You fire people here, hire over there. And in between, the talent you threw away.
Since January—or perhaps even earlier—we’ve been hearing the same thing everywhere: layoffs, layoffs due to AI, layoffs due to production cuts, mass layoffs. And soon after, that same company is posting twenty job openings. This pattern is no coincidence, and no one is taking the time to analyze it with the depth it deserves.
When a company lays off employees, the narrative always points to the same thing: the market has changed, the structure no longer fits, we need different profiles. And that may be true. But there’s one question almost no one asks before signing off on the layoffs: are we sure these people can’t do something else within the company? Because in most of the cases I’ve seen, the honest answer is that we don’t know, and we haven’t even stopped to check. People are laid off based on their role, not as individuals. And that comes at a huge cost that isn’t being calculated.
What It Really Costs a Company to Lay Off an Employee
There’s a figure that keeps coming up in human resources studies: replacing an employee costs between 50% and 200% of their annual salary, and depending on their level of specialization, it can be even more.
That includes the hiring process, onboarding, the time it takes for the new person to perform at the level of the one who left, and all the institutional knowledge lost along the way. And yet, companies still choose layoffs as a first option rather than a last resort. Why? Because it’s easier to justify to a board, because the numbers look good for the quarter, and because no one asks about the long-term cost.
A few years ago, Ikea faced something all retail companies know well: automation and changes in the business model were rendering certain positions obsolete.
The obvious response would have been the usual—layoffs, redundancies, and a corporate statement about the difficult economic situation. Ikea did something different: it decided to retrain part of its workforce as interior designers, a role the company needed and for which the market was increasingly in demand.
The result was a team of people who already knew the company’s culture, products, and values—people who didn’t need to start from scratch and who had a genuine connection to the brand.
Few companies are willing to invest: time, strategy, and a vision for people that extends beyond the next quarter.
There’s another cost that doesn’t show up on spreadsheets either: what people think of you when you leave. People who’ve been laid off talk to their contacts, on Glassdoor, on LinkedIn, in coffee-break conversations you’ll never hear. And the people who stay are watching too, because every mass layoff sends an internal message about how the company treats its people when things get tough.
For me, reskilling talent is a statement of values, not just an economic decision; it means: we believe in the people we have, we’re willing to invest in them, and we don’t treat each other as disposable. That message is worth more than any employer branding campaign you might hire later.
I’m not saying layoffs are never necessary—sometimes they are. But before it comes to that, there are questions that deserve an honest answer: Do we really know what each person on this team can do beyond their current job description? Have we identified what profiles we’ll need over the next twelve months? Have we cross-referenced those two lists? In most of the companies I’ve worked with, the answer to all three questions is no. And that’s a people strategy problem that HR faces today.
Someone who’s been with your company for five years knows things that aren’t written down anywhere—they know the processes, the culture, the clients, the shortcuts, and the mistakes that have already been made.
That has enormous value, and it’s thrown away every time a termination is signed without first asking if there was another way out. Not every company can be Ikea, but every company can ask the right questions before taking the easy way out.
Want to know a little more about who wrote this article? 👇
People Strategist and founder of Career Insights.
She helps founders and teams make better decisions about people.