: ... if I were an outstanding performer, why would they let me go, they'd move me into a different role or something.

Lisa Stefanac: Well, and so then this is the next piece of advice I'd offer is to ask for feedback. I mean, quite frankly, sometimes it is that the role's getting removed. Sometimes there's redundancy, sometimes there's some level of reorg that's happening, and this role is no longer needed or is going to be absorbed somewhere. So the why becomes then, that language of meaning becomes very important for those who might have a tendency to go into that place of, oh, it must be me. But high performance, yeah, that's where I would absolutely want to be talking to my manager to ask, "What is this about? I need to know the why. Is it my performance? If so, I need some feedback."

Hal Weitzman: Mm-hmm. And what about the narrative part that relates to the company? Because you often hear people saying, "The company did very well. Now the company's hit a rough patch and therefore you have to go." So I mean, do people care about the organization that they're working... I guess sometimes they do and sometimes they don't.

Lisa Stefanac: I mean, I am here at University of... I very much feel as part of the family.

Hal Weitzman: Of course we care. Of course we care.

Lisa Stefanac: So I would say there is oftentimes that sense, and Dr. David Kantor talks about this. He comes from family systems therapy, and he will say that any organization, any team that you step into in a way is... your family system was your first team. So oftentimes we are looking to be part of a family and to experience ourselves as belonging. So yeah, too often the hang-up or what can happen is when it comes to companies, they aren't actual humans or entities that have a heartbeat, and so there is a need to sometimes change based on market situation or whatever is being determined strategically. So in those moments, it also helps to hold oneself as separate from and recognize and detach. Wow, this is a company that needs to survive financially, and right now, I'm not part of that.

Hal Weitzman: If you're enjoying this podcast, there's another University of Chicago Podcast Network show that you should check out. It's called Nine Questions. Join Professor Eric Oliver as he poses the nine most essential questions for knowing yourself to some of humanity's wisest, the most interesting people. Nine Questions with Eric Oliver, part of the University of Chicago Podcast Network.

So, Lisa, in the first half we talked about the kind of word, the kind of language, the kind of message that a company or manager should use when they do have these difficult layoff conversations. You talked about using language of care, language of meaning, language of action which will hopefully help people who are being laid off and help the whole experience be more positive than it might otherwise be. I guess it still might not be very positive.

Lisa Stefanac: No layoff is positive. It is hard, and I think that oftentimes just needs to be accepted.

Hal Weitzman: Okay, so it's possible that people just won't hear it or they will hear selected parts of it, or they'll interpret it in their own way. But let's imagine that I'm running a company and I come to you and say, "We need some help. We know we have layoffs coming up in next quarter or two." How would you advise us to... what are the steps that we should use to prepare?

Lisa Stefanac: Well, first, I want to ask, are there any alternatives. Have you explored all the alternatives? Because if you actually are in a position of yes, I mean we've explored everything, we've exhausted everything, whether it's redeployments or furloughs or voluntary retirement, asking in that direction, then yes, okay, layoffs are necessary. And then comes, what is the approach do you need to take. So there's stakeholder engagement first and foremost, looking across all the teams and how interconnected they might be, where do you lay off, and to make it fair, what is it that needs to put a particular attention such that one team isn't going to get completely hacked and another team gets maintained, is there a way to share that burden because it's, again, hard.

And then I would say there is some training for managers. I would want to train your managers to come with those three languages in this message. And of course, in many layoff scenarios you need to not just have the manager, you would need to have an HR person present, whether it's HR manager or some kind of ombudsman or whatnot in the organization present. So where would you like it to go next in talking about this? Because there's many places to go.

Hal Weitzman: Okay, well, I'm kind of interested in this... I'm still interested in this connection between the humanity that comes from having somebody who you work for and work with being involved in the conversation as opposed to that ombudsman doing it or the HR person doing it. So is that something that companies tend to do, to force managers to may have these difficult conversations?

Lisa Stefanac: In my opinion, think of it this way, it is the most respectful to receive it from your manager because that person knows you. If you are that manager of me and laying me off, I would want to hear it straight from you. There's kindness in the directness and there's kindness when it comes to allowing the relationship to be forward in the conversation in addition to the message from the company. This is I would say by and large one of the hardest things for any manager to do. One, managers oftentimes are struggling with do I let this person go on a sooner or later side. I always advise it needs to be sooner if you even are thinking about letting someone go, but that's more of just firing versus a layoff process. Now we're in a process where the manager themselves, you yourself are going to be caught up in the wave of what the company needs to have happen. So to remove yourself from that is removing yourself from the process of whatever healing needs to take place. Because it is a cut, it hurts.

