How to deliver the news of furloughs and layoffs

By Sarah Nagem

Donny Shimamoto, CPA/CITP, CGMA, founder of IntrapriseTechKnowlogies, thought he could avoid laying off or furloughing the roughly 13 employees of his advisory-focused CPA firm during the coronavirus pandemic. But when several clients put the brakes on their projects, he realized what he had to do.

Shimamoto furloughed three workers and reduced the hours for two others. This wasn’t new to him — he made similar decisions a few times before, including during the recession in 2008. But this felt different.

“In this one, everyone is affected,” Shimamoto said. “You can’t figure out when things are going to come back.”

Some employers have managed to avoid layoffs and furloughs by securing loans, including those available through the Paycheck Protection Program and the Economic Injury Disaster Loan program. But while layoffs and furloughs are a last resort for many employers, the economic fallout from the pandemic has made some workforce reductions unavoidable.

The United States lost 20.5 million jobs in April as the unemployment rate rose to 14.7%, the highest recorded since the Great Depression, according to the U.S. Bureau of Labor Statistics. It was a drastic jump from 4.4% in March and 3.5% in February.

Informing workers that they are being furloughed or laid off is never easy. Further complicating matters: Many of these conversations are happening virtually as companies continue work-from-home policies.

Shimamoto was honest with the affected employees about the status of company projects and why he was making cuts. His advice to others: “Don’t paint the rosy picture, but paint it as is.”

That kind of transparency is key, said Jaime Klein, CEO of Inspire Human Resources. Managers should be open about the company’s financial status and the possibility of additional cuts.

“The number one rule for corporate leaders in this environment is to be transparent,” Klein said in an email. “In these unprecedented times, direct and open communication have become critical.”

Morris E. Harris, CPA, CGMA, was among those at IntrapriseTechKnowlogies who was furloughed for an anticipated six weeks starting May 16. It wasn’t totally unexpected, he said, because his workload had been reduced.

Harris said he wanted assurance that the furlough was directly related to the pandemic and not other factors. So he appreciated Shimamoto’s thoroughness and willingness to share that Harris wasn’t the only worker affected.

“I think the thing employees wonder is, ‘Is this personal? Is there something I could have done?’” Harris said.

Have a script

For smaller companies, the owner, president, or CEO should deliver the news of layoffs or furloughs, said Mitch Wienick, president of career management and executive coaching firm Kelleher Associates, an AchieveNext company. Wienick recently took part in the webinar “Executing a Layoff: Right Steps, Mistakes to Avoid and Words of Advice.”

That might be impossible for large corporations, and in that case the company leader should delegate the responsibility to managers working jointly with human resources, he said.

It’s important to know in advance what you’re going to say to affected workers so the conversation doesn’t go off track, Wienick said.

“I think it’s really important you have a script,” he said. “A little practice goes a long way in doing this.”

Talk to workers individually, with your video on

When managers are delivering bad news virtually, it’s important to be empathetic, patient, and kind, Klein said.

“Prior to the pandemic, layoffs were often made swiftly and only in person,” she explained. “Now in the pandemic, there has been a backlash by employees of companies who are laid off in swift fashion.

“What sets good leaders apart is compassion and empathy when delivering this news.”

Workers affected by furloughs or layoffs should receive the news individually, Klein said, instead of during a team meeting or group call.

Shimamoto said he spoke with each of his employees affected by the cuts before there was a larger announcement.

His firm has always operated virtually, with workers spread across the country, so in-person discussions wouldn’t have been possible even in normal times. But the culture is one in which Shimamoto and his employees follow each other on social media, learning about their families and lives outside of work.

Workers don’t always turn on their video during meetings, Shimamoto said, but he used the video feature to deliver the news of furloughs and layoffs.

“We both had our cameras on,” Harris said. “We had both started doing that more frequently. That helped when I was informed of being furloughed because I witnessed it was not necessarily something he was comfortable having to do.”

It’s important for workers to know they’re valued, Harris added. “I think that actually counts for a lot.”

Be prepared to answer questions

Harris, who was grateful to be furloughed instead of losing his job, had questions when he learned the news. Namely, he wanted to know if he was eligible to apply for unemployment benefits.

The firm’s controller went into detail about the unemployment process during the larger team meeting, Shimamoto said.

It’s important for managers to think ahead, Klein said.

“They also should suggest a plan for the employee’s next steps, including filing for unemployment, finding a new role, and ensuring continuous health care coverage. Some affected companies have partnered with companies who are hiring in the pandemic, to help their employees find new roles as soon as possible.”

“Ongoing support” could also come in the form of severance pay or letters of recommendation, Klein said.

Watch your tone

Managers should avoid being lighthearted when delivering the information, Wienick said. “Even if you’re looking to defuse the situation,” he said, “that’s not the tone to take.”

And resist the urge to give workers meaningless assurances that everything will work out fine for them.

“Don’t ask people if they’re OK,” Wienick said. “They’re not going to be OK — this is hard news.”

The AICPA’s SBA Paycheck Protection Program resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.

Sarah Nagem is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.

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