How to Downsize Your Company, Consciously.

by Suzi Sosa

This past June, I had to let go of one third of our team.  Our PPP funds were running out and COVID was dampening our sales pipeline. It was one of those moments in our company’s history when my leadership choices would define who we are as a team and culture.

When it comes to handling really painful things, especially things that trigger feelings of shame, I find myself wanting to delay, delegate, or detach myself.  I think of those as the “Three Dark D’s of  Downsizing.” None of those paths reflect the conscious leader I am committed to being.  So, this June I walked a different path, an uncomfortable path, but one that felt in integrity with who I am and how I want our company to be. It’s taken me a long time to get to this place, and unfortunately this was not the first downsize event I had to lead a team through. In this post I’m going to share what I learned over the last 15 years about how to downsize your company, consciously.

Downsizing your team consciously requires thoughtful stewardship of four things:  (1) how you lead yourself, (2) how you lead conversations with the people you are letting go, (3) how you lead the conversation with the remaining team, and (4) how you lead the process itself.

How you lead yourself

The very first step in being a conscious leader of others is to be a conscious leader of yourself. This step is often overlooked or taken for granted by CEOs who jump right in to the work of leading others.  To show up in your highest and best self with others, and to avoid bringing your own drama to the downsize process, start with these practices yourself.

Mourn first, privately. 

The most important thing in how you lead yourself as CEO during a downsize event is to do your own mourning first, privately.  It’s incredibly sad, and sometimes feels very shameful, to have to downsize your company.  You’re letting go of people you hired, who believed in you and your vision, who dedicated a third of their daily lives to your cause and who battled with you on the front lines day in and day out.  You will miss them.  You will worry about them.  You will feel that you let them down in some way.  But, you have to do your mourning on your own before you start the downsize process.  If you are overcome with your own emotions, you will not be able to hold a safe, compassionate space for the rest of your team as they deal with their own emotions.  As you do your mourning, consider how you can support yourself with self-care and self-compassion.  This is a great time to reach out to your confidential support network, which might include friends, family, mentors or an executive coach.  Practices like journaling, walking and meditation will create space for you to process your feelings of grief. 

Be able to be in the presence of the pain of the others. 

This is one of the experiences we want to avoid the most, and I’ve seen many leaders try to avoid  this pain by delegating someone else to have the tough conversations or by letting people go in a large anonymous group.  It’s uncomfortable to be fully present when our actions are causing pain in others.  To be a conscious leader you must practice being able to be present with the pain of others and not get triggered into your own stories. One of the practices that has been helpful to me is to breathe deeply and remember that the pain the other person is experiencing isn’t a reflection of my worth, kindness, integrity or love.

Know the details of the downsize intimately.

I am very much a big-picture CEO who relies on the superpowers of detail-oriented people around me.  Normally I would not be concerned with the details of exactly how many days of transition time or severance we would be paying to each person.  But, a downsize event rocks your company, impacting everyone, even the people who know they are staying on.  Part of the way that you re-establish stability for the team is by being super clear on all the details of what’s going to happen today, tomorrow and through the very end of the process.

QTIP: Quit taking it personally.

There will be lots of reactions to the downsize event.  Some people will be understanding.  Some people will be sad.  Some people will be very angry.  Some of the people who stay on will have “survivors’ guilt” and will have mixed feelings toward you.  When you take these reactions personally, you shift out of your conscious leadership space into a space driven by thoughts, feelings, and stories that are usually tied to old, disempowering narratives you’ve been carrying your whole life.  Remember that the feelings of others do not determine who you are.  Conscious leaders must be able to be with the feelings of others without being triggered into a defensive or self-critical state of being.

How you lead the conversations with each person

When I downsized Verb in June, I chose to let go of three members of my Executive Team.  In the weeks before, the “Three Dark D’s of Downsizing” dominated my thinking. First and foremost, I wondered how I could delay this painful reality?  I asked the executives  to defer compensation but it only bought us a few more weeks.  I ran multiple scenarios in Excel counting up all the other people I could let go of  to afford to keep them.  But, it was not the right decision for the company, and ultimately I was just hiding from what I didn’t want to do.

