Layoff paradox

Daniel Sada talking about layoff paradox and why layoffs are easier than firing an employee.

To fire someone for performance, managers must document everything meticulously. Every missed deadline, every subpar deliverable, every coaching conversation needs to be recorded. HR requires a paper trail that can withstand legal scrutiny. This process can take months or even years, during which the underperforming employee continues to collect their salary and potentially drag down team morale.

The legal risk is real. Even in at-will states, wrongful termination lawsuits can be expensive and time-consuming. Companies worry about discrimination claims, especially if the fired employee belongs to a protected class. Better to have an ironclad documentation trail than face a costly legal battle.

Layoffs, paradoxically, are “cleaner.” When you eliminate entire roles or teams, you sidestep the performance documentation requirements. You’re not firing someone for being bad at their job, you’re eliminating the job itself. The legal risk is minimal, and you can even look compassionate by offering severance packages and transition support. Employees can even claim unemployment and keep their income for months!

For VPs and executives, layoffs solve multiple problems at once: they can eliminate underperformers without the messy documentation process, reduce headcount to hit financial targets, and maintain the narrative that they’re making “tough but strategic decisions” rather than admitting they failed to manage performance effectively.

The bitter irony? Getting laid off is often better for the employee than being fired. Layoffs typically come with severance, extended healthcare, and the ability to say you were “affected by restructuring” rather than “terminated for cause.” You get more time to find your next job, and your professional reputation remains intact.