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PUBLICATION

Human Capital Management during COVID-19: Conducting Compassionate Layoffs

The trajectory of COVID-19 remains uncertain around the world. The Conference Board predicts a deep contraction in Q2 and has a scenario of even extended economic weakness in Q3.Organizations should prepare for these worst-case scenarios, which have high probability. As some businesses shut down to slow the spread of the virus, many more have started various cost-cutting measures to avoid layoffs.1

AUTHORS

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Robin Erickson, PhD

Principal Researcher
The Conference Board

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Amy Ye

Researcher, Human Capital
The Conference Board

Why avoid layoffs? Previous research shows that they often result in negative outcomes such as loss of skills, learning, productivity, and innovation; low employee morale; and brand reputational risks,2 as well creating the risk of a slower recovery.3 Knowing this, CEOs at some leading companies (e.g., Morgan Stanley, Citigroup, Visa, FedEx, Bank of America) have taken a stand and committed to not conducting layoffs.4

Although many organizations have decided to keep all employees in the short term, the longer the COVID-19 crisis lasts, the more companies in survival mode may feel compelled to make the tough call. In the US alone, over 16 million people filed unemployment insurance claims in the past three weeks (ending April 4, 2020).5 To make layoffs less painful and damaging in both the short and long term, The Conference Board suggests employers take the following seven actions to conduct layoffs more compassionately:

  1. Leverage strategic workforce planning. Strategic workforce planning (SWP) plays an important role in determining the criteria for layoffs and ensuring adequate talent remains to sustain day-to-day operations. The SWP team, along with other HR and business leaders, needs to (re)identify critical roles based on current business needs, assess costs, and evaluate the difficulty of replacing laid-off employees. A data-driven layoff strategy will ensure fairness in the process. SWP should also help develop internal mobility plans to improve organizational agility and maintain operational efficiency.6
  2. Communicate that all other cost-containment measures have been considered and that layoffs aren’t about personal performance. Both downsized victims and survivors will be much more accepting if they understand that their companies have exhausted other options before implementing layoffs. In one of the sectors hit hardest by COVID-19, Marriott International found itself needing to close hotels around the world. When CEO Arne Sorenson recorded a widely viewed video explaining the steps the organization had to take, including laying off 15,000 workers, he announced that his salary would be suspended and his executives’ pay reduced 50 percent.7
  3. Implement temporary furloughs with benefits. A handful of organizations in the restaurant, hotel, and airline industries announced furloughs with benefits (temporary leaves with continued health care coverage) to prevent permanent job losses. For example, all the furloughed workers from Macy’s will continue to receive health benefits through May 2020.8 Companies should provide information about unemployment to the furloughed workers who may not realize they’re eligible. Some organizations (e.g., technology, grocery stores, medical suppliers) are also considering partnering with hiring companies to assist furloughed employees in the interim.
  4. Provide training for HR and managers before conducting layoffs. Many executives and managers have never been trained on how to have difficult conversations, how to appropriately and compassionately conduct layoffs, or how to counsel remaining employees. It’s important to help HR and managers develop awareness of nonverbal behavior and enhance listening and responding skills before they conduct layoffs.9 Provide step-by-step guides such as sample scripts and responses to various employee reactions to help prepare for layoff notification meetings as well as conversations with unaffected employees.10
  5. Demonstrate compassion to those who have been laid off. A personal touch from their manager and HR can help reduce the pain for employees who are laid off. Have a face-to-face conversation with each employee in a private setting and thoroughly explain the reason for the layoff. Provide space for laid-off employees to express their emotions, and listen to their feelings and needs with patience. One executive was shocked when an employee asked if she could hug him after their layoff conversation. Unless there are legitimate security reasons, don’t walk employees out—allow them to say goodbye to their coworkers and friends and leave the office with dignity.
  6. Provide financial, health care, and career assistance to those who have been laid off. Offer reasonably generous severance packages to all laid-off employees, even those who have recently joined the company, and provide information on unemployment benefits in your state. Extend medical coverage for at least a month, especially during this medical crisis. To help employees alleviate financial difficulties, a US-based manufacturing company is also exploring foundations and funds to provide additional financial assistance. Many restaurant owners and employees are creating GoFundMe pages to help support their laid-off coworkers. Offer outplacement services, conduct virtual job fairs with outside employers, and connect employees to company alumni to help transition to new jobs.11
  7. Care for and engage remaining staff. Maintaining engagement is critical during a crisis, especially when organizations are forced to conduct layoffs.12 Express empathy for the remaining employees, and actively listen through pulse surveys and focus groups to help them overcome their “survivor” guilt. Never implicitly or explicitly express that these employees are “lucky to have a job.” Monitor the new workloads of those who have not been laid off, as they may not be able to do the work of two or more employees for an extended period of time. To retain employees after the crisis, organizations need to find ways to persuade them to stay after the layoff.13
 

This report is part of the larger Human Capital Management during COVID-19 series created by The Conference Board to help HC leaders navigate the effects of the pandemic with their employees. The series reflects not only the latest research (ours and others') but also the comments and insights from our Members as they address this unprecedented challenge. To see the other reports in the series, visit The Conference Board COVID-19 Pandemic Resources & Support for the Human Capital Community.

