Layoffs: The Blame Game

As markets continue to fluctuate amid economic woes—and as AI disrupts industry after industry—it’s not surprising that firms and analysts believe layoffs will continue into fall and winter. What is surprising is the factor leaders blame for this development: employee performance.

One year after they cited overhiring as the primary cause of layoffs, some 30% of HR leaders, in a new report, blame underperformance for cutbacks—placing it in a tie with overhiring as the number-one factor. Restructuring and incompatible skill sets closely follow, according to data from LHH, but the focus on performance has surprised many experts. They say it may reflect corporate leaders’ views of both employees and remote work since the pandemic ended.

“Historically, layoffs have been an event where the company wouldn’t blame the employee,” says HR expert Ron Porter, senior partner at Korn Ferry. Instead, he says, firms would cite causes like unanticipated business slowdowns or the need to cut costs.

So far, the tech industry alone has already laid off almost 125,000 workers this year, according to Layoffs.fyi. And surveys indicate that there’s more to come: Three-quarters of organizations are undertaking or considering 2024 layoffs. But firms rarely talk about the issue of performance as a motivating factor. “Out of respect, you don’t want people leaving with the messaging that they’re the worst performers,” says organizational strategist Maria Amato, senior client partner at Korn Ferry. In her view, under-performance may have less to do with employees themselves than with challenges in firms’ hiring, onboarding, and support practices.

Certainly, some corporate leaders continue to be skeptical of remote- or hybrid-work arrangements, insisting that working outside the office affects productivity and questioning whether some workers might be abusing the flexibility. Word of impending layoffs related to performance could spark fears among employees watching the tightening job market. Indeed, in a recent poll, a third of workers said they feared losing their job before being able to find a new one.

DEI experts, meanwhile, say performance-related layoffs can work against certain groups—and advise leaders to be careful about how they reduce staff. Decades of research suggests that women and people of color consistently receive lower performance ratings. “If managers are deciding layoffs off of performance ratings, they’re going to reinforce inequities,” says Andrés Tapia, global diversity, equity, and inclusion strategist at Korn Ferry.

Performance-related cutbacks typically focus on annual reviews, say experts. “Companies will likely hide behind skill-set needs and the needs of the organization,” says Dennis Deans, vice president of global human resources at Korn Ferry. Using performance ratings to guide layoffs is a norm, at least as a starting point: Firms typically begin the process by identifying underperformers, says Deans. “They’re not going to broadcast that detail.”

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