HR risks losing top performers with voluntary buyout programs

Tech workers are no stranger to the unfortunate reality of layoffs.

Amazon has laid off 59,560 employees since March 2020, more than any other tech giant, followed by Intel with 43,167; Meta with 35,700; and Microsoft with 35,355, according to the layoff database Layoffs.fyi.

Microsoft has also made headlines for another headcount-cutting strategy: voluntary buyouts. This week, it offered its largest-ever voluntary buyouts to 60,000 employees, or one-quarter of its workforce, the Wall Street Journal reported. In April, Microsoft offered its first-ever voluntary buyouts to 8,600 employees, CNBC reported.

The buyout program “meet[s] different business needs while continuing to create opportunities for our own people to grow and contribute,” Amy Coleman, Microsoft’s chief people officer, said in a note to employees that the company has since made public.

“Companies, with reputations to protect, are looking at incentives for employees to exit instead of doing mass layoffs,” John Frehse, global head of labor strategy at consulting firm Ankura, told HR Brew. “It’s expensive, but it’s the kinder way to reduce headcount.”

What’s happening? In today’s economic climate, many companies are conducting layoffs to reduce costs. Some are looking to divert investments from their human workforce to their AI and data centers, Frehse said.

“What we’re seeing in the marketplace right now is companies are not distressed,” he said. “They’re actually planning for extreme growth, and that growth does not involve the workforce.”

While buyout programs may have a “softer landing” with employees than mass layoffs, Frehse said, companies that use them risk losing their best talent. Top performers may take a buyout offer because they often have the skills, network, and experience to find another job, he added, while low performers may decline out of fear of not landing another role.

“This is the great risk to HR professionals and talent acquisition professionals,” he said. “Talent will be walking out the door and you’ll be paying your highest-performing employees to leave in some instances.”

Reminders for HR. Any reduction in force can damage workforce stability and employee morale, Joe Mull, employee commitment expert and author of Employalty, told HR Brew. The best strategy for people leaders navigating these transitions is to lead with honesty and empathy.

“We need to tell the truth, and we need to do it with compassion,” Mull said. “Just tell the truth. Be honest about feelings. Acknowledge that it’s hard, and sit with people as they move through it.”

Microsoft responded to HR Brew’s request for comment by referring to the public announcement of the voluntary exit offer from Amy Coleman, Microsoft’s chief people officer.