How to lay off employees from a bankrupting company
AM Survivor #27
Closing a company is one thing. Letting go of people who, for years, woke up every morning to work for your success is a completely different level of difficulty.
In June of this year, in the second episode of this series, I wrote about when to say “stop” and shut down an unprofitable business:
Now I want to write about how to carry out one of the most painful and thankless operations in an entrepreneur’s life. Laying off employees from a company that is going under is the moment when all the dramatic emotions, suffocated hopes, remnants of ambition, and one hard fact collide: there is nothing more that can be done.
And this is exactly the moment when you must be at your most honest, your clearest, and your most consistent.
First of all, people know it’s the end - earlier than the employer. They feel it under their skin. The worst thing you can do is pretend the situation is stable. You lose credibility faster than you lose money. And once you lose it, you have nothing left.
When you finally manage to say it out loud - to announce what no one wants to hear - it doesn’t mean the ordeal is over. It’s actually the beginning of a very difficult process.
At the same time, the fact that the company is collapsing and employees are losing their jobs does not mean you should treat them leniently and allow them to drift in uncertainty. Paradoxically - it’s precisely in these moments that you must hold the direction even more firmly than ever before.
When a company is sinking, chaos is the greatest enemy. Clarity and purpose - even if it’s the final one - are the only things that keep the situation from falling apart.
An honest conversation is the foundation. Not a motivational speech, not a story about what could have been, not looking for reasons, blaming others... Only the truth - pure, and direct, even if it hurts.
The next step is establishing the tasks for the final weeks of operation. And here comes the difficult moment - this is not the time for pity.
If employees still have contracts, if they are still in their notice period, if they declare readiness to work - do not release them from their duties just because the situation is dramatic.
You are the one losing the business, you are the one whose life’s work is collapsing.
And the fact that the company is fading out does not mean that the remnants of its assets should disintegrate in chaos.
Right now, the last work must be done: moving equipment, packing documents, cleaning the facilities, preparing for liquidation sales, securing assets, completing the projects that can still be completed.
This is not exploitation - it is normal use of working time, which you still pay for or are trying to pay for.
And speaking of money - be honest until the very end. If you have the means, settle everything down to the last dime. If you don’t - don’t scheme, don’t run, don’t lie to the people who stood by your side for years.
Sit down with them, explain the situation, propose solutions. Spreading payments into installments, amicable arrangements, verbal agreements about later settlement - all of this is better than silence or avoidance. People can understand a difficult situation if they feel they are being treated seriously and humanely.
Laying off employees is not just signing papers. It’s a process of organizing the company, emotions, and relationships. Even if your pride urges you to run away, you must stay until the end and close everything in a way that allows you to look at yourself in the mirror.
Employees won’t remember that the company failed - that is a random event. They will remember whether you behaved decently in those final days.
At the same time, don’t expect gratitude. Don’t fool yourself into thinking someone will say, “Boss, it was great anyway.”
People have their own lives, their own bills, their own stress. Your bankruptcy is a real-life problem for them, not an „unsuccessful business story.”
But if you remain honest, clear, and consistent, at least you won’t leave scorched earth behind you. And that, surprisingly, matters immensely - for your reputation, your peace of mind, and your future.
When you lay off employees from a bankrupting company, you are no longer saving the business - you are saving dignity. Yours and theirs.
And although these are some of the hardest conversations you will ever have in your career, they are precisely the ones that show what kind of leader you truly are.
In moments of success, anyone can be a leader. In moments of collapse - only a few.
I wonder what company inspired this post! I know a couple that did it another way.