Why You Got Laid Off — What Actually Happens Behind Closed Doors

Tears welled up in her eyes, and I could see, as I told her she was laid off, that she was taking it as much more than a bad piece of economic news or a shock to the system. She was taking it more deeply, more personally. Of course, it's personal when you get laid off, and she took it that way. And I could see in her mind she was running through what she had done wrong and what she hadn't done enough of, and some little part of her crumbled as I told her what was happening.

Now, I had a good relationship with this supervisor that I had to lay off in my work, and I knew and stayed connected enough to know that she had recovered and thrived. But that moment stayed with me. Obviously, it was harder for her than for me, but the moment stayed with me. And I used to tell managers and supervisors that worked for me, "If letting somebody go or laying someone off ever becomes easy for you or casual for you, you need to check your humanity."

It was a difficult moment for her and an educational moment for me. Hi, I'm Todd Jensen. Today, we're talking about layoffs. Layoffs are brutal. And I hope to give you some background on why they happen, take you behind the scenes on what happens leading up to a layoff, and talk through what factors come into play in who gets laid off and who gets to stay. Welcome to the world of work.

Let's start with why layoffs happen. There are three broad or general reasons why layoffs happen. First is that some industries and many businesses have seasonal demand. Customers use their products or services or buy their products and services at particular times of the year. Think about retail companies that prosper during the holidays, during Thanksgiving and Christmas. They need more people, more staff, more attention, more support, everything during those peak times, because every delay, every hitch, is a sale that's gone. So they have to be well-staffed during those peak times. And then after, it's a low season for them, and they have to cut some costs to manage their balance sheet. So seasonal work is just a part of business, and it's good for you to know if you're in the type of business that has seasonal work and to understand the vulnerability to layoffs there.

The second reason is there's a shock to the system. Some new player — we're in the middle of a shock right now, with AI shocking everybody. Every industry is facing the challenge of a boss coming in and saying to an entire department, "You know, I can have three people working with ChatGPT to prepare these kinds of things. I don't need a department of 20 of you." You may argue and say, "Well, ChatGPT can't see this or can't do that," or whatever. Might be true, but that's still going to drive a lot of decisions in letting people go, laying people off. So shocks create moments where businesses feel like they have to brace to survive, and they have to make some cuts. They have to reduce the cash flow and figure out how they're gonna adapt to this challenge.

Now, it's important to understand: some companies and industries are capital-intensive, and some are labor-intensive. Those are two different categories. Layoffs tend to happen more in labor-intensive businesses. So look at your industry, look at your company. Are you capital-intensive or labor-intensive? What's the difference between the two? Think of an airline. Airlines have to spend huge amounts of money on planes and maintenance and facilities, and a smaller percentage of money on people. So airlines are a capital-intensive business. Retail is a labor-intensive business. Most of the money that it takes to run the business day-to-day, that's not allocated to some long-term capital, is labor cost. So when there's ups and downs, when there's shocks to the system, labor is one of the main areas of focus where companies need to make cuts.

The third reason is something's wrong with the balance sheet, and this is pretty normal to happen to any business. When there's a new CEO that comes in, he or she's gonna take a look at the balance sheet and find areas that don't seem to support the core part of the business they're gonna move to, and so they'll make cuts in those areas. They want to immediately make an impact, and for them, it's always easier to be the bad guy up front and make cuts and trim back businesses when they're new to the company than later. So they make those cuts earlier rather than later, usually. Other reasons: maybe a company's getting ready to go public, or maybe they're wanting to be sold, and they need to improve how their balance sheet looks, and they're gonna have to reduce some costs. And if you're in a labor-intensive business, that's going to mean layoffs.

So let's go behind the scenes on what happens when a layoff comes. I'll share my experience. I worked for an e-commerce company, and they were getting ready to start making themselves more attractive to private equity and to maybe go public. And so everybody in the business got scrutiny on what they really needed to spend in order to get to these targets and goals and objectives that we had set as a business. I ran a large production operation that created the content that went to the site, and my department cost a lot of money. And so I was brought into those meetings in the boardroom, sitting with the CEO and the CFO.

