How can Startups handle Layoffs effectively?

21 June 2016

We are operating under the reality of a transitioning economy swathed by challenges. Startups probably bear the brunt of it the most in trying to adapt and keep pace with the industry. Making adjustments to a fast growing business is today common place to course correct and to rectify its focus areas for growth. Such decisions can often mean downsizing your employees in the interest of the overall business and at times survival itself.

However such moves are bound to have lasting ramifications for a brand in particular and its perception among stakeholders. Companies need to carefully plan the roll out of such announcements to mitigate any negative fallout for the brand. Startups are currently enjoying a growth phase but need to be doubly cautious to scale within practical means. The TinyOwl episode is still fresh in most minds. In this case the company chose to let go off their employees who were predominantly field staff in short notice. With an earnest intention the cofounders decided to inform the employees in person which however backfired and resulted in a veritable hostage situation. Staff of their Pune office restrained the cofounder demanding that all dues be settled immediately. This also got local politicians come knocking to partake in the melee.

How did the press report it?

  • Layoffs at TinyOwl
  • TinyOwl Founder held hostage
  • Why did TinyOwl resort to mass firing?
  • TinyOwl Founder detained after layoffs

This is the harsh reality of a crisis situation on engaging with the media. I am sure it would have pained the Founders and promoters no end to see such scathing headlines. But the reality is that the damage is done and history will remember TinyOwl for the flawed execution of the downsizing.
Other startups that went through downsizing efforts include Zomato, Spoonjoy, Ola and Housing.com. While Layoffs may be a reality in a volatile economy, what can be managed is the roll out of these announcements.
Some of the qualities of Startups that make them vulnerable for potential crisis situations are as follows.

  • Young teams with limited experience
  • Startups are typically risk prone
  • Business plans that often lack vision and long term growth prospects
  • Erratic messaging when it comes to media relations
  • Media are currently on overdrive when it comes to Startup reporting
  • Lacks senior counsel when it comes to PR messaging

Given this scenario there are several steps that a Startup can adopt to streamline their PR efforts and to avert possible crisis situations during layoffs.

First of all the companies need to understand the importance of Human Resources. A lot of importance must be laid on this valuable asset and proper caution must be exercised in engaging and managing them.

While that is the thumb rule, several planned steps can be taken to avoid any negative fallout during times of layoff.

  • Maintain constant communication with employees on the progress of the company through the HR department, through newsletters, noticeboard bulletins, etc.
  • Engage with employees to keep them motivated.
  • Adopt a transparent approach for management to engage and interact with employees.
  • Ensure the media are intimated about developments within the company in a timely manner and that it does not come as a surprise for them.
  • Keep channels of communication with the media open at all times.
  • Develop sufficient messaging and documents for the media explaining the need for this decision and how they plan to avert such situations going forward.
  • Make allies of the media and other important stakeholders during such announcements.
    What can the PR agency or internal PR team do during such instances.
  • Proactively reach out to important media informing them of this development.
  • Be on call round the clock during the exercise to take necessary action as it unfolds.
  • Prepare well in advance with proper documentation for possible questions from the media or employees.
  • Prepare a FAQ’s document to preempt any possible outcome or surprise that the announcement can throw up.
  • Keep the spokesperson briefed adequately.

While the above points represent a broad checklist of actions one can take to avoid possible situation, the fact remains that preparation, presence of mind and tact will be crucial to combat crisis situation. There is never a magic bullet to manage a crisis situation but proper research and understanding of potential situations will go a long way in managing them effectively.
Startup Mentors and advisors on their part must also incorporate suitable modules to help Startups stay grounded with reality when it comes to working with the media and managing potential situations.