The Right Way to Handle LayoffsThese lessons learned will help you find the best possible outcome in a difficult situation.
Thoughtful leaders find layoffs among the most stressful events they manage. Warren Heffelfinger, CEO of Ingenio, has a compelling story.
Hire the best.
In 1999, Warren and his college roommate Dave Riordan started a telecom business.
“It was a crazy time. Telecom was particularly hot; if you had a pulse and could dial a phone you could get private equity backing. The private equity guys wanted us to raise $500 million and hire 1,200 people over a 12-month period. Dave had five years of management consulting experience and I had never hired a human being in my life. So, we went back and said, ‘Listen guys, we’re flattered but you’re nuts. We need to hire a CEO.’”
“The single most important thing that we did in that business was, we hired a boss — the world’s most wonderful role model you could imagine. I would say that I learned 80% of my leadership skills from being joined at the hip with Tony DiStefano for six-and-a-half years.”
But then the market crashed. “We were in the epicenter of the dotcom meltdown. And raising $500 million? We couldn’t raise five cents after April of that year. We faced a gigantic round of layoffs in 2000. And that’s where Tony was the master.”
Err on the side of transparency.
“I had a view that great leaders are paternalistic — they sheild their company from bad news. It’s your job to do that because the company can’t handle bad news.”
“Tony helped me understand that it’s exactly the opposite. We didn’t get funding, our credit line was at risk, we had looming layoffs; all this bad stuff was happening. My gut was to lock Dave and Tony in a room and figure this out. Tony said, ‘No, tell them.’”
“So, we were incredibly open with our team about what was exactly going to happen. In September we said, ‘Listen, one of three things is going to happen: We’re going to find an investor, someone will buy us at the last minute, or we’re going to have to fire everyone. Those are the outcomes. We understand if you don’t want to stick around, but if you do, double-down and work your tail off. That will help us get to the best outcome.’”
“There was an initial shocked reaction. But then everyone was like, ‘Alright, let’s get back to work. We’ve got to work harder.’ It was a great lesson. When given a choice between sharing and not sharing, the answer is almost always: share.”
Tailor your communication.
According to Warren, “A significant percentage of the company sees a problem exists. A smaller subset sees the problem and will figure out what the right solution is. The smallest subset sees the problem, can find the right solution and how to communicate it. Communication is the hardest part. It’s not your knee-jerk reaction. It’s understanding all constituencies and how they are going to be impacted.”
“There are two important constituencies in a layoff: the people you are letting go and the people who are staying. The people who are staying are going take great lessons about how you communicate and how you handle the situation. What you hope for is, they say, ‘This sucks but at least if it ever happens to me, it looks like I’ll be treated pretty well…with respect, like a human being.’ That’s super important communication.”
Fire before Christmas.
“There were some very counter-intuitive parts of our layoffs. For example, we were facing layoffs around mid-December. My reaction was, ‘How can you fire people before Christmas?’”
“But Tony’s answer was, ‘You must absolutely fire before Christmas. Right before Christmas, people are going to Christmas shop and rack up credit card bills because they think they have a job. If you give them the bad news ahead of time, you let them avoid that mistake.’”
“’And, if we lay them off December 15th, they get a month of notice and greater severance. If you wait until January 1st, they only get two weeks.’”
The team followed Tony’s advice. What surprised them most was that people understood. Not only did they save the company, but Warren received thank you notes from people who were laid off.
Message based on the strategy, not the person.
Large layoffs are painful, but even the decision to fire just one person can be wildly stressful.
“There was one caustic executive who had a big personality. He was very smart, but manipulative. I was up at 3 a.m., nauseous, not sleeping, for close to a year because I knew he was plotting against me every day. And I knew that every time he walked into my office, something manipulative was happening. He brought benefits to the business, but the psychic cost of having to deal with him every day was extraordinary.”
“I learned that when you decide to let a toxic person go, you’re already six months later than you probably should be. But there’s nothing more liberating than the day you make that decision.”
“Still, you need to create a win-win. The conversation I wanted to have was, ‘You are a pain and caused me not to sleep, and you’re a miserable human being.’”
