MBA1515 Q&A Wednesdays: I need to make some layoffs. Should I do it slowly or all at once?

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If you have a question you want to ask, just email me over at Omar100, MBA NET today's question is from Bill and Bill asks because of the situation with COVID 19, I am forced to make some layoffs. I've been putting it off for some time but I need your advice. Should I lay off team members slowly and in stages or should I do it all at once? Would love your insights. Thanks for producing this great podcast Bill. Bill, this is not an easy thing to do. It's not a fun thing to do. It's a tough decision and I want to make sure that you have all the information to know when and how to make your layoffs. Many people like Bill need to make this decision with COVID 19 with the lack of revenue that's coming into businesses and they're wondering, hey Maybe I can stagger this, lay off people as each week goes on, maybe things will change quickly and improve quickly. Or is it better just to do it all in one go? We discussed this very important decision in today's Q and A Wednesday. So let's get into it. Let's get down to business. Having to make layoffs in your business is never easy, but we all at times need to make these difficult decisions in order to keep our business going. Now, my advice is always to pay attention to how you make each layoff. How you let go of a team member is just as important of when I would even say it's more important. Let me explain. If you're able to lay off a team member or team members with a good amount of warning so they can start planning and looking for another job with some sort of severance package, with some sort of pay, with some sort of support, whatever you can do that's better than waiting and being in a situation where you're leaving them high and dry, where it's all of a sudden they have no warning and. And there is no compensation or any kind of way to allow them to transition into a new job financially. So in that regard, making many layoffs at one time is more suitable for the individual team member. I'll explain. I was of the opinion that, you know, if you had to make layoffs, stagger as much as possible, so that way you're only laying off people that you have to because things can change, things can improve. So, for example, instead of laying off 10 employees at one time, maybe you lay off two this week, and then three weeks later, you lay off three, and then you see how things go, and maybe another three weeks later, you lay off another three. You get the point? And I subscribed to this belief because I thought, hey, why let go of a teammate that you can hold on to just in case, you know, things change, things improve and you're able to pay their salaries. And. And I really didn't understand the negative of doing this, but there is some pretty big negatives. And actually, I was convinced of the other argument that it's actually better for your business and for the employee to be laid off all in one time, do the cuts at one shot. And I was presented this argument by Patrick Campbell, who's the founder of ProfitWell. And it was the first time I kind of saw that perspective and thought, I think I need to change my position on this. Now, the downside of slowly laying off people is that your whole team, the team that actually will Stay with you. The other people that are in the company that are not being laid off at that time, they experience a downward shift, a downward mood. In your team culture, it's never easy to say goodbye to your teammates, right? Especially a layoff, because it's not anything in their control. It's not like they're being let go or being fired because of performance. And that sometimes happens. Sometimes you have to, to fire somebody that is a great person and a fun personality and a great team member, but just not cutting the mustard, right? They're just not doing what they need to do to hit their quotas or to hit their, their KPIs, and you need somebody better. That's just the reality of employment, right? But if you're laid off, that's just not their fault, right? And that really dampens the mood and the team spirit. It also gets people thinking, well, am I next? What does this mean for me? Am I going to get laid off next? It creates a sense of worry. Now imagine you having to do this not once in a period of time, but two, three, four, five times in a period of maybe three months. They're going through all these emotions over and over and they feel a sense of instability. Every time you make a layoff or a series of layoffs, they're going through these emotions and it's confirming some of these doubts that they have, hey, maybe this is not the best place to work. Maybe this is not stable. Maybe I should start looking for a job so I can leave on my terms rather than, you know, being surprised by a layoff. The second reason why a staggered approach is not so good for your team or the business is that when we stagger, we're basically doing the bare minimum financially so that we can continue to pay people and pay and employ people that we have on our team. But that doesn't leave much wiggle room or finances for those who have to leave. Say, for example, you want to give two months severance to everybody who leaves your team on a layoff situation. If you're cutting things so tight, you're not going to be able to do that because, hey, two months severance with the layoff will not allow enough money for people that are there full time employees. You're not really giving enough financial wiggle room. And when you make a layoff, everybody's watching and they're going to see, hey, what happens when you get laid off on this company? Do you actually get compensated? Do you get some help? Do you get some heads up? Do you get some Time to transition out. So financially, it doesn't really give you a lot of wiggle room to give your departing pleasure something to help them out. So actually, it's not good for the people that are getting laid off. And lastly, staggering the layoffs is not very efficient in terms of time or money because you're going to have to go through that whole process over and over again, wasting your time, wasting your emotions, wasting a lot of resources in your business every time you make