Layoffs Are Not Unethical, but They Also Don’t Have to Be Cruel

Companies around the globe are laying off workers, but big tech cutbacks closer to home are getting much of the attention.

There are the major reductions underway at Meta and Twitter, not to mention workforce trimming at Silicon Valley staples like Netflix and Lyft. More cuts are likely on the way.

This is not a new phenomenon. I was Airbnb’s chief ethics officer when the company made the tough choice to cut about 25% of its staff shortly after the pandemic began.

As the latest wave grows, however, I’m increasingly hearing the same question: Are layoffs unethical?

The truth is that these kinds of cuts can be a necessary evil. They must be made for the health—or even survival—of the company.

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But layoffs are often handled in a way that is unethical, and even cruel. How an organization wields the ax can speak volumes about its leadership and values.

Leaders can earn the respect of those who remain by demonstrating authentic empathy for the lives of families who are disrupted by the jolt of suddenly losing a job, and offering responsibility to people who worked so hard for the company in better times.

Here’s how.

Shoot Straight

Use honest, empathetic communication.

The weeks leading up to the layoff are often filled with anxiety and dread. Be honest about the challenges facing the company, acknowledge the fear brought on by the uncertain environment, and avoid robotic legalese in your language.

Be specific about exactly what happened to the business that necessitated the moves. Otherwise, those who remain will speculate that a recession is just an excuse to get rid of certain teams or employees.

The first round of layoffs (or second, or third) may not be the last for some companies. Stay away from false optimism and phrases like “we’re all in this together” if you know that you may soon be letting go of more people.

Cut Executive Pay

If you’re laying off workers, you should also be slashing top executives’ pay.

Leaders may “eat last,” as author Simon Sinek counsels, but in a crisis they have to sacrifice first. A CEO cannot credibly implement layoffs without also making deep, painful pay cuts at the leadership level.

The top is where compensation is the highest and the ability to weather hard times is presumably the strongest.

Think About Furloughs

Consider alternatives to layoffs.

I’ve seen instances where a business rebound leaves companies scrambling to try and rehire talent after a layoff.

If you really want to keep people, try asking employees to take vacation and sick pay to save cash obligations. Give teams the option to go part-time.

Furloughs—or temporary layoffs—might be a workable option. They allow employees to keep health insurance and maintain some connection to the business.

Keep the Recruiters

In-house recruiters are usually the first to go during a layoff, since the company won’t be doing a lot of hiring in a slowdown. They can be repurposed to provide valuable assistance to other employees being shown the door.

When Airbnb laid off employees in 2020, the company kept on a team of recruiters and paid them to help laid off employees find new work.

Don’t Skimp on Severance

Generosity goes a long way.

It costs money to provide a generous severance, especially for a business that has already decided it was to trim its workforce to make ends meet. But it’s also the right thing to do for people who dedicated themselves to your company in better times.

Include extended healthcare benefits and transitional assistance, if you can.

At Airbnb, we also allowed laid-off employees to keep their work laptops (after they were wiped of company information). The company had no use for the machines anyway, and the now former employees might be able to use them to search for work.

Do a Bias Double Check

It’s easy for unconscious bias to creep in when you’re deciding who to keep, and who to let go.

If your first draft of cuts has a disproportionate impact on a particular group within the company, think again.

There is a lot of literature demonstrating how diverse organizations outperform homogeneous ones. That’s not to mention the legal risk.

My most gut-wrenching moments as a leader involved letting people go, even though it was necessary and the right thing to do for the company.

Be aware that a crisis is an “integrity moment” that reveals the character of a company and a leader. Everything you do and say is watched closely by those who leave, and those who remain. How you respond will be remembered long after the downturn ends.

Rob Chesnut is the former general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and later oversaw US legal operations at eBay. The author of “Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution,” Rob consults on legal and ethical issues.