Many leaders are currently navigating one of the most challenging responsibilities leaders face: layoffs. This process can be daunting, but with the proper framework to add structure, guidance, and equity to the process, leaders can make decisions strategically, communicate them with care, and support those both leaving and staying.
Why This Matters
We’re starting to see a wave of restructuring across sectors, from energy to technology to hospitality, in order to sustain long-term viability. Handled poorly, layoffs damage morale and brand and can erode employee trust. Done well, they can be a turning point for resilience and renewal.
Building the Framework
As with any organization design activity, it’s tempting to jump straight to discussing names or roles. Before we get to this point, we must align on the “why.” What’s changing in the business? And what capabilities are needed going forward? Even when tough decisions have to be made, they must connect with the overall business strategy and future-state design.
While decisions may help meet immediate financial goals, they can result in misalignment and challenges for years to come. Taking time up front to design the right strategy will save years of correction. Rash decisions made without proper consideration of overall organizational impact may result in greater challenges moving forward, such as:
- Misalignment of capabilities to achieve future goals and objectives
- Inequity across the organization
- Disengagement
- Loss of productivity
Just like selection and hiring, termination and layoff processes are highly scrutinized, litigious processes. Many employment laws must be followed to reduce the risk of litigation. Compliance is non-negotiable. Engage the legal team, HR, and communications early to ensure all decisions are made fairly and equitably and in alignment with organizational goals.
Key Considerations
WARN Act
Enacted in 1988 to protect workers and their families, the Worker Adjustment and Retraining Notification (WARN) Act is the primary law associated with layoffs or restructuring. It broadly applies to private sector employers, including nonprofits, with 100 or more full-time employees or 100 or more employees (including part-time employees) who work a combined total of at least 4,000 hours per week.
Not all layoffs trigger the WARN Act. Some triggering events include:
- A permanent or temporary shutdown of a facility resulting in the loss of employment of 50 or more employees at a single site
- Reduction in force that results in job loss for at least 500 employees
- Reduction in force that results in job loss for 50-499 employees if they make up 33% or more of the workforce at a single site
Penalties for non-compliance can be high, including $500 per day for failure to notify the local government of the planned action.
In addition to the federal WARN Act, many states have “mini-WARN laws” that have more stringent requirements, including lower thresholds for coverage, longer notice periods, and additional reporting requirements. To ensure alignment with federal and state laws such as the WARN Act, it is critical to consult legal counsel early in the design process.
Anti-Discrimination Laws
In the U.S., a collection of federal laws known as anti-discrimination laws exists to ensure that employment decisions, including layoffs, are made fairly and without bias.
This collection of laws includes:
- Title VII of the Civil Rights Act: Prohibits discrimination based on race, color, religion, sex, or national origin.
- Age Discrimination in Employment Act (ADEA): Protects employees aged 40 and older from age-based discrimination.
- Americans with Disabilities Act (ADA): Ensures equal opportunity for individuals with disabilities.
- Pregnancy Discrimination Act (PDA): Prohibits discrimination based on pregnancy, childbirth, or related conditions.
- Genetic Information Nondiscrimination Act (GINA): Bars the use of genetic information in employment decisions.
Though each of these is a separate act, they are collectively referred to as anti-discrimination laws because they all serve the same purpose: to protect individuals from unfair treatment in the workplace based on personal characteristics that have no bearing on job performance.
Together, they form a legal framework that helps organizations make employment decisions that are not only lawful but also equitable and defensible. For leaders navigating layoffs, understanding and applying these laws is not optional; it is foundational.
How To Define and Apply Layoff Selection Criteria
Once the legal guardrails are understood, the next critical step is determining how to make layoff decisions fairly and strategically. This is where selection criteria come into play.
The goal is to create a process that is objective, transparent, and aligned with the future needs of the business. That starts with identifying the roles and capabilities that are essential to your organization’s evolving strategy. Rather than focusing on individuals, begin by asking: What skills and functions will we need to succeed in the next phase of our business?
From there, develop a set of weighted criteria to evaluate employees within those roles. Common factors include:
- Role criticality to future operations
- Skills alignment with strategic direction
- Performance and growth potential
- Versatility or cross-functional value
Each criterion should be clearly defined and assigned a weight based on its importance. For example, if future-critical skills are paramount, they might carry 40% of the total score. Importantly, these weights should be agreed upon before any names are considered to prevent bias from creeping into the process.
Once the criteria are set, apply them consistently across the selection pool. Use a scoring matrix to evaluate each employee and normalize the results to ensure comparability. This structured approach not only supports fairness, but it also creates a defensible audit trail that can stand up to legal, ethical, and cultural scrutiny.
Finally, conduct an adverse impact analysis to check for unintended bias. If certain groups are disproportionately affected, revisit your criteria or rationale. The goal isn’t just to reduce headcount, it’s to do so in a way that upholds your values and protects your organization’s long-term credibility.
Communicating with Compassion: Supporting the Departing and the Remaining
Layoffs are more than operational decisions; they are deeply human events. How you communicate during this time can either reinforce trust or unravel it. That’s why compassionate communication isn’t just a “nice to have.” It is a leadership imperative.
For impacted employees, clarity and dignity are essential. Avoid corporate jargon or vague justifications. Instead, be direct, empathetic, and transparent. Acknowledge the difficulty of the moment. Offer practical next steps: severance details, outplacement support, and resources for emotional well-being. And, most importantly, recognize their contributions. People may forget what you said, but they won’t forget how you made them feel.
Equally important is how you support the employees who remain. These “survivors” often experience a mix of guilt, anxiety, and uncertainty. They may wonder: Am I next? What’s the plan? Do I still believe in this company? Leaders must re-establish psychological safety by clearly articulating the path forward, reaffirming the organization’s values, and creating space for honest dialogue. Listening is just as important as speaking.
In times of disruption, people look to leadership not just for answers, but for humanity. Communicating with compassion isn’t about softening the truth. It’s about delivering it with respect. And when done well, it can be the difference between a fractured culture and a resilient one.
Layoffs with Integrity
Layoffs will never be easy, but they can be done well. When approached with strategic clarity, legal rigor, and human compassion, workforce reductions can become moments of leadership rather than liabilities. By grounding decisions in objective criteria, honoring the dignity of those affected, and supporting the resilience of those who remain, organizations can navigate these transitions with integrity. In doing so, they not only protect their culture and reputation but also lay the foundation for a stronger, more focused future.
About the Authors
