How did graphic design tech company show its generosity amid layoffs?
These days, news of layoffs often go viral — but, recently, a layoff announcement made the news for all the right reasons.
Melanie Perkins, co-founder and (CEO) of Canva, a graphic design tech company based in Australia, announced restructuring and relocation would cut 1,271 jobs — 22 per cent of its workforce.
According to the company, the cuts in 37 different countries are coming to bring “more teams together in person” and “collapse the layers,” Tthe Guardian reports.
However, it is the severance packages that have gone viral across social media — with many calling it a “company doing it right.”
Canva says departing employees will receive six months of salary and retain health coverage for up to 12 months where their country’s benefits allow it. The company also says employees can apply for a $10,000 grant to help start their own ventures, Inc magazine and tThe Guardian report.
David Zweig, professor of management at the University of Toronto says the company’s decision is a smart business move — not only for the brand but for the chance to avoid future litigation.
“Obviously, if you treat people poorly through this process — when you’re delivering any kind of negative information — their reactions are going to be so much more negative,” he says.
Why dignity matters in layoffs
Zweig says Canva’s example is an important reminder of why dignity and respect always matter in situations like this.
He points out that decades of research show that when layoffs or cuts are handled with dignity and respect, it tends to lead to more positive outcomes. He says it is part of what researchers call “interactional justice” — a process of how you treat people when delivering bad news.
“Research is very clear that when you treat people with dignity and respect, you give them an honest explanation and justification for why this outcome is occurring — and then you treat them with dignity through the process, just like Canva did for its employees,” he says. “It helps the employees who are experiencing this negative outcome respond more favourably.”
While layoffs are generally a difficult thing, Zweig says any organization that participates in the process of justice and dignity tends to win in the long run.
“It avoids things like people retaliating against the organization and trying to get revenge,” he says. “It also sends a strong signal to the surviving employees — ‘This company, even though we had to go through this, if this happens to me, they’re going to treat me well.'"
What surviving employees see — and what it costs
The dignity aspect is also important to the surviving employee on how departing employees are treated — if not more so, Zweig says.
The adverse effect of not keeping that dignity aspect in mind, he says, can lead to much more negative reactions — extending beyond the departing employees to those who witnessed the layoff and stayed.
“If my company is going to treat me badly, why on earth should I be engaged?” he says. “Why should I put in additional effort? Why should I help my colleagues do their work? I’m only going to stick to the letter of my work. So, all of that goes out the window.”
How Canva delivered the news
Inc magazine reports that Canva employees were notified in a memo given to staff about the restructuring. In the memo, Perkins called the layoff “the hardest moment in our 13-year history” and explained the reason behind the cuts, writing: “As we shared earlier this year, our growth has slowed for the first time in a decade. To set ourselves up for the next decade, we need to refound Canva."
Zweig says the same concept applies across other situations — such as letting an employee know they did not get a promotion.
What Canadian employers should take away
Zweig says the dignity aspect should not come in isolation. While Canadian employers do not need to be giving away laptops or funding start-ups in severance packages like Canva, he says they must be considered fair.
“The severance package or whatever the benefit package is for people who are being let go has to be reasonable and fair,” he says.
While there are different benchmarks for each organization, employers should avoid “saving a few bucks by offering less," he says.
“In the long run, that is going to cost more in a number of different ways. It’s hard to calculate, but they’re tangible. The survivors, how they feel, how they perform, how they behave after these layoffs, and even the retaliation, litigation — the reputation of the brand. That’s all important."
According to most employment standards, severance pay can vary depending on company size and length of service — however, even then the entitlements are not beyond the minimum requirements. It can also vary depending on provincial statute and the common law. For more severance pay, read CHRR’s guide to severance pay best practices.
Zweig says handling layoffs with dignity also helps in situations where employees come back through legal means claiming an unfair process.
In situations such as this, HR should focus on having a strong voice in the process, he says.
“Can we do something else to help people leave with a little more dignity and security and recognition of what they gave us?” he says.