those cuts. Now, let's explore. What if you made one big cut? You had to let go of 10 employees at one time. Instead of staggering it. This frees up a bit of capital for you to be able to treat those 10 people properly. Okay, whatever that is for you in terms of a severance package or an exit package or whatever it is, it also allows you to give them a heads up. It also allows you to be transparent with the team that's staying, hey, we are making a big cut, so we don't have to do this again for another six months or something like that. Be transparent, tell it like it is. Hey, we had to make this cut to stay alive. We're good for six months. And I'll update you how things are going. And if they see you're making some hires again, they'll be like, okay, cool, we're back to normal, everything's all right. Also, when you're cutting your employees, you're laying them off, let them know, hey, I have to do this to make sure I can treat you well as you leave, give you a heads up, but also let you know, let's keep the communication going, stay in touch, because if things do change, you know, your job is secure here, you can come back. It's much better for the employee that's being laid off to have that kind of messaging be like, hey, all right, I'm getting let go, but I'm getting two months pay. I have two months to figure out, you know, how to bounce back. They treated me well, they're honest with me, and if things change, I can always go back and work again in that great team. Opposed to I got cut, I have no warning, I gotta find a job by Monday, and I just got paid my last salary and that's it. Now, of course, they're not mutually exclusive. You can do a combination of both, but you have a lot more wiggle room and a lot more freedom to do so. When you have freed capital and you made one big cut at one time, I highly recommend that when you do these layoffs, that you have a team meeting, okay? You have a team meeting and you are transparent with your team. Have an honest conversation as the lead of your team. Hey, we had to make a major set of layoffs that I'm not happy about. I had to make some tough decisions about our finances. We don't look to do this for another six months. If you're here, we need your full support and hopefully things will turn around and we will continue to make hires and make some rehires. And please don't like being in the dark. They want to know what's going on. They want to feel included. They want to feel like you trust them enough to give them the truth and they'll appreciate it. They'll be like, hey, this place is all right now. If somebody is looking to leave even after that speech, even after that meeting, that's their prerogative and that's their freedom. And people could leave, by the way, at any time, regardless if you're laying off people or not or the economy is going great or not. But most people in my experience of being an employee at one point in my life will stick with a company that treats them with respect. They'll say, hey, I'll ride this out as long as I can, right? I like working here. I like the way they're treating me. By the way, changing jobs is a big headache, you know, for the employee, you know, it's, it's hard to re establish yourself and learn, you know, the new culture and the new business and your new colleague. And people have to figure out, you know, what can, you know, I do and how can I provide value to the company. They don't want to re establish themselves. It's better to stay at a company they're happy at. And if you're able to, you know, help out in some way, those who are leaving your company through a layoff, they're going to remember that. They're going to spread the word. They're going to have fond memories of working at your place instead of having sour memories because of the way they left.

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To wrap up today's Q and A Wednesday's question from Bill Do I make some layoffs now and some later staggered approach, or should I do it all at one time? My personal opinion is if you can do it all at one time and and treat your employees that are leaving properly, that's a lot better for your team and for those who are leaving. It also gives you a bit of breathing room so you can work with what you have before you have to make your next cut. Hopefully you don't have to make a next cut, but it gives you a lot more Runway. Thanks Bill, for writing in asking your question for today's Q and A Wednesday. I know that's a tough situation to be in. I'm with you. Hopefully this advice helped you and business is a roller coaster and sometimes we're in that down part of the roller coaster where we're swooping down. But if we can make it through the tough times, we can really enjoy the good times. We can know that we fought for our business and fought for employees and really did the best thing we could to succeed as entrepreneurs. Thank you so much for listening to the Hunter MBA Show. If you have a question you want to ask on Q and A Wednesday, make sure you email me over@omar00mba.net I'll make sure to answer it right here on Q and A Wednesday. Also, don't forget to hit subscribe right now on whatever you use to listen to podcasts. Whatever app you're using right now, whether it's Apple Podcasts or Stitcher Radio or Spotify or Overcast or Himalaya or whatever it is, hit that subscribe button right now. By hitting subscribe, you make sure when we have the next episode, it's automatically right on your device. And also by hitting subscribe you get access to over 1500 episodes in our archives so you can build your business on Overdrive. Before I go, I want to leave you with this. It's never easy to make layoffs. It's really tough. Your team, the people that work in your business, they're very much like family because you spend so much time with them. You spend eight to nine to ten hours a day, every day with them, working with them, talking to them, getting to know them. So saying goodbye and being the person has enforced that is really tough. But that's the burden of being a business owner. And you got to bear the burden because you can't reap the rewards without the responsibilities. Thank you so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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