 

 

Related Resources

 



1 For more information on cost-cutting suggestions during a crisis, see: Robin Erickson and Amy Ye, Human Capital Management during COVID-19: Finding Innovative Alternatives to Layoffs, The Conference Board, April 2020.

2 Robin Adair Erickson, Here Today But What About Tomorrow? Reducing the Attrition of Downsizing Survivors by Increasing Their Organizational Commitment, unpublished PhD dissertation, Northwestern University, 2007.

3 Sandra J. Sucher and Shalene Gupta, “Layoffs That Don’t Break Your Company,” Harvard Business Review, May-June 2018.

4 Jack Kelly, “CEOs Are Cutting Their Own Salaries in Response to the Coronavirus,” March 30, 2020.

5 News Release: Unemployment Insurance Weekly Claims, Department of Labor, April 9, 2020.

6 For more information on talent mobility, see: Robin Erickson, Marion Devine, and Amy Ye, Total Talent Mobility: Strategic Purposes, Barriers, and Best Practices, The Conference Board, April 2019.

7 Melissa Wiley, “Marriott Announces CEO Arne Sorenson's Salary Will Be Suspended for the Rest of the Year and Senior Executives' Salaries Will Be Reduced by 50% as the Coronavirus Ravages the Hospitality Industry,” Business Insider, March 19, 2020.

Avie Schneider, “Macy's Furloughs Most of Its 130,000 Workers,” March 30, 2020.

9 Stephanie Creary, The Impact of Workforce Reductions on Layoff “Survivors”: Results from a Global Survey, The Conference Board, November 2009.

11 For more information on assisting those who have been laid off, see: Sophia Muirhead, Compassionate Downsizing: Making the Business Case for Education and Training Services, The Conference Board, November 2003.

12 For more information on maintaining engagement, see: Robin Erickson and Amanda Popiela, Human Capital Management during COVID-19: The Importance of Focusing on Employee Engagement during a Crisis, The Conference Board, April 2020.

13 For more information on supporting layoff survivors, see: Creary, The Impact of Workforce Reductions on Layoff “Survivors.”

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Thought leaders who provide trusted insights for navigating companies and the economy though COVID-19.

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Bart van Ark

Outgoing Chief Economist; Program Director, CFO: Fortune 250 Council

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Lynn Franco

Director, Economic Indicators and Surveys

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Ataman Ozyildirim, PhD

Director, Economic Research, and Global Research Chair

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Matteo Tonello

Managing Director, Environmental, Social, and Governance (ESG)

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Gad Levanon, PhD

Vice President, Labor Markets

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David Hoffman

Senior Vice President Asia and Managing Director of the China Center for Economics & Business

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Rebecca L. Ray, PhD

Executive Vice President, Human Capital

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Anke Schrader

Senior Researcher

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Amy Lui Abel, PhD

Vice President, Human Capital Research

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Thomas Singer

Principal Researcher

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Dr. Uwe G. Schulte

Leader, Global Sustainability Centre and Program Director

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Paul Washington

Executive Director, ESG Center

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Ilaria Maselli

Senior Economist

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Amanda Popiela

Researcher, Human Capital

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Elizabeth Crofoot

Senior Economist, Labor Markets

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John Forsyth

Leader of the Consumer Dynamics Institute

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Cindy Cisneros

Vice President of Education Programs

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Steve Odland

President and CEO

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Jeff Hoffman

Institute Leader, Corporate Citizenship & Philanthropy, ESG Center

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Joseph J. Minarik

Senior Vice President and Director of Research

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Erik Lundh

Senior Economist

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Robin Erickson, PhD

Principal Researcher

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JP Kuehlwein

Marketing Institute Leader

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Denise Dahlhoff, PhD

Senior Researcher, Consumer Research

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Laura Sabattini, PhD

Principal Researcher, Human Capital

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Robert Schwarz

Senior Researcher, ESG Center

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Chiqui Cartagena

Chief Marketing Officer & Center Leader, Marketing & Communications

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Devin O’Connor

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