Rebuilding trust after layoffs in tech companies

There is much debate about the relative strength of the technology industry in the United States vis-a-vis Europe and other parts of the world, but one aspect of it rarely examined – because it is not pretty – is labor market flexibility.  The technology industry, be it electronics, IT or Internet applications, is in constant flux. Empires fall, start-ups rise to join the ranks of the world’s largest companies, and the cycle continues.  Intel founder Andy Grove once candidly commented: “Only the paranoid survive.”

When I joined the tech sector in California the greatest eye opener was how easy it is to fire people, and conversely to hire them. Once I witnessed a company go from 2,500 employees to 500 survivors in the space of a few months. It came home to me that labor flexibility is a major enabler for innovative industries. In France, your best option would have been to tap into the bankruptcy process right away and lose everything you had built. In Brazil you would not have hired all of those people in the first place.

Even though they can come as a surprise (although they really should not), layoffs are a constant in high-tech industries as market trends swing widely. Rarely a week goes by without an announcement of layoffs in technology companies, big or small. Some companies’ business models even seem to prescribe a regular “refreshing” of the work force. But none of this makes those events less brutal or shocking.  They break the trust between leadership and rank and file. The post-layoff environment must be handled with care.

Having worked with many companies going through downsizing, and studied the subject in some depth, I have five recommendations for senior leaders of companies forced to let large numbers of employees go:

• Acknowledge distrust and mistrust: recognize how traumatic layoffs are;

• Flood the system with information: asymmetric information between leadership and rank and file marks the period immediately before layoffs, so afterwards it is important to communicate, communicate, and communicate;

• Focus on the future: spell out what the new opportunities are for those who remain with the company and how this inflection point can make the company stronger;

• Improve the human resources process: this is a great occasion to reassess, and make improvements to, all human resources processes dealing with employee evaluation;

• Rebuild trust at the top: it is not unusual for senior managers to themselves experience a sense of anger with each other. Some may have had to let their best employees go and deeply regret it, particularly as others did not, while yet others chose to resign during the process for various reasons.