The way you handle a downsize event at your company speaks more about your company’s values than anything you have written on the wall. At Verb, two of our values are Authenticity and Leadership. My entire company would know if I was truly committed to those values by the way I behaved in this difficult situation.  As Dr. Martin Luther King said, “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”

When you’re letting go of someone, there are four practices to remember. 

Come to the conversation in a clear, centered, emotional space.

For me this required blocking my calendar for at least 30 minutes before each conversation so that I could recenter myself from whatever I had been doing prior.  Often I would sit in quiet meditation (or sometimes just lie on my bed or the floor and stare at the ceiling) and create a clear, peaceful state of mind.  Notably, I would not allow myself to imagine the conversation over and over again.  Instead, I would focus on my breathing and hold an image of the person in my mind, thinking loving and compassionate thoughts toward them. I realized that most of my fears about the conversations were because I was afraid the person would be upset with me, and I would feel sadness or shame.  By releasing myself from my fears, I was able to show up to each conversation in a peaceful, compassionate state and not be cold or stiff because I am blocking my emotions.

Get straight to the point.

Second, in my experience the most compassionate way to lead these conversations is to get to the point quickly.  Once upon a time, I would make small talk and try to “act normal” for a few minutes before awkwardly transitioning to the topic of letting the person go. Now, I start calmly, gently and directly.  “I’m sorry to say that we are downsizing the team, and I am letting you go.”  Notice that I also take responsibility for what’s happening by saying “I am” vs. “We are.” Once I say what is happening, I stop talking and leave some space for the other person to process and reply.  Sometimes they have questions, and sometimes I continue on after the pause with more details.  By starting the conversation with the news, you are able to be authentic and genuine throughout the conversation vs. starting off inauthentically with pleasantries or other irrelevant topics.

Hold the space of compassion throughout the conversation.

The person who is being let go may experience a range of emotions, including their own shame at losing their job or fear about how they will support themselves and their family.  Often these powerful root emotions manifest as anger or disagreement. The person may challenge you, saying things like “You can’t fire me.” Or “The business will never survive without me.”  One of the most upsetting reactions for me is when the other person argues that I lied to them because they believed that once upon a time I had said or implied that I would never let them go.  It’s very easy for these reactions to trigger shame, doubt or defensiveness on our part.  But, that’s just our stories flaring up and “hogging” the space.  Another thing to remember is that our employees are whole people with so much more going on in their lives than just what we see at work. A moment of crisis like this can be greatly exacerbated by other things going on in their life that we know nothing about. Likewise, the emotions that arise for them can be rooted in a number of factors, including their past or personal lives. The call to greatness as a conscious leader is to hold the space of compassion, to meet people where they are and to focus on love and support for the other person no matter what is said in the conversation.   

Be prepared with all the details of what’s going to happen.

Once people get over the shock of the news, their mind starts racing with dozens of questions: “How much longer will I get paid?” “When will my benefits end?” “When are we telling the team?” “What are we telling the team?” “Who will lead my team now?”  They may want answers right away.  As the CEO, you need to be prepared with detailed information about all of this and more.  One of the strategies that has also worked well for me is to plan a follow-up conversation for the person with our head of finance & HR who walks them through all the financial and legal aspects of separation, including compensation, benefits, severance, etc.

How you lead conversations with the team

As CEO you must address the full team about the downsize.  As soon as they get wind of what’s happening, fear starts to spread.  They start wondering if they will be fired, too, or if the company is going out of business.  One of the most emotionally challenging things about downsizing is dealing with the intense pain of the conversations with people who are being let go and then turning around and having to support and lead the rest of the group immediately after.

There are three practices that I use to consciously lead my conversations with the rest of the team.

Show vulnerability and emotion.

One of the “Three Dark D’s of Downsizing” is detachment, and I’ve seen many CEO’s deploy emotional detachment as a way of steadying themselves when speaking to the larger group.  Unfortunately, by detaching yourself from your feelings, you also detach yourself from your team and cannot be effective as a leader.  If you show up stiff and cold, the message to the team is that either (a) you don’t care about the people you just let go, or (b) you’re being inauthentic by not expressing any emotion.  Neither one of those displays conscious leadership or creates a safe space for them to express their emotions.  As the leader, the team is looking to you for guidance and to show them the way.   It is powerful to demonstrate that it’s ok to feel sad, frustrated, disappointed, angry or any other myriad of emotions due to the downsizing.  It’s also an opportunity for you to show them how to navigate those emotions productively and positively.