Now, there's things you can and can't do when you're in those kinds of meetings. What you can't do is say, "But these are all my friends. I really like all these people. I don't wanna let anybody go." That's gonna sit in the mind of those leaders that say, "Maybe we don't have the right guy running this department." You can't say, "Well, I'm so perfectly efficient that there's just no way that we can run this business without the total complement of people that we have." Because they're coming into that room with your numbers and your data and your costs and their own assessment of the situation, and they're gonna push and challenge and test each of those points you try to make.

So my approach was knowing what I was going in for. I understood that I needed to justify what we needed to have in order to accomplish our goals, and I had to take an honest look at what we could do without, or where we could take reasonable risks in reducing something going forward. So some of my plans looked good, and they approved those and liked those. There were a couple of others where they would push and test. Now, one of the other things you can do in that situation is say, "Look, I can get more efficient in this activity if you spend the development dollars to make these tools better here, here, and here." And you're very specific on what that means. But they're making cuts to the product departments as well, to the engineers. In some cases, you may be able to make an argument that, "Look, this cost of creating these upgrades to my tools can save me 12 people within six months." And maybe those costs will equalize, and they'll keep one extra developer on longer.

Those were the types of discussions that we had. When it was all said and done, we knew: okay, I'm gonna have to make a cut here and here in a staff area. I'm gonna have to make a cut in a leadership area, and I'm gonna have to make a cut to a production shift, to the graveyard shift. Now, I didn't wanna cut the graveyard shift. I liked having the graveyard shift. But as I looked at what the production flow and capacity needs were in the upcoming six months, we could probably handle it without the graveyard shift. So when I sat down with that supervisor that I told you about in the first part of this video, that's what I had to try to explain. I had to try to explain the business of it and what my thinking was and why I was making that cut. And many of those people that were on the graveyard shift got cut. Others didn't — they were great producers, and we had open slots in a few other parts of the business, and we wanted to keep those people if they could move over to a daytime shift.

So those are the types of things that are going on behind the scenes. When the decision's made, then HR gets involved, and you know what you're going to tell all the people that are gonna be laid off about benefits and salaries and timing. All that kind of stuff gets communicated. That'll be in coordination with the CEO, who will communicate more broadly that these are the things we're doing as a company, and he'll put his spin on why he's asked us all to make these cuts.

One of the things you might be wondering is: how do you make decisions about who stays and who goes if they're in the same position or in a similar position? Is it strictly by seniority? I know that's true for some unions. Let's take an example of a production team that has 12 people on it. I'll sit down with the supervisors and other people that I trust, and we'll look through each of those 12 people. We'll look at their production, we'll look at their track record, we'll look at their performance reviews, and we'll start putting them into categories. And let's say we go through that process and eight of those are indispensable. We have to have them. They have the types of skills where they can do multiple things. So we need to keep those people on the team. That leaves you four others. Maybe two of them are new, and it's gonna take them a year to ramp up to being at the same level as some of those eight that are remaining. So we're probably going to let those two go. And then there's two others that don't rank as high in the production. They may have other things they do really well, but maybe it's only one or two things they do well, not three or four, or the production is mediocre, or they're a problem.

The key criteria for me was: who creates the most value relative to their cost? And cost doesn't only mean salary and benefit cost. We've had some people on teams my entire career that are difficult to work with. They have a hard time working on a team. They don't have very good social skills. Whatever the case may be, they're not a strength to the team. I've had team members that are constantly asking other members of the team to help them figure out how to do something when they should have known how to do it by this point in their training cycle. That constant questioning becomes a drag to the other members of the team. And there's some people that are just negative or whiny or complainy, and it's a tax that the other team members have to pay by constantly listening to it. Maybe they're polite and say, "Oh, yeah, that's really bad." But they just wanna come to work and do what they do and not have somebody moaning and whining all day long.

So there's almost always somebody on a team that is a cost to the team functioning well. And in a layoff situation, when you're grading people, that's one of the things that helps you know who to let go.

Why were you laid off? Well, it could be because you were new. It could be because you were not at the top of the rankings. It could be that the company or the team is shifting away from your particular skill. Something else has shocked the system, and the company's going in this direction to cope with it, and your skills are not part of that direction. That's a reason why you might be let go. If any of those are the cases, there's not much you can do about it. So don't make too much of it. Recover from the emotional blow and move on. I don't think you need to do deep soul-searching if those are the kinds of reasons why you were let go.