Hal Weitzman: And the contrast, you said, between firing someone and laying them off which I'm guessing, I mean, thankfully this has not happened to me, but I'm guessing that could often feel like the same conversation, that the distinction can probably be lost. Is that fair?

Lisa Stefanac: It can be fair. It depends. Usually, ideally, when somebody's being let go, it is hopefully with awareness of many months of understanding that performance has not been up to speed or up to par.

Hal Weitzman: Right, so that's in a way the harder part, right? Because if you're running a department correctly, then someone has been given opportunities to change their behavior or whatever.

Lisa Stefanac: Much feedback I would hope in that process.

Hal Weitzman: And yet the layoff can come so suddenly and unexpectedly and you can be letting go of your best performers.

Lisa Stefanac: Yes, and that's the pain a manager's going to be feeling. So for you to be a manager needing to let go high performers, that in itself is already... you're part of the system of communication, and to even avoid naming how hard something is. If I were to come to you and I'm laying you off and I need to say how this is really hard for me, and I've been up all night knowing that this conversation was coming, and I am so sorry and we need to lay you off. The company has decided to move in this direction strategically. Your role is becoming redundant or is getting folded in. It pains me to have to say this to you, and at the same time, I'm going to be here for you to help you land in the next job because I believe in you. Your performance is top-notch.

That kind of message straight from a manager to their employee is going to go so much further in the healing process for that individual who's receiving the layoff message, and also for the manager to know, wow, I've done everything I could. Whether they fought behind the scenes to say, "No, this person ought to stay. They're such high performer. Can we redeploy them?" or for them to be able to even close the door themselves to know that they did everything they could, and even that meant showing up for that hard conversation.

Hal Weitzman: And we talked about what's at stake for the company. You talk about reputational issues, and as I said at the beginning, we've seen these viral videos of people being fired badly which no doubt does have an effect.

Lisa Stefanac: Well, they're viral videos, and so they absolutely stand for the organization to have to answer to why they did it the way they did it. The how becomes so much more important, and like I said, with Airbnb, that has become one that's been lifted as a best practice of showing up.

Hal Weitzman: So tell us a bit more about how Airbnb did these layoffs.

Lisa Stefanac: Great question. Brian Chesky, when looking ahead at the pandemic and understanding, "Wow, we are going to be hit hard while all these homes are going to be vacant. How are we going to handle the staff that we have accrued with the level of success that we've had up until now?" What he did with the leadership team is he took the facts of what was happening and he held a conversation with all of his leadership team and said, "Look, we need to do this. I'm going to lead the way." He wrote a long letter that include all of those languages, the language of action, language of care, language of meaning, the why, the I know this is hard and this is hard for me, and also here's what's going to happen.

And then after offering that particular announcement, then came all the managers following up with every single one of their employees that were being laid off, and more importantly, also holding meetings and town halls to talk through the aftermath for those that were left behind because it was 25% that got cut. So those that were left behind, "Why am I still here? That was my colleague that I loved and that I went for lunch every day with." So there was just such an opportunity for them to capture ahead of time, dream, and then of course the most important part is the after, how do you handle the after. And to be clear, for Airbnb, how they laid every person off is just one big package severance, as well as support in knowing how to go into the next step, whether it was training in their resume or support in whichever direction they wanted to go to.

Hal Weitzman: I'm interested to hear from you what should a company do about those who remain. You talked about survivor guilt. How should a company help those who's still at the company to get over their own grieving process for their colleagues who've just been let go and then tackling, often tackling more responsibility than they had before?

Lisa Stefanac: Yes. I'll give an example in which I was an advisor with Google in, what was it, 2022, '23, I think, January. In fact, I think we're coming on the two-year anniversary of it in which Google laid off a good 20% of their staff. What I noticed in the aftermath and what I was advising and I was fortunate to be there to be able to advise and work with each of the managers is that you can't just jump straight back into the task at hand. There has to be that language of care at the beginning of the meeting. Even every town hall that was offered is to just check in and be open to questions about why, what's next, what about the culture, how are we going to survive when this number has disappeared.

