Imagine laying off 8% of your workforce then having kudos spread like wildfire across the internet using words like “authenticity, transparency, accessibility and integrity.”  Meanwhile your customers commit to more word of mouth marketing and placing more orders to ensure your company survives the economic downturn.  This is exactly what happened immediately after Zappos CEO Tony Hsieh announced layoffs and that the company would “take care of employees properly” by providing 2 months severance pay, more for those with 3 plus years at Zappos, and full health insurance coverage for 6 months.  He was specific and transparent about the company’s finances and future outlook.  Hsieh also discussed the emotional aspects of these actions and encouraged employees to respond.  Failure to act as Zappos did may result in the following scenario described in INC. Magazine,  “It felt like torture…engineers seemed to be writing deliberately inscrutable code in order to protect their jobs.”  It would literally take 4-5 hours to make heads or tails of it - a job that normally takes 2 minutes.  (Seminars on Downsizing like Zappos   and    Creating Alternatives to Layoffs)

Below you can read part of Hsieh’s initial layoff announcement to employees.

“I know that many tears were shed today, both by laid-off and non-laid-off employees alike. Given our family culture, our layoffs are much tougher emotionally than they would be at many other companies.

I’ve been asked by some employees whether it’s okay to twitter about what’s going on. Our Twitter policy remains the same as it’s always been: just be real, and use your best judgement.”

 (To read the full text of Tony Hsieh’s email to employees click here)

Here are a few of the plethora of statements from customers, employees and industry experts that flooded the internet.

“Known for its extensive vetting process when hiring people, Zappos is now earning praise for how it fires people. Beyond a generous severance package, the shoe e-tailer is being commended for the comprehensive way the layoffs were explained to workers.”  (

“I believe this is one of the companies that deserves to survive and succeed, contrary to many of the Wall Street fatcats that are getting away with taxpayer money… Let’s spread the word, Zappos is a company with integrity and dedicated to the clients !!! Consumers have to exercise their power to ensure that the best companies have a chance to succeed !!!”  (Zappos customer, LinkedIn)

“Good for Zappos for handling an unfortunate reality of  business with humanity, something sorely missing in corporate America.” (Twitter)

Tony Hsieh and Alfred Lin are some of the insightful, kind, and compassionate corporate executives that I have ever had the privileged of working under. I was a mere rank-in-file employee. I am sure, without a doubt, when Tony says this was an extremely difficult decision, he means it. I think Tony was being as transparent and honest as he could be about why these events transpired. When he says it was emotional, he means it.

Tony Hsieh and Alfred Lin have gone beyond every conceivable limit to make Zappos one of the best companies to work for in the United States. Zappos isn’t just a website, it isn’t just a cultural perspective, it is a family. During my time there, I noticed that Zappos cares for their employees like no other company I have ever seen. I worked in the Silicon Valley in the heyday from 1999 to 2002 during the implosion of the dot com companies. Somehow, Zappos was able to maintain a work hard play hard ethic while giving employees every possible comfort you can imagine.

In kind, the employees respond by working more productively and with a sense of ownership in their tasks. That is why the vast majority of the comments left on the site say something about how impressed they were with the fast delivery of their merchandise, or how wonderful the customer loyalty team was while speaking with them.

In contrast to Zappos, public .com companies like webvan, gave their employees no notice at all. The employees showed up to work only to find the doors literally chained shut as a putative measure by some government agency. Do you think those employees got severance packages and 6 months of paid Cobra?” (zappos blog)

“I am a repeat customer and will continue to be. I have 3 married children and 7 grandchildren and 2 soon to be grandchildren in law. I have passed the catalog that came with my shoes to them and told them to pick out their Christmas as I will be doing all my Christmas shopping at Zappos. I hope that will help the Zappos situation just a little. And I have emailed all my friends and family the web site to Zappos telling them how great product you have, how quickly items are shipped and about the free shipping and return also. Some have already made purchases from you. ” (zappos blog)

Ten Tips for Downsizing with Dignity

Company leaders demonstrate their real values when making tough decisions in difficult times.  While lay offs may be unavoidable the way you treat people during the process speaks volumes.  Word of your actions and what they say about the company travel across the internet at lightning speed.   Your current and future employees, customers, vendors, competitors, industry experts, and stock holders will hear the good, the bad or the ugly. 

If your core values include caring about employees, layoffs are a time to walk the talk.  So why don’t more companies do the kind of things Zappos does, beginning with a clear and straightforward explanation of what’s happening, allowing people to express their regrets and say goodbye, and providing services or compensation through a reasonable period after the layoff action?

Layoffs are emotionally difficult.  Rather than sit with the discomfort - our own, the person who was laid off, and his/her peers – many of us cut and run.   But when you turn your head away from the bleeding, others see you as simply not caring enough to look and tend the wound. 

Because layoffs are seen only as a cost saving measure, the idea of spending more than the bare minimum seems illogical.  But layoffs are much more than a cost saving measure.  They are an opportunity to strengthen motivation, morale,  the culture,  and the company’s reputation. It is difficult to manage the competing tensions of saving while investing but it is possible.  Here are 10 tips to guide you.  

1.  Be transparent and open. Explain what actions you are taking and why as well as the company’s current and predicted financial picture.

2.  Be generous.  Offer the best severance package possible.  (Consider how much you would have to pay for the kind of marketing Zappos received.  You are investing in your company’s future not just saving money.)

The algorithm for time to finding a new job is 1 month for every $10,000 in salary, and that’s in relatively normal times. Help employees get through this period.

3.  Continue to offer health insurance by paying some portion of or all of the employees COBRA expenses.  

4.  Help employees land on their feet by offering workshops such as 

  • Managing Transitions*
  • Job Search Strategies that Work*
  • Job Search Tool Kit - resumes, cover letters, networking, etc*

*Germane Coaching & Consulting offers these workshops

  • Starting Your Own Business

5.  Make arrangement for former employees to use company resources - phones, laptops, internet access, and printers - during their job search

6.  Create and communicate a plan for saying goodbye.  Don’t just “disappear” people.

7.  Use your network to help people find work or start their own business

8.  Offer to be a reference

9.  Create a mechanism to communicate to remaining employees  good news about those who have left - with their permission of course.  For example, announce who has landed a new job and where, who has started a new business, or decided to stay home with family.

10.  Involve employees in finding ways to cut costs.  Meetings on a Napkin™ is Germane Coaching & Consulting’s methods for engaging large groups in structured problem solving sessions that deliver creative outside the box solutions and engage everyone in implementation.  Employees who are closest to the work know a great deal about what can be done at the operational level.  In addition, you will be showing once again that you are all in this together and that employees have some control over their own destiny.  Both factors will help sustain morale.

Anne Perschel
Anne Perschel
When she is not consulting; coaching; reading and writing about leadership; or enjoying her work in other ways; Anne can be found:

Listening to ocean waves receding over stones.
Enjoying the spontaneous expressions of young children who haven’t yet learned to hide their emotions.
Taking in the scent of freesias, lilacs or salt water.
Enjoying the great, or not so great, outdoors and all variations of nature’s gifts.
At the gym.

As Seen In:

Finding the Upside in the Downturn