Seven Steps To Downsizing

1. Before deciding who stays and who goes, make sure there are justifiable business reasons for the layoff in the first place and that you have a clear picture of what your business will look like moving forward.  The staffing decisions that you make need to be consistent with these business reasons and the end result you're seeking.
2. Choose a layoff selection committee, ideally consisting of diverse individuals in terms of age, race and gender.  The individuals you choose to act as decisionmakers should be people that are most likely to remain with the company so that they can be available to help defend the layoff decisions should there be any litigation in the future.  Include members of management who understand the business needs and have first-hand knowledge of employee performance.
3. Remind your selection committee of equal employment opportunity issues to ensure they are making sound decisions.
4. Check with your legal counsel to see if your layoff will trigger legally required notice obligations, such as the WARN Act (read more about the WARN Act at instanthrsolutions.com) or other issues, such as terminating an immigration visa and repatriating foreign workers.
5. Identify selection criteria you will use to make decisions. 
   • Using seniority only can mean you retain your highest-paid workers, and lose some of your newer star performers. 
   • Performance is the most common selection criterion, but it's the most subjective.  Review past performance evaluations to help make the decision.  If you don't have written performance reviews for your employees but decide to use performance as the deciding factor, it will be virtually impossible to defend against a claim of unlawful termination or discrimination, so you'll need to consider other factors. 
   • If you're restructuring jobs, make sure to update job descriptions.  In the event of litigation, you'll need to show that the individuals you retained have the skills to fill those positions.
   • Analyze the jobs and responsibilities within your business and determine where you have the most redundancy.  Look for ways to shift responsibilities or reorganize processes so you can eliminate redundant positions.
   • Look at your management vs. staff ratio.  Being top-heavy during a recession is pretty much a guarantee that you'll burn through your cash more quickly.
   • No matter the size of your organization, all companies need to think like a small business during an economic downturn.  Make sure the people that you retain are the ones that are most flexible and agile, with the ability to multi-task.
   • Hang onto your top performers.  Human capital is your most valuable asset even in a difficult business cycle, and your competitors will quickly grab up your key talent if they're available.
6. Once you have a list together, review it for any potential discrimination claims.  Compare the demographics of the current workforce against the workforce you plan to have moving forward and make sure that any protected groups (based on age, gender, race and other factors) have not been disproportionately impacted.  If you find there are potential issues, revisit your selection criteria or at least make sure you have legitimate, nondiscriminatory reasons for the selections made.
7. Decide what benefits, if any, you will provide to laid-off employees.  If you offer a severance package, you should obtain a release of claims from the employee.  (Read more about what you are legally required to pay employees at termination and check out survey results to see what other companies are providing at instanthrsolutions.com.)

Layoffs are a common strategy for businesses trying to survive.  Thoughtful consideration of the legal issues involved and the staffing requirements moving forward is required.  Following these guidelines will help you avoid the pain of expensive lawsuits and ensure you have the right people in place to make it through an economic downturn.