Crises reveal whether a leadership team has real trust, clear judgment, and operational discipline. The work is to move quickly without becoming careless, and to communicate directly without creating panic.
Principles
- Own the situation. Do not blame the market, board, investors, employees, or bad luck.
- Communicate what you know, what you do not know, and when people will hear more.
- Make decisions at the right level of altitude. The CEO owns the narrative; functional leaders own execution details.
- Treat people like adults.
- Write the plan before the day of execution.
- Assume anything written internally may become public.
Layoffs
Layoffs are one of the hardest things a founder may have to do. They need to be handled legally, ethically, and operationally well.
Before doing anything, work with counsel and HR. This is not optional.
Plan The Decision
Decide based on roles, not personalities. The plan should be tied to the company’s go-forward strategy:
- Which work is no longer funded?
- Which roles are required for the next plan?
- Which roles are eliminated because the company has changed?
- What runway does this create?
- What milestones does the new plan support?
A helpful framework is to pretend that you’re starting a new company from scratch, with no existing team. First decide which roles (not particular individuals!) are needed at this new company, then go through your existing team and match people to those roles.
If you are doing a layoff to save the company, cut deeply enough to avoid repeated rounds. Multiple rounds destroy trust and keep the remaining team in a permanent state of fear.
Prepare The Package
Think through:
- Severance
- Benefits timing
- Visa issues
- Equity treatment
- References
- Job search support
- Return of equipment
- Access to systems
- Employee assistance resources
If health benefits end at month-end, timing can matter a lot. A few days can change whether someone has another month of coverage.
Prepare The Communication
The CEO should own the company-level message.
Prepare:
- A script for individual notifications
- Written details for impacted employees
- Manager instructions
- Internal company announcement
- All-hands plan
- External statement, if needed
- FAQ for remaining employees
Individual notification should be direct and humane. Say clearly that the role is being eliminated and that the person is being laid off. Do not make it about how hard the day is for you. It is much harder for the person losing their job.
After Notifications
Once notifications are complete, tell the remaining team quickly. They need to know:
- Notifications are complete
- Why this happened
- What changes now
- What the company is focused on next
- How departing employees are being supported
- When there will be space for questions
Schedule an all-hands meeting soon after where you paint the path forward and answer people’s questions.
The remaining team will remember how people were treated.
Pay Cuts
Pay cuts often sound fair, but they rarely reduce burn meaningfully unless the company is large. For founders and executives, pay cuts can be an important symbolic gesture. For individual contributors, they often damage morale without materially changing the outcome.
Do the math before choosing symbolism over clarity.