© 2001 by Prentice Hall Managing Employee Separations, Downsizing, and Outplacement

© 2001 by Prentice Hall 6-2 Challenges  Identify the costs and benefits associated with employee separation.  Understand the differences between voluntary and involuntary separations.  Avoid problems in the design of early retirement policies.  Design HRM policies for downsizing the organization that are alternatives to a layoff; and, when all else fails, develop a layoff program that is effective and fair to the firm’s stakeholders.  Understand the significance and value of outplacement programs.

© 2001 by Prentice Hall 6-3 Human Resource Replacement Costs Recruitment Costs Selection Costs Training Costs Separation Costs Advertising Campus visits Recruiter time Search firm fees Interviewing Testing Reference checks Relocation Orientation Direct training costs Trainer’s time Lost productivity during training Separation pay Benefits Unemployment insurance cost Exit interview Outplacement Vacant position

© 2001 by Prentice Hall 6-4 The Benefits of Employee Separations  Reduced Labor Costs u An organization can reduce its total labor costs by reducing the size of its workforce.  Replacement of Poor Performers u If an employee does not respond to coaching or feedback, it may be best to terminate him or her.  Increased Innovation u An important source of innovation in companies is new people hired from the outside who can offer a fresh perspective.  The Opportunity for Greater Diversity u Separations create opportunities to hire employees from diverse backgrounds.

© 2001 by Prentice Hall 6-5 Voluntary Separation A separation that occurs when an employee decides, for personal or professional reasons, to end the relationship with the employer.

© 2001 by Prentice Hall 6-6 Excelling at Exit Interviews  Start with the assumption that open and honest responses will not be easily obtained.  Use skilled interviewers, preferably from the HR department.  Assure departing employees that any comments they make will be held confidential (except those that concern potential legal issues) and that their responses won’t endanger their chances of getting a good job reference.  Start with routine departure basics, such as when benefits will end, before moving to the heart of the interview: why the employee is leaving.  Ask open-ended questions and avoid coming across as the company’s interrogator or defender.  Before taking any action, make sure the feedback from exit interviews correlates with other available information.  Take action. People are more likely to feel their comments make a difference at companies that have a history of responding to ex- employees’ perspectives.

© 2001 by Prentice Hall 6-7 Involuntary Separation A separation that occurs when an employer decides to terminate its relationship with an employee due to (1) economic necessity or (2) a poor fit between the employee and the organization.

© 2001 by Prentice Hall 6-8 The Layoff Decision and Its Alternatives Business Needs to Reduce Labor Costs Voluntary Separations Voluntary Work Force Reductions Outplacement Alternatives to Layoffs and Separations Early Retirements Involuntary Separations Layoffs

© 2001 by Prentice Hall 6-9 Alternatives to Layoffs Employment Policies Changes in Job Design Pay and Benefits Policies Training Reduction through attrition Hiring freeze Cut part-time employees Cut internships or co-ops Give subcontracted work to in-house employees Voluntary time off Leaves of absence Reduced work hours Transfers Relocates Job sharing Demotions Pay freeze Cut overtime pay Use vacation and leave days Pay cuts Profit sharing or variable pay Retraining

© 2001 by Prentice Hall 6-10 Worker Adjustment and Retraining Notification Act (WARN) of 1988 A federal law requiring U.S. employers with 100 or more employees to give 60 days’ advance notice to employees who will be laid off as a result of a plant closing or a mass separation of 50 or more workers.

© 2001 by Prentice Hall 6-11 Requirements of Advance Notice for Collective Dismissals in Selected Countries CountryNotice Requirements Belgium Denmark Germany Greece Ireland Italy Luxembourg Netherlands United Kingdom 30 days 22 to 32 days 60 to 75 days 2 to 6 months 30 to 90 days (if at least ten workers are involved)

© 2001 by Prentice Hall 6-12 Implementing a Layoff  Developing layoff criteria  Notifying employees  Communicating to laid-off employees  Coordinating media relations  Maintaining security  Reassuring the survivors

© 2001 by Prentice Hall 6-13 The Dos and Don’ts of Terminating/Laying Off Employees DOs  Give as much warning as possible for mass layoffs.  Sit down one-on-one with the individual, in a private office.  Complete a firing session within 15 minutes  Provide written explanation of severance benefits.  Provide outplacement services away from company headquarters.  Be sure the employee hears about his or her termination from a manager, not a colleague.  Express appreciation for what the employee has contributed, if appropriate.

© 2001 by Prentice Hall 6-14 The Dos and Don’ts of Terminating/Laying Off Employees (cont.) DON’Ts  Don’t leave room for confusion. Tell the individual in the first sentence he or she is terminated.  Don’t allow time for debate.  Don’t make personal comments; keep the conversation professional.  Don’t rush the employee off-site unless security is really an issue.  Don’t fire or lay people off on significant dates, like the twenty-fifth anniversary of their employment or the day their mother died.  Don’t fire employees when they are on vacation or have just returned.

© 2001 by Prentice Hall 6-15 The Goals of Outplacement  Reducing the morale problems of employees who are about to be laid off so that they remain productive until they leave the firm  Minimizing the amount of litigation initiated by separated employees  Assisting separated employees in finding comparable jobs as quickly as possible.