The Information Asymmetry Problem: When Leadership Operates in the Dark
I’ve been through seven layoffs in my career. Some as the person making decisions, others as someone watching from the sidelines, and others counseling collegaues on their next step after being laid off. Each time, I’ve witnessed the same destructive pattern: critical information gets hoarded at the top while the leaders who need to execute decisions operate blind.
This isn’t about whether layoffs are necessary or how to communicate them to employees. It’s about a more fundamental problem that destroys trust and effectiveness when organizations need both most.
The Inner Circle Problem
Here’s what typically happens. The CEO and CFO know layoffs are coming three months out. Maybe the head of HR gets read in. They start planning in secret - which departments what percentage, timing with board meetings. The circle stays deliberately small.
Meanwhile, department heads are still being asked to submit hiring plans. VPs are approving training budgets. Directors are setting quarterly goals for teams that won’t exist. These leaders aren’t stupid - they can sense something’s wrong - but they’re operating with incomplete information.
I watched this play out at a media technology company where I was running product. The executive team knew we were cutting 30% of engineering weeks before it happened. But they kept asking me for detailed roadmaps and sprint planning. I spent hours with my team leads mapping out Q2 deliverables, knowing something felt off but not knowing what.
When the layoffs hit, my credibility with the remaining was shot. Not because I had lied to them, but because I had unknowingly asked them to invest time and energy in plans that leadership already knew were meaningless.
The Execution Gap
The real damage happens during execution. Leaders who haven’t been part of the planning process are suddenly expected to implement decisions they don’t understand. They can’t answer basic questions from their teams because they literally don’t know the answers.
I’ve seen directors find out about layoffs the same morning they have to deliver them. They walk into rooms full of people asking logical questions: Why these roles? What’s the new structure? How do we prioritize work now? And the director has no answers because they weren’t part of the strategic thinking.
This creates a cascade of problems. Teams lose confidence in their immediate managers. Middle management loses credibility they need to lead through the transition. The organization becomes less resilient exactly when it needs to be more adaptable.
The Trust Calculation
Senior executives often justify the secrecy as necessary to prevent leaks and maintain morale. But this calculation misses the downstream cost to organizational trust.
When leaders discover they’ve been operating with bad information, they become more cautious about futurements. They start hedging their communications with teams. They become less decisive because they’re not sure what they don’t know.
I remember a VP at Microsoft telling me after a reorganization: “I don’t know what else they haven’t told me.” That uncertainty changed how he operated for months afterward. He became more political, more careful, less willing to take risks. The organization lost some of his best leadership qualities because the information asymmetry had broken his trust in the system.
A Better Approach
There’s a middle path between telling everyone everything and keeping leaders completely in the dark. It requires being more thoughtful about who needs what information when.
The key insight is distinguishing between planning information and execution information. You don’t need to involve every leader in strategic planning, but you do need to prepare them for execution.
At a startup where I was head of product, we faced a significant reduction in force. Instead of keeping it completely secret, the CEO brought department heads into planning two weeks before execution. Not to debate the decision, but to think through implementation. How would we reorganize teams? What projects would we pause? How would we communicate priorities?
This approach had several advantages. Leaders could ask questions and understand the reasoning. They could prepare their teams for change without revealing specifics. Most importantly, when the announcement came, they were ready to lead through it rather than just react to it.
The Practical Framework
If you’re in a position to influence this process, here’s what works:
Expand the planning circle gradually. Start with strategic decisions at then bring in operational leaders for implementation planning. Give people when they need it to be effective, not at the last possible moment.
Separate decision-making from execution planning. Leaders don’t need to be part of every strategic decision, but they do need enough context to execute well. Frame it as “here’s what we’re doing and here’s how we make it work” rather than “here’s what we might do.”
Acknowledge the information gap explicitly. If you can’t share everything, say so. “I can’t give you all the context right now, but I nee me on this direction.” That’s better than pretending everything is normal when it clearly isn’t.
Plan for credibility recovery. Assume that some trust will be damaged and think about how to rebuild it. This might mean giving leaders more autonomy afterward, or being more transparent about future decisions.
The Long Game
Organizations that handle information asymmetry well during difficult periods come out stronger. Their leaders maintain credibility with teams. Their culture remains more resilient. They can move faster on the next challenge because people still trust the system.
Organizations that handle it poorly create lasting damage. Leaders become more political. Teams become more cynical. The next crisis becomes harder to navigate because people are already defensive.
The choice isn’t between transparency and secrecy. It’s between thoughtful information management and letting information asymmetry destroy the leadership capacity you need most when times get tough.
