Layoff

Letting someone go for their own performance and eliminating a role for the company's reasons are different events. While both went by the same word, neither the person leaving nor the people staying could read what had actually happened.

Picture a company that raised money, hired thirty people, and then spent six months failing to close the next round. If runway — the number of months the cash lasts at the current spend — has dropped to four, there are two options: spend less or shut down. When payroll is most of the spend, there is effectively one line item to cut.

Reaching for individual performance as the justification breaks two things at once. The people leaving carry out a verdict that their work fell short, and the people staying start reading their own performance as a forecast of who goes next. The real cause was the company failing to raise, and the explanation has been moved onto individuals.

A layoff is that action given its own name and its own process. The reason is pinned to the company, which is exactly why the company has to decide in advance and then explain which roles go, on what criteria, and what the people leaving receive. Most countries attach legal requirements to this, which is a second reason the sequence matters.

The decision starts with a number, not with names. The amount to cut gets fixed first, then converted into a count of roles, and only then mapped onto where those roles sit.

1. Set the amount. Work out what the burn rate — net cash leaving each month — has to fall to in order to reach the next funding point. If the goal is twelve months of room, the answer is a monthly spend figure.
2. Exhaust the alternatives. Freeze hiring, give up office space, end contractor and tooling agreements, cut executive pay. Skipping this step is what makes the remaining team distrust the company's judgment afterward.
3. Convert the remainder into roles. What gets counted here is headcount, the number of positions the organization can hold, not people. Which team loses which position is settled first; who occupies it comes after.
4. Write the criteria down. Record why each role is being eliminated and how a choice is made when several people hold similar roles. Without a written standard, what people are left with is the suspicion that it was personal.
5. Notify and close out. Tell the affected people directly, explain it to the whole company the same day, and run offboarding — handover and access removal.

Legal requirements tend to follow the same shape: a genuine business necessity, a demonstrated effort to avoid the cuts, reasonable and fair selection criteria, and consultation with employee representatives over a defined period. That is why layoffs that skipped step 2 are the ones that get overturned. The documents produced along the way — the cash plan, the list of alternatives tried, the written criteria — are also the record the company relies on if the decision is later challenged.

The chief executive and whoever owns finance move first. The amount comes out of the cash plan, so nothing else can start until those two have fixed the size of the cut. That stage usually takes two to four weeks.

People operations joins the moment the role count is settled. They turn the criteria into a document, calculate the compensation, and handle the consultation the law requires. Legal review runs alongside, and the notification wording and agreement forms get written here.

Team leads find out last, but a few days before notification day. Those days are for preparing how many positions their team loses and how the remaining work gets redistributed. A lead who learns the news the same morning as the team can't answer the first question anyone asks, which is what happens to the work now.

Notification itself happens within a single day. Spread it over a week and rumor arrives first, and every conversation after that becomes a guess about who's next. Individual conversations, the company-wide announcement, and the meetings with remaining teams normally all land on the same date.

"We have five months of runway, so this has to be decided this month."

The months of cash are the months available to delay. Wait longer and there isn't even cash left to pay severance.

"This isn't about performance. The role is being eliminated."

A request to keep the two separate. The person leaving and the people staying need to hear the same explanation.

"You aren't affected this time, but I can't promise anything past next quarter."

A refusal to cover the remaining team's anxiety with false reassurance.

At Pagedeck a funding round slipped, and Grace spent four weeks working the numbers with finance. Freezing hiring and cancelling paid tools took out part of the monthly spend but not enough, and what remained came to eight positions.

Team leads were briefed on their own team's changes the day before. Individual conversations happened the next morning, the company-wide announcement that afternoon. The first thing Grace covered in that announcement wasn't the number of people cut — it was how many months the decision had bought and what had to be achieved inside them. That's what the people staying most wanted to know that day.

Some treat a layoff as an opportunity to clear out low performers. If headcount is coming down anyway, picking in order of rating looks like the efficient choice. But the moment selection works that way, the action stops matching its name. Once the criterion is individual performance, the remaining team worries about its ranking rather than the company's finances, and a real process like a performance improvement plan (PIP) — set goals and a deadline when someone falls short of expectations — becomes something to skip. Courts may also read it as choosing people rather than removing roles.

Assuming it only happens once is the other common mistake. A smaller cut looks gentler on the organization, but having to repeat it a few months later costs far more than the first round did. After the second, nobody takes the company's explanation at face value, and the people with the most options leave on their own. That's why many companies choose to cut deeply once and commit to not going back.