6 Reasons for Layoffs Within an Organization

In December 2023, U.S. employers reduced layoffs to the lowest level since July, as reported by Challenger, Gray & Christmas. However, the total job cuts for the year reached over 720,000, almost double that of 2022 and the highest since 2020. The technology and retail sectors announced the most job cuts in 2023, citing economic uncertainty and business closures as reasons. Companies remain cautious, with expectations of continued cuts in early 2024. Almost the size of a small city, that is a tremendous number of people being affected by layoffs, and people may end up feeling the same way this person feels below. Check out this recently viral video of a former employee at CloudFlare showcasing their termination process.

Navigating the job market can be tricky, especially with the uncertainty of job security. Understanding why companies lay off employees shortly after hiring and training them is crucial. Equally important is knowing what questions to ask during an interview to gauge the stability and practices of a potential employer. This blog post delves into both these aspects, offering insights for job seekers.

Reasons Companies Lay Off Employees Shortly After Hiring

Whenever we start a new job, we never expect to be laid off so suddenly. Excited by the prospects of a new job, we blindly put our trust in institutions, that are led by ….people. Though they do try to have the best interest of the organization at heart, people are imperfect. They have to navigate economic challenges and changes in workforce planning. Let’s take a look at these 7 reasons lay-offs occur and potential things to consider if you are looking for a new role.

1. Sudden Economic Downturn or Internal Financial Constraints: An unexpected economic downturn or financial difficulties are common reasons for layoffs. Companies facing reduced revenue or profitability might need to cut costs.
   • Ask about the company’s financial situation and future projections.
   • Understand how the role contributes to the overall organizational performance should there be a downturn.
2. Poor Financial Planning or Management: Mismanagement, overestimation of needs or poor planning can lead to hiring more staff than financially sustainable.
   • Investigate the past performance of the department or role you’re applying for.
   • If it is a new role, ask about the need for the role and how it fits into the larger function of the department.
   • If it is a nonprofit organization, ask about the length of the grant funding the role, and how long it has been funded.
3. Shifts in Business Strategy: Changes in business strategy can render certain roles redundant, especially if a company opts to automate or outsource.
   • 
     Inquire about any recent layoffs and their causes, as this can be indicative of the company’s stability.
   • Inquire about a time where the company realize they can operate efficiently with fewer staff than initially estimated, and how they handled the situation.
4. Capital Expenditures, Mergers and Acquisitions: Major investments into newer facilities or research and development can lead to sudden constraints on workforce capacity. Overlapping roles in mergers or acquisitions often lead to layoffs. Though it may sound well planned, expect the unexpected.
   • Ask if any mergers or acquisitions are expected, as these can lead to restructuring and layoffs.
   • Ask about any planned renovations, restructuring, new product creation.
5. Regulatory or Market Changes: New regulations or market shifts can impact operations, leading to staff reductions.
   • Understanding the company’s growth plans can help assess potential downsizing risks.
   • Inquire about any recent or expected strategic changes within the company.
   • Ask how the company manages workforce fluctuations, which can reveal their approach to scaling and layoffs.
   • Ask about project completion or seasonal demand. In project-based or seasonal industries, layoffs occur post-project completion or demand reduction.
6. Cultural & Workplace Performance Issues: Poor leadership mentorship, lack of training, and unrealistic expectations for new hires, not meeting expectations might face layoffs.
   • 
     A high turnover rate can signal internal issues or general dissatisfaction.
   • Understanding how the company conducts evaluations and feedback can reveal their approach to performance issues.
   • The availability of professional development opportunities can indicate a company’s investment in its employees.
   • Ask hiring managers, how they are able to manage their workload and to whom do they seek mentorship when they need it the most.

It is important to point out that the interviewer’s responses, or lack thereof, can be as telling as the answers themselves. Evasive or vague responses might indicate underlying issues. By understanding potential red flags and asking the right questions, job seekers can better navigate the complexities of job security in today’s market.

Remember: Always do your due diligence before accepting a job offer to ensure you’re entering a stable and supportive work environment. Once you have the job, do not rest on your laurels. We must be ready with our resumes, references and cover letter templates ready for updates for the appropriate time. It is easy to view your layoff as a personal attack-especially when HR departments are ill prepared and proceed with terminations in a tactless and non-empathetic manner. I always recommend updating your career success portfolio (resume, skills, projects, resume, job responsibilities, etc) once a quarter. Keep a journal with reflections on where you have grown, and next quarter personal goal projections to keep you on track.