A layoff is the elimination of jobs because the company must cut expenses or change direction, not because the affected employees performed poorly. At a startup, it usually follows a dangerous mismatch between cash burn and revenue. It is painful, but waiting until cash runs out can be worse for everyone. section 29.0 section 29.1 section 29.3
Start with a rock-solid plan for the smaller company. The reason for the reduction should determine its shape: reduce evenly across functions, remove functions built too early, cut sales when product-market fit is unproven, or rebuild around a major pivot. section 29.2.2 section 29.2.3
Execute the process with care:
- Prepare an individual packet covering the change, final paycheck, stock options, career help, unemployment, and health coverage. section 29.2.3
- Hold individual meetings as close to simultaneously as possible, with the functional manager and HR present. section 29.2.3
- State the financial or structural reason plainly: the role is eliminated, and the action is not performance-based. section 29.2.3
- After affected employees have left, address the remaining team the same day with the reason, transition plan, and believable new strategy. section 29.2.4
A pivot can require a new team design
When a company makes a major pivot, first sketch the adjusted market, product, and business model. Then identify which roles fit that future company, which people can remain, and which capabilities must later be hired anew. GeoTrust experienced repeated pivots and layoffs; one reduction closed its Portland office while retaining a smaller Wellesley office. section 29.2.2 section 29.2.4
The hardest work continues after the announcements. Remaining employees need a credible explanation of the mistake, confidence in the new plan, and clear ownership for unfinished work. A fearful team may begin leaving weeks later, so the goal is not merely lower expenses but a company people still believe can succeed. section 29.2.4 section 29.3
