RIFs: How to Kill Your Company with a Layoff

Elon Musk is at it again! Another Twitter RIF (reduction in force). After firing even more Twitter employees last month (that makes 5,000 fired of 7,000 when he took over the company), business managers who watch frontrunners like Musk are even more inclined to follow suit without exploring other options–and it may be digging themselves into an even bigger hole.

“Let’s cut off my arm and see if I don’t bleed out,” said no one ever. Don’t be that company: check out these alternative options that industry leaders and economy experts suggest to keep your business afloat and your staff employed! ??‍??

The Twitter Pitter

It’s interesting to watch this real-life tech drama unfold, starring uber rich and questionably moralistic modern oligarch Elon Musk and social media platform, Twitter. (When do you think the movie will come out? ?) After laying off half the staff last year, the company then backpedaled and sent out some “Oops, please come back to work for us” requests once they realized that they let go of essential personnel. ? Now, they are looking to roll out Twitter Blue, a prime experience, and yet with another layoff at the company last month they let go the person in charge of that rollout–and the whole communications team (one way to be unavailable for comment).

We’re keeping our eyes peeled for the upcoming trailer! How will it all end? No spoilers!

The Ethics & Economics

Times are tough. And no matter what the economy is doing, some businesses will have to consider a layoff. That’s just an unfortunate reality. However, a RIF shouldn’t be your go-to course of action as it causes harm in several factions. Layoffs make the most sense as a very last resort after creative initiatives have been exhausted.

This (paradoxical) tweet from Dave Ramsay is a pint-sized truth bomb:

Layoffs should be your LAST option, not your first choice. Laying people off to get your stock prices up is unethical.

Love this wisdom from @DaveRamsey on the EntreLeadership Podcast this week 👏#EntreLeadership #layoffs #LeadershipDevelopment #leadershipskills pic.twitter.com/GSldoqQKWM
— EntreLeadership (@EntreLeadership) March 21, 2023

Mic drop, Dave! ?? Defaulting to a layoff can make a company look bad for several reasons:

Negative impact on employee morale: Layoffs can create a shattering impact on employee morale that results in a loss of trust and loyalty from remaining employees.
Negative impact on company culture: RIFs can result in a loss of institutional knowledge and experience, which can result in long-term scrambling to rebuild the company’s culture and cohesiveness, increasing the effort it takes to execute its strategy effectively.
Short-sighted strategies and loss of legacy: Layoffs bring into question sustainability and the longevity of the company, and wrack up additional long-term costs, including: collected unemployment insurance and severance packages, future talent recruitment and training, stunted productivity from remaining demoralized staff, jaded employee exodus, angry customers, and lost market share.
Damage to company and leadership reputation: If the company is known for resorting to layoffs as a solution to financial problems without first exploring other options, it can damage the company’s reputation among potential employees, customers, and partners. Top talent will shy away when job seeking, customer loyalty dwindles, and business opportunities become more limited.
Legal and regulatory risks: RIFs can also create legal and regulatory risks for the company, such as wrongful termination lawsuits or negative publicity.

Like a suntan, layoffs look good in short-term profitability reports, but they can cause repercussions like scared, angry employees, reduced productivity, loss of reputability, and ultimate business downturn that spreads like cancer. To name a few. So if you can, avoiding letting your employees go is ideal.

The bottom line is that layoffs cost companies:

Time wasted

Market reliability

Employee wellbeing

Employee & customer trust

Long term gain or sustainable profits

Knowledgeable, creative, innovative talent

Proven alternative methods to thrive

Creative & strategic solutions

Employee & customer loyalty

Growth opportunities

Their soul?

Companies that default to layoffs as a solution to financial challenges come across as callous and insensitive, lacking in empathy for their employees (if the people that work for them are just a number, why would customers think you’d treat them any better?), and unwilling or too uncreative to explore alternative solutions.

The good news? Companies that do prioritize their staff’s wellbeing and put their heads together and commit to trying creative solutions to address financial challenges are highly respected by employees, the customer base, and other stakeholders.

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RIF Alternatives to Save Livelihoods, and Your Business

That’s why a RIF should be a hail Mary to keep your business from going under, not a shareholder-pleasing strategy. So what can you do? Below are a few ideas to get you rolling payrolls for everyone:

Take the problem to the team

Asking your employees for input and ideas to save money or produce an unexpected line of revenue. Their creative solutions and willingness to bend may surprise you! A voluntary, hopefully temporary, pay cut to ensure no one loses their job might be a compassionate move they’re willing to make. An innovative idea could increase cash flow in a non-traditional way for the company. You’ll never know all the possibilities if you pass on tapping into the brain power of the people who work for you!

Redistribute workloads

Analyze the workload of each employee to identify areas where work can be redistributed to reduce the need for layoffs. This can involve reassigning tasks, adjusting work schedules, or offering part-time work options.

Give furloughs a go

Consider implementing temporary furloughs, where employees are given a temporary unpaid leave of absence, instead of layoffs. This can be an effective cost-saving measure during times of economic uncertainty. Encouraging wellbeing focus and spending time with family and doing hobbies during this time can help ease the experience.

Offer training and development

Providing training and development opportunities can help employees develop new skills, which can improve productivity and efficiency. Your employees become more versatile and adaptable, and this avoids training new folks who are unfamiliar with the company’s cogwork.

Learn about alternative work arrangements

Consider offering flexible work arrangements, such as remote work, job sharing, office downsizing, etc. to reduce spend while retaining employees. Unnecessary overhead can be costly.

Consider a salary freeze

Rather than cutting jobs, consider a temporary freeze on employee salaries as an effective cost-saving measure to help you avoid the need for layoffs.

Implement a hiring freeze

Putting a temporary freeze on hiring new employees is a common sense place to start. This can help to reduce costs while still retaining your current workforce.

Offer voluntary retirement

Depending on your organization’s demographics, offering a voluntary retirement option can provide older employees with an incentive to retire, freeing up positions for younger employees and avoiding more layoffs.

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‘First Do No Harm’ Isn’t Just for Doctors – Avoiding Cruelty in a Layoff

Companies that institute arbitrary job cuts lose money, weaken productivity and inflict mental, physical and financial harm on employees.

–Victoria Wells, Senior Editor at Financial Post

So none of the above alternatives are an option, and you’re certain that a layoff is necessary. Rats. However, don’t overlook the fact that the way in which you perform a layoff is a big deal!

Your company’s approach to an already painful experience can take matters from rough to excruciating, OR respectable. Putting thoughtful effort into how the offboarding process will go can make a huge difference–for those losing their income, for those who are left struggling with “survivor’s guilt” and increased workloads, for onlooking consumers and customers, for your future hires… so essentially, a huge difference for your company’s reputation and profitability.

Laying off staff doesn’t have to make you the bad guy. With a little bit of empathy, people are more likely to feel respected and heard.

RIFs: How to Kill Your Company with a Layoff

In this article:

The Twitter Pitter

The Ethics & Economics

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