Source : The Hard Thing About Hard Things - Ben Horowitz
It’s also important to be fair to outgoing employees, giving them decent severance packages and good references. This not only helps the morale of those who stay but also makes future recruiting easier, it is also simply the right thing to do.
When it comes to justifying the layoffs, CEOs must be clear that they are necessary because the company failed the employees.
Admitting this failure has two main benefits:
First, an admission of failure helps solidify trust, in this case between the remaining employees and the CEO.
Second, everyone must understand that the company failed and must now find its way forward and move on.
How does this work in practice?
If, for example, you need to lay off people due to the company not reaching its goals, don’t justify this by saying that the company is correcting its underperformance.
Instead explain that unfortunately, because the company failed to hit its targets, some outstanding talent has to be laid off.