4 Good Reasons to Lay Off Employees

By Scot Herrick | Job Performance

Apr 23

Most readers of Cube Rules know that I believe that laying workers off can be traced back to something that management mismanaged. Whether they didn’t understand the external environment, control of risk, or misjudged the speed of business, the layoff is usually the answer to all problems. Layoffs are an easy management decision to make in spite of the emotional aspects of laying off workers; layoffs are lazy management. The recent AT&T layoffs, in my opinion, is a lazy management answer to changes in business.

However, there are times when layoffs are necessary and is a good management decision. The effect on the employees is the same — they lose their jobs — but the layoff is the right action to do.

Here are four good reasons for laying off people:

  1. Corporate survival. If management has misjudged events enough (say, for example, the effect of the credit sub-prime crisis…), the survival of the corporation is at stake. When the bottom falls out of revenue and the survival of the corporation is at stake, layoffs almost always need to occur.
  2. New management team. When things are bad, the Board of Directors will bring in a new management team, recognizing the previous management was not working right. The new management, along with other actions, usually will have to lay off people to get the company to the right size for the business. The bad decisions made by the previous management team forces the new one to act quickly.
  3. Exiting a business or division of a business. If the company decides to exit some portion of the business, it makes sense that layoffs will occur.
  4. Corporate sale. If your company or division is sold, “duplicate” functions will result in people being laid off. If your company or division is sold, remember you’re the one that got bought and it is rare that the sold company will not have layoffs. It’s part of that “synergy” thing where the company is so much better combined — when you’re gone.

All of these “good management” reasons to lay people off can be traced back to some ineffective management in the past. These reasons to lay people off, however, are solid.

Are there others?

  • […] the course of time, I’ve written a lot about layoffs, being laid off, and how no job is secure. But those are all symptoms of a deeper issue: companies […]

  • As a manager, I have dealt with all four scenarios you point out!


    Simple cost savings.

    Outsource activity offshore and make people redundant on-shore.

    Technology. New technology replaces manual work – hence redundancies.


    • Scot Herrick says:

      What managers need to do now is to try and figure out ways to use these employees — who have learned the culture, know the ropes, and have contributed to the organization — in other areas of the company. It won’t necessarily happen every time, but what a great resource pool.

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