Kat & Alex

Are tech. companies sticking with a “last-in, first-out” approach to layoffs?

What exactly is last-in, first-out?

You can probably get a sense for this approach from the name alone. Last-in, first-out is a method for making layoff decisions based solely on the tenure of employees. Put simply, the ones who joined your staff most recently should be the first to go when you need to make a staff reduction. 

It might seem like an oversimplified tactic for making such weighty employment decisions, but it’s still surprisingly prevalent. According to research from Revelio Labs reported in The Wall Street Journal, the average tenure among 5,000 workers who lost jobs in 2022 was only 15 months—proof that newer employees are often the first to be shown the door. 

But is last-in, first-out the right approach?

Many companies think layoff decisions based on the last-in, first-out philosophy is systematic and methodical. It feels quantifiable. Plus, it seems like a way to show commitment to a company’s most deep-rooted employees while also holding onto valuable institutional knowledge.

In reality, though? Last-in, first-out can actually create more problems than it solves, including:

  • Sabotaging diversity gains: Diversity, equity, and inclusion (DEI) has become a focus for most employers in recent years, with 83% of U.S. organizations implementing DEI initiatives in 2021. For many, that involved bringing more diverse talent onboard. That could mean last-in, first-out will disproportionately impact people of color, women, and other underrepresented groups who were hired more recently—effectively undoing any diversity gains that companies recently made. 

  • Undermining business priorities: Leaders and decision makers hire to support the business’ current priorities. That might mean that a good chunk of recent hires are all from a specific team or business function. Last-in, first-out would subtract a huge portion of staff from a department that’s likely still a key focus for the business.

  • Impacting hiring efforts: Job seekers are understandably apprehensive about applying for a role with a company that recently announced layoffs — particularly if the reduction primarily impacted newer employees. Do they want to go through the hassle of the hiring process if they might be out of a job only a few months later? 

So…what now?

It’s clear that the last-in, first-out approach shouldn’t always be the default way forward. And, as reported in the same piece in The Wall Street Journal, experts assert that tenure is no longer the main consideration in layoff decisions.

So what are the other options? There’s no default approach—employers are taking a variety of different routes:

  • Considering other factors: Tenure isn’t everything. Employers also need to take other factors into account like business priorities, employee performance, potential skill gaps, and more.

  • Shifting people to other roles: Some companies find clever ways to restructure rather than having to do a major workforce reduction. Employees are given the option to move to a different role and team that’s more pertinent to the business, rather than facing total job loss.

  • Cutting employee hours: For hourly employees, companies can reduce their schedules and hours instead of cutting entire jobs. It still has its challenges, but it can help avoid a huge staff reduction.

  • Using data and algorithms: An impressive 98% of HR professionals say they’ll rely at least partly on software programs to decide who to lay off if they have to reduce staff in 2023. These algorithms use a number of different employee metrics and are a way for companies to take some of the heavy emotions out of the decision-making process.

  • Allowing employees to self-select: Other employers are giving workers the option to move forward with voluntary layoffs, where they opt to leave their jobs for a severance of some other benefit. It’s a way to give employees some ownership over the way forward and also give workers who want a way out—whether for early retirement, a new career, or something else—an opportunity.

There are plenty of options to think through. But even so, there’s still no one “perfect” or “right” way to handle layoffs. It’s a gut-wrenching situation for everyone involved—the companies that need to make the hard choices, the workers who find themselves without jobs, and the remaining employees who need to pick up the pieces.

All of the hard emotions that are wrapped up in layoff decisions can lead companies to default to a quick and seemingly straightforward method like last-in, first out. But in reality—and especially when it comes to layoff decisions—it’s important to remember this: Nothing is ever as simple as it seems. 

Note: This article is the first of a 2 part series, coming next: How some employers are capitalizing on layoffs to snag top talent.