By Corey Ferengul
There’s no way around it—layoffs and reductions in force (RIFs) are some of the toughest decisions a CEO can face. It’s not just about numbers; it’s about people, and how you handle this process impacts your company culture, reputation, and trust.
In this article, I’ll walk through the differences between layoffs, RIFs, and furloughs, and share lessons learned from my own experience and insights from my co-host Mike Shannon. The goal is to help you, as a leader, better navigate these challenging waters.
Understanding the Terminology
Before diving in, let’s clarify the key differences between layoffs, RIFs, and furloughs:
Layoff: Employees are dismissed temporarily with the expectation that they may be rehired when conditions improve.
RIF (Reduction in Force): Employees are permanently let go, often due to structural changes or long-term financial realities.
Furlough: Employees are sent home without pay but with a defined return date, such as after three or six months.
As I mentioned on the podcast, it’s important to be clear about the language you use. Telling employees it's a “layoff” when it's actually a RIF creates confusion and false hope. “Most companies are doing a reduction in force, not a layoff,” and your communication should reflect that.
Why Layoffs and RIFs Happen
Unfortunately, layoffs and RIFs typically happen because something in the company’s financial model breaks down. Maybe a strategic investment didn’t pan out, market conditions changed, or a new product line didn’t perform as expected. When growth slows or profits are squeezed, companies often need to reduce headcount to adjust.
Sometimes, there’s a shift in the market, and suddenly, what was once a ‘growth at all costs’ mindset changes to ‘we need to be profitable now’". This is often driven by investors shifting their focus, which forces CEOs to rethink how the company operates, especially when cost-cutting becomes necessary.
The Decision Process: Data, Communication, and Timing
As a CEO, I always try to anticipate when a shift might occur. In my weekly leadership meetings, we’re constantly reviewing metrics—revenue, customer growth, and expenses. The earlier you can identify that something is off, the more time you have to course-correct, potentially avoiding the need for drastic measures like a RIF.
Once you’ve identified that layoffs or RIFs are necessary, it’s critical to involve your leadership team in the decision-making process. As Mike and I discussed, this isn’t a decision you make alone. "The CFO and I would think through where we could make cuts, and then work with individual executives to understand the impact on their teams".
The worst thing you can do is wait too long to act. As Mike mentioned, "If you delay making the tough decision, the size of the RIF may end up being even larger later". You don’t want to put off a necessary reduction and then find yourself forced to make an even more severe cut.
Communicating Layoffs or RIFs
Perhaps the hardest part of this process is communicating the news to your employees. There’s no easy way to do it, but there are better ways.
Be transparent: Let employees know why the decision was made. Share the broader financial context, market conditions, or strategic missteps that led to this point.
Act with empathy: Remember, these are people who contributed to your company’s success, and this is often a traumatic event for them. Show respect, and wherever possible, provide resources to help them land on their feet.
Be clear: If it’s a RIF, make sure people understand that they won’t be coming back. This is where precise communication is key.
Mike and I both agreed that mass emails often get criticized, but they sometimes serve a purpose. For large organizations, a company-wide email or Slack message may be the only way to efficiently inform employees about a major restructuring. That said, individual conversations with affected employees should always happen, giving them a chance to ask questions and understand their options.
Final Thoughts
There’s no perfect way to manage a layoff or RIF, but there are ways to handle it with care and thoughtfulness. For CEOs, the key is transparency, empathy, and timing. Make the hard decisions before the situation spirals, communicate them clearly, and do everything you can to support your employees through the process.
It’s never easy, but with the right approach, you can help minimize the impact on your company and ensure that your team understands why it happened—and that you’re working to prevent it from happening again.
-Corey Ferengul
Co-Host of Opening the C-Suite
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