After numerous blue chip companies announced layoffs in 2024, step into my office and let’s have a chat.
Layoffs are one of the hardest decisions a CEO will ever make. No one enjoys it—if you do, well, congrats psycho.
But sometimes, whether it’s due to economic pressure, shifting strategy, or over-hiring, you have no choice but to reduce headcount.
While layoffs may solve an immediate financial problem, the real damage often shows up later. And it’s not just the people who leave—it’s what happens to the team that stays behind. Layoffs can tank morale and productivity if you’re not intentional about how you handle them.
Managing The Future is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
I’ve seen it happen. Your remaining employees start thinking, Am I next?, even as they’re overwhelmed with picking up the slack of their departed colleagues. Meanwhile, the people you really want to keep—your top performers—often leave on their own because they don’t see a clear path forward.
In other words, if you’re not careful, a layoff can solve one problem but create two or three more.
Although layoffs will always be painful in the moment, it is possible to handle them with thoughtfulness and precision. A few elements make all the difference.
First, transparency isn’t optional. Employees will be watching whether you tell the truth and how clearly you communicate. Credibility is everything in these moments. Be clear about why the layoff happened and what your reasoning was. Avoid tying layoffs to multiple, conflicting messages—like announcing a workforce reduction while simultaneously promising major investments in flashy AI projects. That muddles the narrative and confuses employees. They need clarity, not spin.
The standard to aim for is “process fairness,” a term that refers to whether employees understand how a decision was arrived at and whether the process of making the decision was reasonable. One study showed that employees care more about the cause of a layoff being fair than about the dollar amount of their severance package. Another study:
found that a major determinant of whether employees sue for wrongful termination is their perception of how fairly the termination process was carried out. Only 1% of ex-employees who felt that they were treated with a high degree of process fairness filed a wrongful termination lawsuit versus 17% of those who believed they were treated with a low degree of process fairness.
People can handle transparency and will appreciate your honesty, especially if they see that you were unbiased and fair in how you came to this difficult decision.
Second, layoffs are a moment to live your values. Misalignment between your actions and your stated values will shatter trust faster than the layoffs themselves. If you’ve built a culture based on offering talented people first-rate employment opportunities, this might mean offering generous severance packages or outplacement services to those leaving. If transparency is one of your core values, you’ll need to lean extra hard into sharing all the details of the financial or strategic reasoning behind the decision—even if it’s uncomfortable.
Third, what you do after the layoffs is just as important as how you handle them. Refocus the team by resetting priorities. You may even need to re-set the company-level strategic objectives, so people understand that this is a new reality—not just them being asked to do more with less. Make sure everyone understands what matters now. Be present. Speak frequently, even to the point of discomfort—it’s better to overcommunicate than leave a vacuum. And don’t forget to celebrate progress, no matter how small. Those moments of recognition and connection go a long way toward rebuilding morale and momentum.
Culture doesn’t “heal itself.” People are watching you. They’re looking for signals that the company is still moving forward and that leadership has a plan. If you stay quiet or seem checked out, they’ll fill that silence with their own stories—and those stories are rarely good ones.
There’s no perfect way to do a layoff. But the companies that navigate them well are the ones that treat people with respect and clarity—both the ones who leave and the ones who stay. Ask yourself: have I been clear about why this happened and what’s next? Have I supported my managers so they can guide their teams? Am I showing up for my people, or hiding from the tough decision?
Because here’s the truth: a layoff might fix a financial problem, but if you’re not careful, it can break your culture. And a broken culture will cost you far more in the long run.