Honor the people who are leaving.

Sometimes in the past I would “move on” too quickly, jumping in to plans for the future without acknowledging the past, and it was painful for the rest of the team. In my world, I had been contemplating and planning the downsize for weeks or months.  By the day of the event, it felt like “old news.” But for everyone else, the downsize was brand new and they were just starting their mourning.  As CEO, I’ve found it very healthy for the whole team to take time to honor those who are leaving.  In some cases, I’ve even been able to host an event with the full team, including those who are leaving, and everyone shares stories and acknowledgements of each person.  For example, once in the past we all gathered in a large circle and shared our favorite moments with our colleagues who were leaving. There were lot of tears and many smiles and hugs too.  It was really cathartic for everyone involved and helped to create powerful closure to the chapter of their participation in the company.  Often it seems the common practice when someone is let go is for them to disappear in the thick of night without anyone seeing.  In my experience, it creates a powerful culture when a company knows how to be with “endings” and can create and hold space to honor people who are leaving.

Be extremely clear and direct.

In the past, I’ve tried to “lessen the blow” by using vague language with my team. For example, I would be ambiguous about whether we were letting people go for individual performance reasons or for company financial reasons. (It made me superficially feel better to suggest that it was more about individual performance than company finances, because that seemed like it reflected less on me…)  In a time of fear and uncertainty, clear, direct information is essential to restore trust and confidence.  The team needs to know exactly what is happening, including how many people are being let go, who they are, why they are being let go, what is the probability of another downsizing, what kind of support is being given to team members who are let go, how much cash runway do we have, what other business changes are expected and more.  I have adopted a practice of creating an FAQ document that I circulate with the leaders who are staying on so that we can all be saying exactly the same thing.  Ambiguity or mixed messages create doubt and erode trust.  As CEO, one of your key responsibilities in a downsize event is to restore stability, including trust, as quickly as possible.

How you lead the process

At Verb when we describe what it takes to be a conscious leader, we talk about the “being” and “doing” of leadership.  The “being” of leadership is who and how you are being as a person.  For example, are you being compassionate, supportive and open, or are you being fearful, defensive and closed? These are all different ways of being as a leader. On the other hand, the “doing” of leadership is the practical, tactical moves you make that also have a huge impact on the results you get.  The previous three sections in this post covered a lot of the “being” of how to downsize your company, consciously.  In this section, I want to share some of the things I’ve learned with respect to what you are “doing.”

Do it all at once.

If you have to downsize your team, do it all at once.  Multiple waves of downsizing creates deep and long-lasting fear and seriously erodes trust in the company leadership.  Employees keep worrying if the latest cuts are the last, and they don’t trust you when you say they are.  Multiple waves of downsizing perpetuates grief and prevents the rest of the team from healing and moving on.  Finally, multiple waves of downsizing causes multiple waves of reorganization, which leads to at least 60 days of low productivity.  Bite the bullet and cut all the people you need to at once to get your expenses down to a place you can sustain.

Be generous.

When you’re running out of cash, it’s tempting to want to shortchange severance packages and other support for people who are being let go. But, that will erode trust in your leadership among the rest of the team who always find out what’s being offered. At the very least, you should honor your past practices to the maximum extent possible and I suggest looking for ways that you can go above and beyond to support the people who are leaving.  For example, I wrote personal letters of recommendation for every employee who requested one.  We also attempted to file a group unemployment claim (we were ineligible) and we extended the exercise period on employee stock options.  Gandhi said, “The true measure of any society can be found in how it treats its most vulnerable members.”  I believe the same is true of companies.

Have face-to-face conversations.

I’ve heard so many stories of downsize events where people were told they were being let go in a group.  It’s very dehumanizing to be on the receiving end of that.  A face-to-face conversation shows your respect and gratitude to the employee for the contributions they made to your team.  It gives you an opportunity to thank them personally, and for them to express what they want and need to say.  While it may be uncomfortable, it’s the responsible and respectful thing to do.

Do it on a Wednesday or Thursday.

