Learning from Layoffs: Skills, Data and Alternatives to Consider

In May 2020, news of the Covid-19 pandemic broke across the world. We saw an inevitable spike in layoffs across many industries as companies scrambled to adjust. Two years later, we are still witnessing high numbers of layoffs with the largest spike since the beginning of the pandemic occurring very recently in May 2022. Companies are citing increased costs and decreased profits as the reason behind it. There is also a large subset of companies who thrived in the elements created by the pandemic such as Peloton and Netflix, who grew rapidly to keep up with demand and are now forced to readjust as customer spending falls back down to normal levels. If your company is in such a position or facing layoffs for completely different reasons, there are a few things you might want to keep in mind moving forward. No matter the reason, it can be extremely hard to look at downsizing your team or department and you want to strive to make the most informed decision possible. If you are able to gather the right information, you may even find that some other options begin to appear on the table. Treating layoffs with caution and intent can lead to significantly better outcomes in the future and protect the morale of the employees left behind. If layoffs are in your future, how do you know you’re making an informed choice?

Things to consider when looking at downsizing

For most organizations, layoffs are a direct result of the necessity to cut costs. When downsizing is unavoidable, the question becomes, how do you know you’re not laying off people with valuable and transferable skills? You want to avoid beginning a cycle of losing talent and skills that your company needs and later having to rehire for the same skills in the future. The first step to making an informed decision is gathering data. Does your organization have skills data to refer to when evaluating which areas of your business need attention? By taking a more in-depth look at your current talent, you can understand what they are bringing to your organization both now and in the future. This will help you answer questions like: What skills do your employees currently possess and what level of skill are they at? Which employees have aspirations or career goals that they are working towards that could help inform the future job placements at your organization? If you can’t answer these questions, you may need to prioritize analyzing more data regarding your talent. Skills assessment combined with information regarding the career aspirations of your employees can give your organization a much better viewpoint besides just knowing which parts of the business are not producing desired levels of profit. If you are able to utilize this data, you will be able to make a more informed decision regarding downsizing and avoid creating additional skill gaps in the process.

Is there an alternative to layoffs?

Research shows that anytime layoffs occur, your internal culture takes a hit. People can adopt a negative perception of the organization especially when these matters are not handled with care and communication. Even worse, employees may begin to feel nervous about the future path forward and even begin to look elsewhere for employment. If you have a detailed view of your employees, and can understand their skills, the option to transfer employees from low profit sectors to high profit sectors begins to emerge. Is one department low-performing and overstaffed? Consider reskilling some employees to move them internally to another part of the business where their skills are transferable and can help close gaps there.

Vlad Tenev of the stock-trading app Robinhood recently recounted his experience regarding the company’s current need for layoffs following large pandemic expansion:

“This rapid headcount growth has led to some duplicate roles and job functions, and more layers and complexity than are optimal. After carefully considering all these factors, we determined that making these reductions to Robinhood’s staff is the right decision to improve efficiency, increase our velocity, and ensure that we are responsive to the changing needs of our customers.”

This is a case that could have been avoided by implementing a skills intelligence platform that organizes skills in relation to job positions. An integrated system can help give organizations a window into critical talent data. This allows for better informed business decisions and can alleviate the need for future layoffs due to duplicated skills and job functions, as well as open roadmaps for reskilling employees for different sectors.

On the other hand, if your organization is rapidly expanding and it feels like you have a large range of open positions, don’t panic. This is inevitable and a good step towards making talent decisions intentionally to avoid the repercussions of rapid, uninformed growth later. When layoffs do need to occur, remember that communication and transparency can help ease the blow to employees. Limiting the negative consequences of layoffs for your internal talent is important for future trust and longevity. While many businesses are needing to adjust due to lower profits and higher expenses, consider a long-term investment, instead of a short-term solution. Your human talent remains your greatest asset to future challenges regardless of the inevitable swing of the market.

If you’re interested in learning the easiest way to begin leveraging your internal skills data to make better informed business decisions, visit our Talent Management platform page!