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The Transparency Dilemma: How Much Should Companies Share About Layoffs?

In the ever-evolving business landscape, companies are often faced with tough decisions, and layoffs are among the most challenging. We’ve seen it all too often recently, the way a company handles layoffs can significantly impact its reputation, employee morale, and overall culture. But how much should a company share about layoffs? And how does transparency factor into this equation?


To shed light on these questions, we've interviewed Adam Horne, co-founder of Open Org, an expert in the field of transparency in business. In this article, we'll explore his insights and delve into the complex relationship between transparency and layoffs.


Portrait Picture of Adam Horne, co-founder of Open Org
Adam Horne, Co-Founder of Open Org, believes that transparent businesses have a competitive advantage.


The Balancing Act: Transparency vs. Panic


One of the key questions when it comes to layoffs is whether companies should always communicate the ups and downs of the business.

On the one hand, transparency can foster trust and respect. On the other hand, sharing too much information about potential problems might cause unnecessary panic among employees, especially if the issues are eventually resolved.

So, how do companies strike the right balance?

This is a really tricky one, and one that will resonate with so many People Leaders and Founders of late. My view is that you can best approach this by first defining what transparency means to you as a business; create a philosophy, or statement. This will guide you, and your employees on the things that you do and don’t share day to day. It helps to set expectations, and in times of crisis, people will already know what they can and cannot expect to hear. Secondly, it’s important to accept this is almost impossible to get perfect. The last 2 years for leaders has been like driving through heavy fog. You can’t see more than 2 metres ahead of you, and things change quickly. Balancing out what you share and don’t share is hard. I often use the analogy of an airline pilot. They’re in charge and have to make calls on what they do and don’t share. If they shared every possible piece of information with passengers, it would probably induce a heap of anxiety. Equally if you heard absolutely nothing from them all flight, it could be equally discomforting. They tend to share information that is relevant to those passenger, and that may impact them, but that helps prepare them for what’s about to happen. So my advice generally is to ask yourself; does this affect people directly? If so, you should share. Whether you know the answer yet or not it doesnt matter. You should share, and be honest about what you do know. That is all people can ask of you.

The Truth Behind Layoffs


Sometimes, layoffs are used as a means to let go of underperformers.

In such cases, should companies be transparent about the real reasons behind these decisions? Or is it better to keep the reasons vague to avoid potential backlash or damage to the company's reputation?

I would always lead with honesty. Employees are adults, and 9 times out of 10, they’ll already know whats happening, and the reasons for it. Your updates are really just validation of that. If the company is struggling, they will often know. You ultimately have two choices; Share the true reason for these layoffs, and own the narrative and the situation. Or hide it, and lead with secrecy, knowing that that will only create room for rumours, anxiety and wrong information being circulated unnecessarily. When people dont have the information, they’ll make it up themselves.

Timing is Everything


Knowing when to share that a layoff might be coming is another critical aspect of managing layoffs. Sharing the news too early might cause unnecessary stress among employees while sharing it too late might lead to feelings of betrayal and mistrust.

So, when is the right time to break the news?

Again, this is so hard to get right. I as a Founder went through this in my previous business in 2022, and can guarantee that we probably could have done better, but we did what we felt was best for everyone at that moment in time. If I could give advice to myself now, it would be to be honest and open with team members every step of the way. The recent economic situation was a rare one; almost every company was struggling and in the same position, so you can guarantee most of your employees assumed there was the chance this might happen. They’re not stupid. The right people will also rally around you, support you, do what they can to help turn things around. There may be some who jump ship when they can, but that shouldn’t deter you from communicating in the right way with those that want to stay and help you through this rough patch.

To Share or Not to Share on Social Media


In the age of social media, news about layoffs can spread quickly. Some companies choose to share news about layoffs on their social media platforms, while others prefer to keep it internal. What are the benefits and drawbacks of each approach?

I think if you decide to share you need to just decide what the reason and context behind sharing that information is. Are you sharing because you want to highlight those that are leaving and use your networks to help them? Are you sharing because you realised you handled this in the wrong way, and want to be open and honest about that? There is a fine line between being vulnerable and holding your hands up, and being seen as that CEO or Leader who is just looking for attention (some may remember the post that circulated online of the crying CEO which got a lot of backlash). Equally though there were some very endearing posts made as well. I think if you overall handle layoffs well, you should absolutely post about it, but use that opportunity not to garner sympathy for you, but help those who you’ve just lost to find new roles. If you havent handled it well, you should consider using this as a chance to share that, admit it and show others with hindsight where they could potentially learn from your mistakes. Again there is a case here for owning your flaws before disgruntled ex-employees take to social media themselves.

Learning from the Leaders: The Case of Meta


Layoffs can be a one-time event or a recurring occurrence, depending on the company's situation. For example, earlier this year, Mark Zuckerberg announced that Meta would be undergoing multiple layoffs. This announcement led some employees to look for new roles in advance. Was this the right move? What can other companies learn from this example? Should a company be transparent about the possibility of multiple layoffs throughout the year?

I think if you know there are likely to be multiple layoffs, it’s the right thing to do to share. Like my previous answer, there will be those who are spooked and move on. That’s their prerogative, and their right. Those that want to be there through thick and thin, and want to take that risk with you to the end will stay, and they will of course be taking a risk, but there will always be employees who believe in your business, in you as a leader and believe they can come through that. And they will feed off your honesty even more if you share this news with them.

Leading with Transparency


[..] There’s a huge amount of Founders and Leaders out there who have learned a lot about layoffs in the last 2-3 years, and who with hindsight would handle things differently. That includes me. What’s key to this is how you are seen as a leader before these layoffs. If you default to transparency day to day, when situations like this do arise, you will be starting from a way higher platform of trust, and you are more likely to be forgiven for any mishandling of layoffs. Everyone makes mistakes, but if you’ve handled leadership in the right way before this, people will over time understand and trust that you’ve done what you can to make the right call at any given time.

 

We'd love to hear your opinion!

What are your thoughts on the relationship between transparency and layoffs? Do you think companies should be more transparent about layoffs, or is there a need for discretion?

Share your thoughts below and let us know your experience in the comments.



Do you think companies should be more transparent about layoffs?

  • Yes, there is a need for more transparency

  • No, it's not feasible or helpful to share more

  • It depends (comment)


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