5 Ways to Ease the Pain of Layoffs Handle cuts gracefully and your remaining team will respect you.

In January, David Johnson realized that all of his budget cuts weren't going to be enough to keep his business profitable. As CEO, he had no choice but to lay off a third of his workforce at Summitville Tiles, an Ohio-based tile factory that Johnson's family has owned for nearly a century. To make the announcement, he gathered all of his employees on the factory floor and blasted the news through a bullhorn.

While this may sound more like a cattle call than a human resources success, at the time, Johnson thought the companywide meeting was the best way to deliver the news.

"The key was for me to have direct eye contact with the entire workforce and to demonstrate that we had a plan of action that, while painful, was important to the longer-term viability of the company," he says.

No entrepreneur wants to lay off staff, but sometimes it's the only answer--especially during a recession. According to estimates by payroll processor ADP, small businesses employing less than 50 people have collectively shed 1.4 million jobs in the past six months. When a layoff is the only option, the employees who leave--and the ones who are left--will feel much better if the boss handles the situation respectfully and humanely.

"Nothing can poison employees' morale faster than watching their former colleagues be shown the door abruptly and disrespectfully," says Michael J. Canavan, a labor and employment attorney in the law firm of Pepper Hamilton LLP. "In a small company, layoffs can be a much more personal thing. There's often not a corporate HR department to handle it. Generally, the people doing the layoffs work with those who are being laid off."

The road of layoff history is littered with bad examples. Some of the worst stories, Canavan says, are from employees who were notified of their job loss via e-mail or text message. Dealing with a layoff is difficult for both employer and employee, but it doesn't have to be unbearable. You can soften the blow with some of the following strategies.

1. Go one-on-one
Canavan recommends notifying affected workers of the decision in private before the word is out. "They should be told in a respectful manner, behind closed doors," he says. "Allow them to take the news and figure out what they're going to do with it before they have to face their co-workers."

After the companywide announcement at Summitville Tiles, the plant manager and human resources director held individual meetings with each affected employee to discuss unemployment benefits and COBRA health insurance. "We did our best to personalize something that would otherwise have been impersonal and even traumatic," Johnson says.

2. Communicate openly
Rather than simply instructing folks to pack their things and leave, respectful employers explain the reasons behind the layoffs. At Shuqualak Lumber in Shuqualak, Miss., owner Charlie Thomas called a meeting of all employees and prepared a speech so he could remember exactly what he wanted to say. But as he began telling employees that a layoff was unavoidable due to the housing crisis, Thomas choked up and couldn't get the words out. "I felt so guilty for having to lay them off; I felt like I had personally failed them," he says.

After retreating to his office to regain composure, Thomas returned to finish his announcement. Sharing his decision process--and his emotions--with workers seemed to make the layoff a little more bearable. "Employees knew that I had done everything in my power to keep us from getting to the point of laying employees off," he says.

3. Allow for goodbyes
Standard layoff policy seems to require terminated workers to leave the building immediately, but Canavan says that's often not necessary. "In most cases, we recommend that folks be permitted a chance to say goodbye to coworkers," he says.

Keep in mind that terminated workers are recent employees, not second-class citizens. When possible, it's even better to allow workers to transfer their responsibilities in an orderly way, perhaps training others who will take over their former jobs.

4. Ease the transition
Small businesses may not have access to job placement services available through some larger companies, but they can still ease workers' transition to other employment. Shuqualak Lumber, for instance, worked with Mississippi's Rapid Response team, which immediately provided resources to help laid off workers find jobs, register for unemployment benefits or return to school.

By providing outplacement services, you're helping folks in your community and generating goodwill with the people being let go and those remaining, Canavan says. "You're also lessening the likelihood that a terminated employee will have issues against you that they'll want to turn into litigation."

5. Remember remaining workers
With fewer employees, it's more important than ever to maintain productivity and keep your company going. That's why you can't neglect the workers who are left behind--often with high levels of anxiety about their own job security and new tasks they may be asked to undertake. After the layoff at Shuqualak Lumber, productivity quickly declined. "We all worked harder than we had ever before, but we were using employees that had to be trained to do new jobs and it took some time for them to become familiar with their new responsibilities," Thomas says.

Ongoing communication with remaining employees can tamp down anxiety and rebuild productivity. "The only thing [you] can do to ease anxiety among a workforce that has experienced cutbacks is to keep everybody informed as to how the business is holding up," Johnson says. "The more information you share with employees, the better understanding they will have of the situation, and the more supportive they will be."

Communicate clearly about job duties and expectations, especially if workers will be asked to take on tasks previously handled by others. Also, talk about each employee's work and what led to decisions about who to keep and who to let go. These discussions help people understand what they can do to keep their jobs, Canavan says. And if there's a chance there will be future layoffs, it's fair to let employees know you will continually evaluate the situation. "That's just treating employees as an important part of the business and as responsible individuals who can help move the company forward," Canavan says.

Nancy Mann Jackson is a freelance writer who writes frequently about small business issues. Reach her at www.nancyjackson.com.