I would say the biggest thing to hit it right when it comes to the aftermath is to be there for the emotions because too often, again, senior leaders, they went through their emotions months prior and they're already ready to... the whole point of doing the LAF was to get even more lean or stronger in their strategy, direction, et cetera. So it has to be that every manager attends for at least a month or two even, and I will tell you it took about two to three months for Google to really be able to talk through and express emotions, feelings of anger, feelings of heartache and grief. Survivor's guilt is real, but it comes with some hard emotions as well. The anger is real, who is this company if that's what just happened.

Hal Weitzman: Yeah, so it almost sounds like the same language or languages that you talked about-

Lisa Stefanac: Absolutely.

Hal Weitzman: ... need to be used, yeah.

Lisa Stefanac: In the reverse. But it needs to be less task, task, task at hand with the language of action. It needs to be pulling back on that, yes, we'll get to what needs to be done. Everyone wants to stay in their job, they just had a layoff. The likelihood is there's also fear, will I be next. So there's still going to be strong work ethic, I'm sure, but also underneath all that is the guilt and the grief and the loss and the question about who are we if this just happened. So yeah, attending to language of care is important. I think language of meaning starts to become less prominent because it's all been described. That's also key is the dream the layoff is the town halls or the all-hands that need to explain why we are doing what we're doing, and again, all three languages need to be present, but it's the aftermath language of care that's most important.

Hal Weitzman: Okay. And in terms of for those who've been let go, is there a requirement for the support that you give them afterwards to carry on? I think sometimes you hear that companies have... I don't know if this would be considered alumni networks, but they have kind of networks of former employees so people can stay in touch and hear about developments at the company and personnel changes and that kind of thing. Is that something you would include people who've been laid off in?

Lisa Stefanac: In these conversations in the aftermath?

Hal Weitzman: Well, so I mean sort of thinking about your network, the company's professional network, sometimes companies have email lists of former employees. Is that relevant or is that not?

Lisa Stefanac: I would say there's a sting that's going to be felt from those who have been laid off for a number of months, and that in fact communication from the company might continue that sting and that pinch that there probably is best to let them, anyone who's laid off to attend to themselves with each other. So I watched, again with Google, there was a ton of folks that were being laid off that banded together to just get support. Then of course there's your moral support that you need from friends and family and maybe even therapy is... it's a transition. So therapy can be extremely useful. So I would say no, it's probably best to stick with what's internal because again that's where most of the resource needs to go anyway in order to have made this worth it. Otherwise, using and expending too much resource you might see a layoff down the road again. So no, I would keep it internal.

Hal Weitzman: So, Lisa, you've talked about these languages and you kind of got to this a little bit earlier, but I think it would be useful for people to hear what the language of care, language of meaning, language of action sounds like. So let's just imagine that you had to have one of these difficult conversations and you were the manager laying somebody off. Can you give us an example of what it sounds like?

Lisa Stefanac: Absolutely, and I recognize this is a hypothetical moment and I do want to have everyone hear exactly what the transition between the languages might sound like, so I'll point those out as I go. So I would definitely would start with a language of care, and let's say it's you I'm laying off, so if you can come with me on this. I first want to start with, "This has been a hard night for me. I really have not slept well, and it is painful for me to share the following news which is that we need to lay you off." In that moment, by the way, lay you off, I'm being direct, I'm being kind, get straight to the point, and I also shared a little bit of what's hard for me. Then continuing, "My guess is this is going to not land well or easy, and so I just want to say I'm here for you. I want to stay in this conversation for as long as you need and to be able to talk through what you need to know in order to move forward." That's with me in language of care, connecting.

Then I'm going to go to the why. So what this is about, this is hypothetical, "With the company performing as it has and you've been watching the poor performance of the company over the last many months, our leadership team has looked through all possibilities and I have definitely been trying to support in whatever way I could, and I want to name the why. It really comes down to our roles in this particular team, it's looking like it's getting absorbed by other parts of the organization and that makes your role redundant. So this is truly about the role and about needing to lay off that role and at the same time you're on the other end of it." And so now I'm back in the language of care to say that doesn't sound so good when you're hearing your own role which you are inhabiting is no longer here.