“But I parked my ego. I said, ‘Listen, I’ve made a hard decision. I’m eliminating your position. You played a significant role as we were transitioning. Now I believe our resources are better spent in other ways. There’s just not a fulltime job here.’”
“I said, ‘I’m open to handling the communication. I’ll handle it if you don’t want to but I’m open to other considerations.’ He thought about it and came back the next day with an elaborate spin on how he wanted to retire and spend time with his kids.”
“We had a three-week transition plan. I let him stand up at the all-hands meeting and drop the news himself. We had a going away party. There was no blow-back whatsoever.”
“Often, once you’ve made the decision a person is not a good fit, you radically overthink the impact of that person leaving on the rest of the organization. That’s my number one lesson to leaders and managers: when you know it, you’re already too late.”
Find your best possible outcome.
The fun of leading a business is accomplishing meaningful work with people we love. The worst part is when the business is struggling and we must make tough decisions. Warren, Tony and Dave’s decision to be transparent, take the employee’s perspective and keep their eyes on strategy helped people remain focused as they turned the business around. They found best possible outcome for a difficult situation.
Seize Opportunities to Shift Resistance to Positive ChangeHow to get your team to shift from active resistance to positive movement.
A while back, I started a project at a mammoth global client. They had just gone through a merger. Ok, not “just.” It had been five years – but you’d never have known it. The us/them dynamic between the two original companies was alive and well. Resistance to more change was rampant.
To make things more interesting, they were in the middle of a full SAP implementation. Anyone who has been through a big ERP project knows that it’s a huge change management effort, touching process, technology and people. No one looked ready. Management didn’t walk in the hallways; they ran. Everyone seemed breathless and unsure.
My team and I had been brought in to conduct a straightforward needs assessment workshop. Given the environment we encountered, I realized we had to change our plan. Soon after we started the first session, we put our agenda aside and listened. By the end of the session, they were in a more productive place. Here’s why.
They got it out.
The group was made up of employees from both original companies. They all had issues with the merger and with the imminent ERP. But it became clear that each person had vented only to those on “their own side.” For the first time in five years, the enemies looked at each other and spoke about the issues that had been troubling them. They had to say “you” instead of “they.” And after one perspective had been expressed, those on the other side had a chance to listen and respond.
They were able to focus on the differences that mattered.
By talking directly to each other, they were able to define their many differences. But then they saw that some of those differences weren’t relevant to what they wanted for the future.
At one point, someone mentioned that when he tested the new SAP system, he found what he considered to be glitches. He proudly described an intricate workaround he had put in place. His confession opened up a conversation; many others revealed that they had also constructed ways to get around SAP transactions and processes. This created a bond between the two sides. It also started an honest conversation about why workarounds would ultimately fail and keep them from what they wanted.
They had an epiphany.
They realized it couldn’t get any worse. The suffering of these two groups was real. They were working in a state of chaos, confusion and stress. I wondered aloud if maybe participating in the needs assessment and contributing to a good implementation might actually help. “Well, I guess it couldn’t make things worse,” said one participant. Another said, “Yeah. Let’s get this over with.”
While I can’t pretend they were enthusiastic about the big change ahead, there was a clear shift: from active resistance to reluctant positive movement. We hadn’t yet touched our agenda, but we felt we had accomplished a lot.
A Simple Tool to Create MomentumTo paraphrase the law of inertia, an organization at rest tends to stay at rest.
To paraphrase the law of inertia, an organization at rest tends to stay at rest. And an organization in motion tends to stay in motion. If you need to move a large number of people in the direction of an important change, you need that momentum.
But how do you get it rolling? With two levers: getting immediate action that drives our desired outcome and creating visible success to reinforce it.
Action. Pick easy behaviors that are important to the change. Support people, so they know exactly what to do, when to do it, and how to know when they get the behavior right.
Success. Reward those who complete the behavior – the reward depends on the situation. It might be a system response, a tangible reward, feedback from a supervisor, or public recognition. Spread stories of team and individual success. Focus the organization’s attention on these “wins.”