It's also possible that you were laid off because you were not a buddy with the boss. That happens. Leaders come in all sizes, shapes, and levels of competence, levels of integrity, and I've known people in organizations and leaders that have their favorites, and everybody else can fend for themselves. They're not really concerned about what's best for the business. Well, I despise those types of leaders. I think that's wrong. I think that's weak. And I think if that happens to you, there's also not much you can do about it.

Bad companies and bad bosses are a fact of life in the world of work. As you're dealing with a bad boss and as you're paying attention to what's going on in the economy and the company, you've got an edge, because you can do the math. You can say, "Okay, this company's headed for layoffs. I'm probably not going to be part of the core group that stays no matter how hard I work, because my manager totally makes decisions based on who his buddies are or who compliments him the most or who he golfs with on the weekends," and you're just not gonna win in that game. So take all of that business intelligence about your situation and move on before the layoffs happen. Get into a better team. Get into a better situation. Work for a better leader.

Be honest, though. After you're laid off, after the emotions settle — and it is emotional, and it is personal, it feels personal, and you're angry or you're sad or you're full of self-doubt, self-criticism — let all of that stuff go and drift away. You have to. You have to recover so that you can move on to the next thing.

But before you move on to the next thing, I invite you to ask yourself three questions, and be honest about it. Number one: what would have made me more valuable in this organization before this layoff? Be honest with yourself. If you were, on a scale from one to 10, a seven in your production output, and it looks like for the most part they kept the tens and the nines and the eights, well, are you suited to that type of production work? Is that the kind of thing you can become an eight and a nine and a ten at? If so, then what are you gonna do to become better so that it's harder for you to be considered someone that gets let go? Value in an organization is currency. In a good organization, it gives you leverage, it gives you staying power, it gives you stickiness when being considered for layoffs.

The other question I think you should ask yourself is: did I create strength or weakness in a team? Now, I've seen some lousy teams that are run by people that don't know how to run a productive team. They want a group of friends, and they want a group of co-conspirators, and they're not really that interested in the business, and so the culture of that team is, "Don't do anything that makes me look bad," and the business is secondary to all of the decisions that we make on the team. Well, that's a bad team leader. It's a bad team to be on. And the sooner you can get away from that team, the better for you.

But that's not every team. So ask yourself: were you a strength to the team, or a distraction or a deterrent to it? I know people who are, "I'm gonna say what I want to say, and you just have to cope with it, and I'm gonna tell you my truth all the time, every time, and if you don't like it, then you're weak and corrupt, and it's too bad." Well, sure, you have the right to be that way and to say those types of things, but you don't have the power to be immune from the consequences of that. People don't like being criticized all the time, or having your view shoved in their face all the time. They don't like working with somebody that isn't willing to compromise or isn't willing to accept differences on a team. Team skill is about fluidity and respect and a unifying purpose to accomplish something. I'll make a video on things that I think are important about teamwork. But ask yourself: are you a strength or a weakness to the team? Answer honestly, and then make adjustments depending on your answer.

Finally, ask yourself: if you were not fairly assessed during this layoff cycle — so they got it wrong, they didn't measure your value to the company correctly — if that happened to you, ask yourself, "What could I have done better to make my value more clear?" The answer to that is going to depend on your industry and the type of work that you do.

But those questions and the answers can really help you sharpen your game and be better for the next job that you try to get into. And you're almost always gonna have someone in an interview say, "Well, what did you learn from your last job?" How cool would it be if you could say, "You know, I wasn't very good at this in the last job, and I spent the last several months sharpening my abilities to improve that, and I think I'm gonna excel at that activity now." As a hiring manager, I've done hundreds of interviews over my career. That's a refreshing burst of self-reflection and honesty, and it has a lot of value.

So those three questions can lead you to things that will help you build, grow, and improve after the brutal effects of a layoff. So whatever your answers, whatever your situation, I want you to succeed. I hope you do well in what you're trying to find and what you're trying to do. And if you haven't been laid off, I hope these things are helpful in reading the landscape and getting a sense of what's happening, so that you can make decisions and not always wait for something to happen to you.

Thank you. Remember to hit like and subscribe and join me on this journey where we talk about how the world of work really works.