Managing Layoffs

Layoffs are the common theme these days in the economy, and the biotech/pharma industry has not been spared from the pain. My last post 5 Best Podcasts for Business Managers was focused on managers polishing their skills and knowledge. Enhancing your management skills is especially important for keeping your current job or quickly finding your next one. This podcast is geared towards managers one the other side of the table, namely, those responsible for giving the bad news of impending layoffs.

It is very hard to manage layoffs well. It is unfortunately very easy and common to handle them poorly. Some key points on what to do are:

Transparency: Trying to keep your employees in the dark until the last minute often fails and results in low morale, rumor mongering, and fear. Everyone feels vulnerable when they see the top management in "secret" meetings and no one is providing factual information. In the absence of facts, rumors will fill the void of information that people are searching for and sharing. If your company is going through a rough time, do not sugar coat or attempt to give the "everything's fine" speech. Let the employees know what problems the company is facing and what the options are. Layoffs should not be the first choice, but if they are announced, people will better accept the decision if they see what led to the problem, why layoffs had to occur, and what the rationale is for who is being laid off.

Fairness A sense of fairness is extremely important when layoffs occur, both for those losing their job and especially for those remaining. For those remaining after a layoff, their is a lot of survivor guilt and anger. People feel bad for their friends who lost their job. If they feel that the layoffs were not fair and that good people were let go and bad people were kept, they will harbor resentment for upper management. If they do not see a rationale for who was laid off and who was not, they will think the layoffs are happening at random and that they are vulnerable for a future layoff. Those who were not involuntarily asked to leave, will likely start looking for opportunities to leave voluntarily.

Planning When laying off people, it is essential to do so according to a well defined and communicated plan. Make sure you, as upper management, have a plan for who is being laid off, what responsibilities will need to be transferred to the remaining personnel, and how the company will move forward with the new organizational structure. This plan should be clearly communicated to all personnel at the time of the layoff. If possible, it is always best to have all the layoffs at once. This will put the bad news behind you as quickly as possible and get things moving forward in the right direction. The worse thing to do is to have multiple layoffs announced randomly during an extended period of time. This will devastate morale and strongly inhibit productivity as people focus their time and energy on guessing who is next and preparing themselves in case they are in the next round.

McKinsey Quarterly just released a nice short video interview with Robert Sutton entitled Good Boss, Bad Times. Dr. Sutton gives some nice advice for managers dealing with layoffs. As he mentions, troubling times and uncertainty in companies can lead to a Toxic Tandem, where managers become blinded to the needs of their employees at the same time that their employees, who are working in a state of heightened anxiety, are scrutinizing their manager's every move. This is a vicious cycle as employees' increased sensitivity to their boss's attitude and signals progressively worsens as their boss's interactions with them become less and less open and responsive.

As with most things in life, it's easy to be good at what you do when things are going well. The test of the good manager is how they act and manage their people when things are bad. How you handle your team and employees during these tough times will determine your reputation as a manager. Hopefully, while the times are bad, your managing will be good.