Our goal is habit – behavior that is self-perpetuating. Once the right behaviors are a habit, and you layer a number of those across the organization, you have momentum.
Example Momentum Plan for Change
- Send an email, reminding my team of the reason for the change, and telling them that we’re starting in small steps. Lay out my “action-success” plan for them.
- Every Monday, email my team with a behavior I want to see that week. Give examples and ways to tell they’ve done it right.
- Throughout the week, informally recognize that behavior when I see it.
- Thursday, send an email asking for stories about how this behavior worked, during the week
- Feed the stories back to the team. Call out great performers. Be enthusiastic! Create some buzz!
- Every day: Remember the key to focusing attention: Keep it simple!
Weekly Action Plan (sample)
Subject: This week, open all meetings with your intended outcome.
We’ve spent eight hours discussing effective meetings. Now it’s time to put it into action. We’ll take this in small steps that add up to our vision.
This week, please open every meeting by defining your intended outcome.
On Thursday, I will ask you for examples of how it went – good, bad, indifferent. I’m looking forward to your stories!
Subject: How did your meetings go?
This week I asked you to open every meeting by defining your intended outcome. How did it go? I’m interested in specific examples, good and bad, of your experience.
Subject: FW: Pam did a good job starting her meeting.
Here’s John’s experience from Pam’s meeting (see below). Good learning here for all. Pam, I love your idea of the flipchart page and circling back at regular intervals. John, thanks for sharing! I appreciate the leadership from both of you.
Set Up Your Project for SuccessHow to ready your change management initiative to succeed.
“You have one opportunity to create a first impression.” This truism is particularly relevant for major change initiatives.
It’s human nature to wait – to reserve support until you see whether a program will be successful. If it reeks, the team takes the blame. If it’s got legs, there are 10,000 owners.
Establish that sense of success in the first three months – immediately after the initiative has been blessed and announced. That’s the window of opportunity to create adoption and momentum for the change.
Here’s what must happen:
First, create reference points. Describe what this change will be like, and what it will not be like. We compare every new experience to what we already know. Comparing is a hard-wired survival skill: Will this experience bring food or death? It’s absolutely critical to create the right comparison, or our stakeholders will create it for us.
Which projects had that sheen of victory? Describe how this new change is like those. Which left a bad taste behind? Describe the critical differences between your initiative and the duds. Be specific. Tell stories. As soon as it begins, plant your project on the right side of your organization’s history.
Years ago, a major retailer hired me to help implement PeopleSoft. For the third time. And guess what? Virtually every stakeholder I encountered asked the same question: “How is this different from the other implementations?” In the absence of the right comparisons, people had decided this project was like those that had failed. I was in a defensive position and damage had already been done. Since then, I’ve learned it’s more powerful to find positive examples and metaphors that resonate with my stakeholder groups. I jump into that space they’re trying to fill, and provide the right comparisons. It changes the conversation.
Second, capture those who are already “all in.” Every organization has a small percentage of people who are weirdly and enthusiastically drawn to anything new. They are the daredevils — the first penguins to plunge into the icy Arctic; if the daredevils aren’t devoured, the early adopters enthusiastically follow. Identify those who might be most positively predisposed to your project, and give them a feel-good interaction with the change. It’ll tip organizational momentum in your favor.
Third, use “operant conditioning.” Define the trigger, the behavior, and the immediate reward. A trigger is the context that causes a person to respond in a particular way. The behavior is what we want people to do in response. The reward is anything good – positive feedback, a happy interaction, or a treat. According to Dr. Edgar Schein, if a group engages in a new behavior, and has an immediate positive experience, they will repeat it. If they repeat it often enough, their behavior creates culture. Driving behavior through conditioning directly impacts culture and enables the ongoing success we’re looking for.
We can actually design adoption and momentum for our change. Defining reference points, getting the early adopters, and rewarding the right behaviors – regardless of the change – creates that early glow of success.
“A person with a new idea is a crank until the idea succeeds.”
“Success is a science; if you have the conditions, you get the result.”