So then we get into language of action. So how this is going to work, and you can hear I'll probably speed up a little bit, but how this is going to work is it starts with this conversation. "I'm here for you for whatever we need to talk about in the process, and you're going to be... from the moment that this conversation is done, there'll be a series of things that you can expect. One, the computer is going to be turned off. The key is going to be turned off for access to the building." This is just a precursor of what's expected. And then comes support, support in helping you know how best to lay out a resume. "I want to be there as a recommendation for you for future employment opportunities and we'll give you a lot of support in terms of what are the next steps for that. When is this going to happen? From the moment this meeting finishes." And then comes also being able to give you a chance to talk through with your colleagues whatever goodbyes you need to have.

Hal Weitzman: Okay. It's so difficult, isn't it, because I can sort of feel myself being drawn in. It's a difficult thing to do. So thank you for modeling that.

Lisa Stefanac: What feelings came up for you?

Hal Weitzman: Fear, I think. I don't know. I mean, it's a difficult situation. I was trying to listen to what you're saying, but I think that it would be hard to hear the whole thing. I think that's what I'm thinking.

Lisa Stefanac: I delivered it all in one go. Normally I would've just paused and said, "How are you doing? How is it to hear this? I've shared with you how I'm feeling, how are you doing?" And then the fear would come up and that's where I would meet you.

Hal Weitzman: Right, it sucks.

Lisa Stefanac: It definitely sucks and I would probably say, "I'm with you." This is hard.

Hal Weitzman: So for those of us who do find ourselves in those conversations, it's probably going to be hard to remain composed. But what are the questions? You talked about one of them which was feedback. What are the other questions that it would be useful to ask at that point?, do you think?

Lisa Stefanac: Oftentimes if it hasn't been delivered with those three language at play, sometimes it helps to ask the question, so what does this mean for me, right? That's the language of care, what does it mean, and that might invite the language of care, it might not. So again, you might not have a well-trained manager who has listened to this podcast, but there is an opportunity to get the needs that you have which might be what does this mean for me, what are the next steps, is there any support that's being offered, is there any severance, what is some feedback for me. If this is about my performance, I'd love to hear specifically so I can learn because that ultimately as the receiving end of getting laid off, I want to ideally grow from this in the midst of my fear.

My fear is going to cloud fear, grief, anger, whatever the emotional state, I also want to name allow yourself to feel that, but there's an aspect of self-management because it's not going to be helpful in that meeting to explode or to emote in that way, unless of course it's too hard to contain. That's where hopefully your manager or whomever is delivering it has been trained to be able to just receive and allow for it to be alive in the room. So I want to name that that's really important for the person who's receiving is to focus on what you can control. Self-management is one of them, but also being able to process the emotional impact after that meeting and get through the meeting because the meeting is the meeting. It's the delivery of the news and the news is hard, and then go get the support you need outside of the meeting.

And the last thing is just recognize, again, this is not about you the person. This is about your role. Your role is now getting laid off and you unfortunately are part of that role. And so it's then looking at learning and strategizing what are my next steps, and hopefully the company will do right by you and provide that support.

Hal Weitzman: Just one final thought. I've seen quite a lot on LinkedIn people posting that they've just been laid off and it seems to be quite a positive experience, that they get a lot of support. Hopefully they get some leads for positions as well. Good idea?

Lisa Stefanac: Absolutely. Go to LinkedIn. That is a network. And the fact that you've been laid off, and there's been enough layoffs in the last many years because the pandemic largely has been a huge reason, it is no longer a shameful thing. It used to be perceived as shameful, but actually now these days it's a common practice that is happening sadly. But at the same time, enough people out in the LinkedIn world, people are willing to step up and say, "Oh, good, we've got some amazing talent on the market. Let's go." And that's how I would want to encourage anyone who's been laid off to know that actually this could be an opportunity, and in fact you might be the very next choice for a really great opportunity in a new career.

Hal Weitzman: Well, Lisa Stefanac, thank you very much. This has been a difficult... well, not difficult conversation. It's been a fun conversation, but about a very difficult topic. So I appreciate you coming on the Chicago Booth Review Podcast and explaining it to us.

Lisa Stefanac: It's my pleasure. Thanks for having me.

Hal Weitzman: That's it for this episode of the Chicago Booth Review Podcast, part of the University of Chicago Podcast Network. For more research, analysis, and insights, visit our website at chicagobooth.edu/review. When you're there, sign up for our weekly newsletter so you never miss the latest in business-focused academic research. This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe and please do leave us a five-star review. Until next time, I'm Hal Weitzman. Thanks for listening.