I used to always let people go on Friday so that it wouldn’t disrupt the work week.  What I learned was that when you let people go on a Friday, everyone ruminates over the week-end and there is a lot of cleanup to do on Monday.  Now I let people go on a Wednesday or Thursday, which gives plenty of time for me and the leadership team to have one-on-one and group conversations, to dispel rumors, alleviate concerns and get everyone focused for what’s ahead.

Plan two meetings with the full team. 

When I first led downsize events, I would schedule the one-on-one conversations for the morning and then convene a full team meeting in the afternoon.  What I learned is that it’s much more effective to have two full-team meetings.  The first one I hold on the same day when individual employees are told they’re being let go.  I hold this meeting as soon as possible after the one-on-one conversations are complete.  I deliver the news succinctly in a 30-minute meeting, leaving some time for questions.  Then, we plan a longer, 90-minute full team meeting for the following morning.  In that meeting, I re-state what’s happening and I present a 30-minute overview of our go-forward plan.  I make sure to talk about why we are shrinking the team, how it will benefit the business and how we will adapt to new roles and responsibilities.  My goal is to get everyone looking up ahead and not ruminating on their grief.  I leave plenty of time for questions because after everyone has had a chance to process the shock of the news the night before, they bring thoughtful and important questions for me to address.    

Set up small group meetings.  

Some employees are never comfortable expressing their questions and fears in a large group setting, especially not directly to the CEO.  As you guide your company through the pain of the downsize toward healing, you have to address as many of your team’s fears and doubts as possible.  An effective way to do this is to organize small group meetings led by other leaders in the company where employees can share their concerns.  I often schedule these immediately after the second full team meeting.  I equip the facilitators with an FAQ doc so they have very clear and consistent answers to the most common questions.  Usually a lot of these small group sessions end up being a space where remaining team members express their sadness and personal concerns about new responsibilities they may have to bear.  It’s a very important part of the grieving and healing process for those who stay on.

Have an FAQ doc.  

A downsize event is very destabilizing for a company and it stirs up fears and distrust.  One of the risks that start-ups face when downsizing is that your top talent – the people who you want to stay on – will get spooked and decide to leave.  So, a top order of business is to restore trust with your team.  A critical way to do that is to make sure that all the leaders in the company are giving the exact same message to the team.  There is no better way to do this than in a detailed FAQ doc that everyone is trained on in advance.  In my experience this document is at least two pages long and addresses everything from what severance packages look like to what is our cash runway and how to answer, “Are we going out of business?”

Plan quick transitions.  

Finally, a lesson I learned the hard way is that quick transitions are always better.  Non-executive employees should have one to three days to wrap up and transition their work.  Executives should have about a week.  In the past I’ve proposed longer transitions and they create ambiguity and awkwardness.  Everyone needs to start their healing process as quickly as possible, and long transitions delay the pain of letting someone go. On the other hand, some companies require everyone to pack up and leave immediately after being let go. In my experience that does not leave enough time for a healthy transition of work or relationships.  The concern I’ve heard from other leaders is that disgruntled employees will somehow sabotage the company.  In my experience, if you are leading a purpose-driven and values-based company, and the downsize process is led consciously with integrity, very few, if any, employees become angry to the extent they would sabotage the rest of the team. 

Final thoughts

Downsizing is a traumatic event for you and your company.  And, like so many hardships, it’s possible for you and the company to come out stronger.   New leaders will step up, new ideas will emerge, and the remaining team will be closer. For you as CEO, it’s an opportunity to reconnect to who you are and what you stand for.  It’s an opportunity to recommit to being a conscious leader and to do what’s right, even when it’s uncomfortable.  It’s a huge opportunity to build trust and credibility with your team and to define the culture of your company.

In my personal journey of entrepreneurship, downsize events were pivotal moments when I faced some of my deepest fears of inadequacy as a leader.  I learned how to be compassionate and careful with myself while also strengthening my practice of living from values and not from my fears and stories.  It was actually by accepting myself as a leader, as I am (flaws and all), that I was able to create the strong, safe, compassionate space to let go of others consciously.  I made so many mistakes in this process in the past, hurting close friends and unsettling my team.  But, by opening myself up to acknowledge that the way I was handling things was not aligned with the leader I am committed to being, I connected to empathy and forgiveness which gave me the courage to do it differently the next time.  

I hope that these ideas will be helpful to you and I would love to learn more hearing yours as well.