The holiday season usually sees nearly 40% of Americans going into debt to pay for presents and other holiday-related expenses. It’s understandable, then, that it’s even more heartbreaking than usual to be laid off in December.
Many companies avoid staff cuts on purpose in these late months, either out of charity or out of concern for their public image. Still, it happens every year, and as a startup employee, you’re at higher risk than most of being laid off.
The truth is, startup jobs pay well partly because you’re taking a risk. The company may be successful, but it may also need to adjust course quickly. Some founders hold off as long as they can before deciding to do layoffs, but there are a number of factors that make December a risky month in general.
Let’s figure out why, and what to do if you as a founder need to lay off staff in the last month of the year.
The final quarter looms
The fourth quarter is more than just another three-month period on the calendar. It’s a critical juncture that can make or break a company’s financial standing, shape investor sentiment and set the tone for the following year. It’s crucial to perform well financially during Q4 because it is the last opportunity for a company to positively impact its annual results.
The successes, failures, and unexpected turns of the previous three quarters all culminate in Q4. For businesses struggling to meet annual targets, Q4 is the final chance to turn the ship around. Conversely, companies having a strong year can solidify their status, push beyond their goals and possibly set new records.
Investor expectations add another layer of pressure. For many investors, Q4 results serve as a barometer of a company’s overall health and future prospects. Investors watch Q4 performance closely to see if their investments have paid off or if it’s time to reconsider their portfolio. Strong Q4 results can boost investor confidence, attract potential investors and increase a company’s share price. On the other hand, poor performance can erode investor trust and lead to a decline in stock value.
In addition, many businesses’ Q4 falls during the holiday season, especially in the retail sector. This period often brings higher sales volumes, making it a pivotal time for companies to enhance their financial performance — Black Friday came to be called so because for many retailers, the Thanksgiving weekend and the ensuing shopping spree would push their bottom line out of the red (losses) and into the black (profits).
But for a company that has had a lackluster Q4, there’s a strong motivation to make some adjustments (read: cost cuts). That’s where layoffs come in.
‘Tis the season for great folly
The primary motivation behind layoffs is financial. By letting go of employees in December, companies can cut costs and improve their bottom lines right before the fiscal year comes to a close.
But cost-cutting isn’t the only driver. Layoffs also allow corporations to clear the decks for the new year: It’s about starting the new fiscal year with a clean slate. Starting the new year with a trimmer, ready-to-hit-the-ground-running corporation comes at huge human cost, but unfortunately, at the boardroom and shareholder levels, the resulting boost to runway and the willingness to make tough decisions is often rewarded.
Layoffs can also be a strategic move to initiate organizational restructuring.
While these reasons may make sense from a business perspective, they’re little consolation to those who find themselves jobless during the holiday season. Critics argue that the timing is insensitive and can cause unnecessary stress during what should be a time of joy and relaxation.
The human cost of layoffs is significant, and as a leader, you need to balance your financial responsibilities with your duty to employees.
In the glorious world of late-stage capitalism, however, as a startup founder, you’ll often find yourself in shitty situations. Yes, you want to do well by the people who’ve bet on you, and as a result, the tendency is to fire people too late. I’ve found one thing to be universally true, both in my own companies and in the startups I work with as a consultant: People almost never do layoffs too early. Quite the opposite, in fact.
So, if you have to do layoffs . . .
If you can’t avoid laying someone off in December, what do you do? The key is to handle layoffs compassionately, ensuring that impacted employees aren’t left high and dry.
Layoffs are never pleasant, but clear and transparent communication can soften the blow. The worst thing a startup can do is surprise its employees. A sudden announcement can lead to panic, confusion and a sense of betrayal. Instead, communicate openly about the company’s struggles and the impending layoffs. It’s critical to explain why the layoffs are necessary and how they align with the company’s long-term strategy.
Give generous severance packages
A generous severance package can provide a financial cushion for employees while they search for a new job. This should ideally include extended health benefits, unused vacation pay, and a monetary payout based on the employee’s tenure.
While it’s an additional cost for the company, a good severance package clearly demonstrates respect and appreciation for the employees’ service. Yes, it will impact your cash flow, but layoffs don’t just impact the employees who are leaving; those who are left behind will pay attention, too.
If you mistreat those on the way out, you will leave a brutal impact on loyalty.
Help them find new jobs
Helping laid-off employees find new jobs is a compassionate move that can significantly lessen the impact of layoffs. Many companies partner with outplacement service providers or their competitors to find suitable roles for their laid-off employees.
By providing job placement assistance, companies not only help their employees transition smoothly, but they also send a strong message about their commitment to their workforce.
Offer training
In addition to job placement assistance, companies can offer career coaching and skills training to help employees upskill and increase their marketability. This can be particularly useful for people in industries that are rapidly changing due to technological advancements.
Consider providing mental health support
Understandably, losing your job can take a toll on your mental health. Providing access to mental health resources like counseling services can offer much-needed support during this challenging time. It’s a step that underscores a company’s commitment to its employees’ well-being beyond their tenure.
Layoffs are tough
It’s challenging for the people who are laid off, those who remain, and the leaders who have to make these tough decisions. However, with a compassionate approach, companies can ensure that they help their employees find new beginnings rather than just marking an end.
In a nutshell: There’s a huge difference between a “Goodbye, and goodluck!” and “Hey, we have to let you go, but here’s an offer of training, support, three months of wages, and an investment in your future success.”
If that doesn’t seem possible for your company due to how far up shit creek you are financially, it’s a pretty big sign that you’ve waited too long to do the layoffs.