This is How Companies Conduct Lay Offs
Laying off an employee is a longer process than most would assume. While small companies are understandably more agile, larger firms pour through employee quantitative and qualitative data to arrive at short lists of candidates per division or area. The process can take months and it is one of the least enjoyable jobs of any department head or C-suite employee.
Tech sector layoffs swept the nation in late 2022 and well into 2023. The US is now witnessing other industries such as health care, the auto industry, as well as banking trimming their workforces. CVS is expected to slash 5,000 positions, McKinsey has announced a 1,400 job cutback, while Deloitte is likely to eliminate 1,200 employees.
Historically, seniority was the first variable that guided layoffs. Firms would group folks into 5-year tranches – those working less than five years, five to ten years, ten to fifteen, and so on. Now, however, it is more common for firms to value skills over tenure. Recent performance is another factor that is also considered and while it might seem reasonable to look at salary levels, many times those employees with the highest salaries are also among the firm’s top performers.
Many companies are transparent with their layoff criteria. Boeing, for example, announced earlier this year that they would concentrate hiring in engineering and likely cut 2,000 positions in human resources and finance. While this can certainly put people on edge, some companies prefer a transparent process to minimize surprises. Amazon did something similar, communicating cuts would be concentrated in advertising, the Twitch streaming businesses, and cloud computing.
When considering layoffs, executives ask themselves where their respective businesses are heading. While layoffs reduce expenses, long-term, positive returns do require investments. It is a mistake to believe Human Resources (HR) is the entity reducing personnel. HR most certainly has a seat at the table, but they are a vehicle to manage the process. It has been informally reported that some firms maintain “layoff documents.” These are documents with names and notes in the event a certain percentage of people need to be laid off. They are live lists, updated frequently, and reviewed with HR.
Lastly, it would be unfair to paint the C-suite and department heads as cold and nefarious employment destroyers. A large part of considering who to lay off also involves considering who could be transitioned to a more profitable or promising area within the company. Layoffs are costly as the firm then must spend months onboarding new hires and building back up that loss of institutional knowledge. A company would much rather move an employee into another area than fire them.