I’ve been thinking about putting this together for some time now. We need to find a way to leave behind the widely held assumption that layoffs are just “a necessary part of running a business”. Frequent mass layoffs are a relatively recently phenomenon that only really emerged in the 1980s. Prior to that, layoffs were very much a last resort — an exceptional, heartbreaking event that companies would go to great lengths to avoid and many companies have retained this mantra. Lincoln Electric, for example, has avoided layoffs for over 70 years now while delivering exceptional shareholder return.
I’ve built this post as a “playbook” for those that might have a voice in this decision. My intention is to provide arguments, research, and alternatives to help convince leaders that there are good reasons not to resort to mass layoffs, and that there are better options worth exploring first. You’ll find links to the relevant research papers throughout this post to help back up these arguments.
Step 1) Appeal to Their Humanity
That’s right, CEOs and CFOs are still humans. However, there is a psychological distance between names on a spreadsheet and the people they represent. Resist the temptation to shift the conversation immediately away from the people and towards the numbers, and remind the room of what the numbers represent—people with lives, commitments, and families.
A 2012 study by Classen and Dunn estimated that for every 4,200 displaced men and 7,100 displaced women, there is one additional suicide directly linked to the loss of employment. A 2004 study by Charles and Stephens found that job loss raises the risk of divorce.
The first question should be, “are we all comfortable with the human impact of what we are about to do?”
Step 2) Make the Business Case for Alternatives
Layoffs aren’t cheap. They may reduce payroll in the short term, but they also:
Destroy institutional knowledge. It takes years to rebuild what’s lost in relationships, expertise, and unwritten processes.
Damage your reputation. After layoffs, employer-review scores fall and stay lower; Glassdoor’s research finds ratings drop immediately and take two years to recover. Consumer polling also shows brand perception worsens when people see layoff news.
Reduce “survivor” engagement. Research shows surviving employees become more risk-averse, less collaborative, and slower to share ideas. Fear suffocates innovation.
Weaken your talent pipeline. People still want job security. When hiring resumes, you’ll attract fewer applicants and lose negotiating leverage — precisely when you need it most.
Multiple longitudinal and meta-analytic studies show that while workforce reductions can yield short-term gains, the long-term financial benefits are inconsistent and in many cases absent. For instance, a recent meta-analysis of 905 effect sizes found little evidence of sustained long-term gain from downsizing. Other longitudinal work indicates that firms undergoing layoffs may experience lasting declines in profitability or return on assets.
Since the research suggests that avoiding layoffs (or delaying and managing them differently) might preserve capabilities, knowledge, morale and thus long-term performance, it supports a strategy of exhausting alternatives before job cuts.
Step 3) Exhaust Every Alternative
Defaulting to layoffs represents a failure of imagination. Before committing to that path, there are plenty of alternatives to explore first:
1. Reduce discretionary spending. Travel, consultants, marketing — freeze anything nonessential before jobs. It makes every remaining dollar go further and sends a signal to employees that they are more important to long-term success.
2. Suspend bonuses. Skip annual or spot bonuses for one year and explain the rationale transparently.
3. Voluntary sabbaticals. Offer unpaid or partially paid time off to those who want it. Combine this with suggestions for pragmatic retraining with a view to revisiting each individual’s role upon return.
4. Temporary hour reductions. Move to three- or four-day workweeks or shorter shifts until conditions stabilize. Many individuals will voluntarily raise their hand for this if it means flexibility and job stability.
5. Retraining and redeployment. Identify adjacent skill sets and fund short-term upskilling to move people into critical areas. Combine this with sabbaticals to create room for thought and reduce financial pressure.
6. Job sharing. Pair two part-timers to maintain continuity without full headcount costs.
7. Internal entrepreneurship. Encourage employees to discuss and propose cost-saving or revenue-generating projects.
8. Supplier renegotiation. Reopen contracts, consolidate vendors, and delay non-critical expenditures.
9. Pay deferrals for higher earners. Leadership should lead the sacrifice. Executives sacrificing their own pay to help protect the careers of those earning less is a gesture not quickly forgotten.
10. Turn employees into suppliers. Who better to buy from than someone who has already earned your trust? Offering employees the opportunity to start their own businesses and sell their services back to their employer creates flexibility, competition, and empowers people to adopt entrepreneurial mindsets.
Step 4) Talk With Your Employees
I am a strong supporter of more participative workforces. Sadly there are few things less participative than being told your job no longer exists and that you need to pack up your things by the end of the day. The least we can do is have a conversation and give people time to propose solutions and plan around it.
There are no real negatives to letting your employees know early on that their jobs are under threat—this is just being honest and transparent with the people most heavily impacted by the circumstances. A month, two weeks, even five working days allows at least some room for discussion around possible alternatives. Employees aren’t children so treat them like adults — listen to what they have to say, and try to find a path forward where everybody wins.
Perhaps they are feeling burnt out and would benefit from reduced hours or a sabbatical. Perhaps they have already been thinking about different career prospects and can combine this with retraining in preparation for a new career track. Perhaps they have been thinking about starting their own business and their soon-to-be former employer could become their very first customer. Perhaps they are exploring a composite career and would be open to contract-based work while they explore other areas.
We’ll never know the answers to these questions if we just keep them in the dark until we walk them out of the door due to some dated and misplaced notion of “business risk”.
Step 5) Build a Resilient Organization for The Future
The best time to prepare for downturns is before they arrive. Companies like Lincoln Electric that handle volatility without resorting to lay-offs share some common attributes:
A participative workforce. This means that the company takes the time to consult with their employees on key decisions, enabling them to have a say in how the business is run. This can include deciding on how profits are shared, who should be promoted, who deserves a raise, and who should lead a team. A workforce that enjoys their work, and is accustomed to dealing with challenges as a team, is one that is prepared to work towards solutions to protect their jobs. A participative workforce may take longer to arrive at decisions but are more bought-in when they do.
Cross-functional experience. Rotational programs allow employees to understand multiple parts of the business, building organizational trust, and making redeployment easier when the time comes.
Cultural comfort with time off. For some reason, many companies are still obsessed with the 9-5 Monday to Friday model of work that established itself well over a century ago in the industrial era. There is no need for this degree of rigidity anymore. Sabbatical policies normalize the idea of stepping away temporarily — it’s less traumatic if it ever becomes necessary and sabbaticals are a great way to come back more energized with new ideas.
Continuous learning. Ongoing training builds a workforce that can move laterally, not just vertically. Training exposes more colleagues to one another which builds trust. It challenges people to grow and learn on a regular basis. It might even uncover a career that hadn’t previously existed and inspire innovations that companies didn’t know they needed.
Flexible arrangements. Normalizing the use of contractor agreements and part-time roles builds a safety net of adaptable capacity.
Final Thoughts
The instinct to cut jobs is rooted in fear: fear of disappointing investors, fear of shrinking margins, fear of uncertainty itself. But that is an illogical fear in the context of long-term business performance. The companies that build lasting strength usually do the opposite — they double down on their people when the pressure is highest. Loyalty is not something you can ask for; it’s earned by how you act when costs rise and choices narrow. In a market where workforce cuts are normalized, a company that protects its people signals something rare, and that rarity is powerful.
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