Layoffs have been hogging headlines since the beginning of 2023. Many big companies, including Google, Meta and Amazon and now Accenture, have laid off thousands of employees in a go. How do companies pick the people who are to be let go? After all, taking a call after assessing each individual would be a cumbersome and time-consuming process. So what are the processes or algorithms used to identify employees who need to go during mass layoffs?
“Companies do use certain criteria to identify people to be laid off,” admits Ramesh Shankar S, chief joy officer, Hrishti.com. He goes on to explain, “The first criterion can be businesses which are not doing well”. If a multi-business organisation is experiencing the impact of a recession, and one of its businesses, such as a banking business, is affected more than the others, the organisation may choose to prioritise its efforts towards that particular business, to make it work.
“Most organizations in India do not conduct scientific performance evaluations, and perceptions always play a role,”
Anil Mohanty, senior HR leader
The layoff process
“In terms of the processes and criteria for selecting individuals for mass layoffs, each country has its own set of contractual agreements, such as notice periods and pay, which must be followed,” points out a senior HR leader. Therefore, the procedures for layoffs may differ depending on the country, including the US, Europe and India. Essentially, “the company adheres to the contractual agreements in each country, and it is a straightforward matter,” HR leader adds.
Identifying the non-performers: After identifying the not-so-good performing business, the companies usually like to analyse the performance and output data, such as productivity, attendance or work quality, to determine who should be laid off. The company will then look at “the consistently low performers who have been given adequate opportunity,” points out HR leader. Such algorithms may assign a score to each employee and use that score to rank them. The ones with the lowest scores may be targeted for layoffs. The HR leader shares, “While assessing the kind of people to layoff, companies follow the performance and productivity metrics.”
However, “the question of how performance is scientifically measured is pertinent, even if mass layoffs are based on performance evaluations,” points out Anil Mohanty, senior HR leader. Unless the function is sales or number-driven, performance evaluation is largely based on perception. “In my experience, most organizations in India do not conduct scientific performance evaluations, and perceptions always play a role. Therefore, the accuracy of performance evaluations remains questionable,” he adds.
Additionally, this also makes the good performers a victim of the layoffs as ultimately the whole is based on managers’ perception of an employee. “When you are not in good favour with your manager or top management, it can be advantageous to be in good standing with higher-ups who dislike certain individuals. These performers may be stubborn, argumentative, and indifferent to socializing or pleasing others. They do not engage in flattery or personal favours. However, I have encountered a few senior individuals who insist on receiving personal favours, and if you refuse, they may find an opportunity to lay you off on various grounds,” says Mohanty.
Monitoring success of associated businesses: “If the business relies solely on external factors, such as in the case of a consulting company, then its success is tied to the success of other businesses or organisations. If the main clients of a business are technology or IT-driven companies — that outsource development or other activities — then the performance of those companies will directly affect the business’ own success,” explains Mohanty. For instance, the success of telecom equipment manufacturers is dependent on the success of the telecom operators they serve. If the operators are not expanding or are experiencing a downturn, then the equipment manufacturers will also suffer. In such cases, cutting operational expenses becomes necessary.
Identifying the required skillsets: Another significant factor organisations look out for is the right skillset (s) that they’d be requiring in the long run.
Identifying those about to retire: Organisations also consider the possibility of including individuals who are close to retirement age. These employees may only have one or two years left before retiring, and the organisations try to explore ways to compensate them for an early retirement, thereby reducing costs. This option is often considered during economic downturns or periods of slow growth, as these situations typically only last for a year or a year and a half after recruitment begins.
Determining role criticality: “The criticality of the role is another factor that companies consider while laying off people in senior roles or at any level,” says HR leader. While seniority may be a factor, the criticality of the role is ultimately more important. Even if some employees are nearing retirement age, the company may offer them voluntary retirement if their role is not deemed critical. Age is not the main consideration here. Rather, it is the significance of the employees’ position within the company.
“Certain progressive organisations also offer their employees the opportunity to volunteer for a voluntary retirement scheme, which they may want to refer to as an ‘employee suppression scheme’,” points out Shankar. This scheme is available to all employees and is structured in such a way that the longer the employees have worked for the organisation, the more compensation they receive. For instance, employees who have worked for ten years may receive ten lakhs in compensation, while those who has worked for five years may receive five lakhs. This compensation is in addition to other benefits the employees are entitled to, such as crowd and fund graduate benefits. Employees who wish to take advantage of this scheme may do so without any stigma or negative consequences.
Sometimes, companies even hire third parties to help them lay off people in a fair manner. In fact, to ensure just and fair assessments, it may be better to hire a third party to conduct assessments instead of relying on internal personnel or data only. “The more appropriate and equitable approach of assessments — that will help eliminate any bias that may exist within the organisation and provide an objective evaluation of employees — is to get a third party to do it,” believes Mohanty.
“I don’t know whether companies apply algorithms, but if they do, I personally feel it’s inhuman.”
Ramesh Shankar S, chief joy officer, Hrishti.com
Identifying physically unfit employees: Employees with a medical condition can also be targeted. “It is possible that individuals who have medical conditions that affect their ability to work may be given the option to compete for easier jobs within the company,” opines Shankar. Alternatively, the company may compensate them for the duration of their employment with the company if they are unable to work due to their condition and let go. Some employees may choose to take advantage of this option. For instance, the absence from work of an employee who has been in an accident and is unable to work for a period of time, may be tolerated for a while only, maybe a few months. After all, work-from-home is not possible for all roles. An employee in the sales team cannot continue selling from home. Therefore, the company may suggest that such employees seek a non-sales position, for which they will be compensated.
Identifying non-core functions of the business: A division of the business which is not part of the production line, can be targeted. This means, a division that is not a support function and is non-billable or non-core to the business,” says HR leader. This particular business may no longer required or may not be as significant as the others. Therefore, the organisation can opt to close it and target its teams during a layoff.
Layoffs are no longer a stigma
There was a time when layoffs were viewed negatively. Employees who were laid off felt ashamed and were often hesitant to talk about it during job interviews. However, that is all in the past now.
Today, layoffs are so common that there is no longer a stigma attached to them. Employees do not shy away from discussing their layoffs during job interviews. Layoffs have come to be accepted as a normal occurrence in the business world.
Clearly, each company has its own set of criteria when it comes to mass layoffs. Generally, there are four or five broad categories that are taken into consideration. These include the performance, productivity, skills, tenure and seniority of the employees, as well as their overall importance to the company.
“These will be some of the ways by which companies may decide to lay off people,” agrees Shankar, while also admitting, “I don’t know whether companies apply algorithms, but if they do, I personally feel it’s inhuman.”
“Every process has advantages and disadvantages, and it is impossible to achieve 100 per cent accuracy in any of them, whether it is done internally or through a third party. If assessments are conducted internally, there is a high risk of bias. On the other hand, if a third party is involved, there is a chance of overlooking high-potential employees who may have the potential to perform well despite external factors affecting their performance. Therefore, it is important to make a conscious decision on which process to follow, based on the organisation’s specific needs and circumstances,” concludes Mohanty.
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Statement made that in India performance measure is beset with individual perceptions; is not only in India. I have interacted with employees and managers in USA, it’s the same story. After all people are people anywhere with bias, prejudice and personal preferences.
Does performance have anything to do with the layoffs Accenture is planning? Are you aware WHY they are doing it, in which geographies?
Human Resource Management (HRM) is the process of managing people in organizations in a structured and thorough manner. HR manager is responsible for managing employee expectations vis-a-vis the management objectives.
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