CHAPTER 13: EMPLOYEE SEPARATION Copyright © 2005 South-Western. All rights reserved.

Employee Separation Reasons for employee separationsReasons for employee separations –Pressures on firms to remain competitive & efficient –Decline in employee commitment to employers Importance of managing separationsImportance of managing separations –Transitions of employees out of firm go smoothly –Continuing operations of firm not disrupted –Important professional relationships not damaged Types of separationsTypes of separations –Reductions-in-force, turnover, & retirements Reasons for employee separationsReasons for employee separations –Pressures on firms to remain competitive & efficient –Decline in employee commitment to employers Importance of managing separationsImportance of managing separations –Transitions of employees out of firm go smoothly –Continuing operations of firm not disrupted –Important professional relationships not damaged Types of separationsTypes of separations –Reductions-in-force, turnover, & retirements

Copyright © 2005 South-Western. All rights reserved. Reductions-in-Force (RIFs) Causes of reductionsCauses of reductions –Restructuring as a result of mergers & acquisitions –Attempts to make organization more cost competitive –Adjustments to declining business environment conditions Reasons for reductionsReasons for reductions –Inefficiency in operations –Lack of adaptability in marketplace –Weakened competitive position in industry Methods for dealing with reductionsMethods for dealing with reductions –Continuance pay & outplacement programs Causes of reductionsCauses of reductions –Restructuring as a result of mergers & acquisitions –Attempts to make organization more cost competitive –Adjustments to declining business environment conditions Reasons for reductionsReasons for reductions –Inefficiency in operations –Lack of adaptability in marketplace –Weakened competitive position in industry Methods for dealing with reductionsMethods for dealing with reductions –Continuance pay & outplacement programs

Copyright © 2005 South-Western. All rights reserved. Reductions-in-Force (RIFs) Worker Adjustment Retraining & Notification Act (WARN) of 1989Worker Adjustment Retraining & Notification Act (WARN) of 1989 –Requires employers with more than 100 employees to provide sixty days written notice of any facility closings or large-scale layoffs of 50 or more employees –WARN does no apply to governmental agencies –Exceptions to WARN “Faltering company”“Faltering company” “Unforeseeable circumstance”“Unforeseeable circumstance” Natural disasterNatural disaster “Temporary facility”“Temporary facility” Worker Adjustment Retraining & Notification Act (WARN) of 1989Worker Adjustment Retraining & Notification Act (WARN) of 1989 –Requires employers with more than 100 employees to provide sixty days written notice of any facility closings or large-scale layoffs of 50 or more employees –WARN does no apply to governmental agencies –Exceptions to WARN “Faltering company”“Faltering company” “Unforeseeable circumstance”“Unforeseeable circumstance” Natural disasterNatural disaster “Temporary facility”“Temporary facility”

Copyright © 2005 South-Western. All rights reserved. Workforce Management Strategies

Copyright © 2005 South-Western. All rights reserved. TurnoverTurnover Involuntary turnoverInvoluntary turnover –Employees asked to leave organization for cause or due to circumstances that cause reduction-in-force Voluntary turnoverVoluntary turnover –Employees who leave organization on own initiative “Beneficial” turnover“Beneficial” turnover –Low performing employees depart &/or new higher performing employees promoted or hired as replacements Involuntary turnoverInvoluntary turnover –Employees asked to leave organization for cause or due to circumstances that cause reduction-in-force Voluntary turnoverVoluntary turnover –Employees who leave organization on own initiative “Beneficial” turnover“Beneficial” turnover –Low performing employees depart &/or new higher performing employees promoted or hired as replacements

Copyright © 2005 South-Western. All rights reserved. Exhibit 13-2 Performance-Replaceability Strategy Matrix

Copyright © 2005 South-Western. All rights reserved. Exhibit 13-3 Strategic Management of Turnover & Retention

Copyright © 2005 South-Western. All rights reserved. Retention of High Performers Critical HR issueCritical HR issue –Development of policies & programs to retain high performers &/or those difficult to replace Employers face competition fromEmployers face competition from –Other organizations –From employees they are attempting to retain (to start-ups) Critical HR issueCritical HR issue –Development of policies & programs to retain high performers &/or those difficult to replace Employers face competition fromEmployers face competition from –Other organizations –From employees they are attempting to retain (to start-ups)

Copyright © 2005 South-Western. All rights reserved. RetirementRetirement Age Discrimination Act of 1967Age Discrimination Act of 1967 –Prohibits employer from setting mandatory retirement age except in certain occupations (e.g. pilots) RetirementRetirement –Creates advancement opportunities for younger employees & reduces payroll costs –Can cause loss of vital historical knowledge of organization, industry & marketplace –Part-time & consulting work can ease transition of older workers into retirement Age Discrimination Act of 1967Age Discrimination Act of 1967 –Prohibits employer from setting mandatory retirement age except in certain occupations (e.g. pilots) RetirementRetirement –Creates advancement opportunities for younger employees & reduces payroll costs –Can cause loss of vital historical knowledge of organization, industry & marketplace –Part-time & consulting work can ease transition of older workers into retirement

Copyright © 2005 South-Western. All rights reserved. Reading 13.1 Holding on to High Performers: A Strategic Approach to Retention Major turnover trendsMajor turnover trends –Increasing turnover rates having significant impact on organizational success –Costs associated with turnover, especially of high performers, continues to escalate Why companies fail to address turnover issueWhy companies fail to address turnover issue –Pervasive belief that high turnover is inevitable in strong economy –Failure of companies to develop effective strategies for managing employee turnover Major turnover trendsMajor turnover trends –Increasing turnover rates having significant impact on organizational success –Costs associated with turnover, especially of high performers, continues to escalate Why companies fail to address turnover issueWhy companies fail to address turnover issue –Pervasive belief that high turnover is inevitable in strong economy –Failure of companies to develop effective strategies for managing employee turnover

Copyright © 2005 South-Western. All rights reserved. Reading 13.1 Holding on to High Performers: A Strategic Approach to Retention Well-planned & coordinated retention strategyWell-planned & coordinated retention strategy –Selection & orientation –Training & career management –Motivation & compensation Selection & orientationSelection & orientation –Recruitment practices that focus on cultural fit –Define critical “success factors” for job –Behavioral-based selection interviewing –Effective orientation Well-planned & coordinated retention strategyWell-planned & coordinated retention strategy –Selection & orientation –Training & career management –Motivation & compensation Selection & orientationSelection & orientation –Recruitment practices that focus on cultural fit –Define critical “success factors” for job –Behavioral-based selection interviewing –Effective orientation

Copyright © 2005 South-Western. All rights reserved. Reading 13.1 Holding on to High Performers: A Strategic Approach to Retention Training & career managementTraining & career management –Create learning environment –Adopt interactive approach to training & development –Establish development as line responsibility –Offer variety of development opportunities Training & career managementTraining & career management –Create learning environment –Adopt interactive approach to training & development –Establish development as line responsibility –Offer variety of development opportunities

Copyright © 2005 South-Western. All rights reserved. Reading 13.1 Holding on to High Performers: A Strategic Approach to Retention Motivation & compensationMotivation & compensation –Many companies are willing to match financial offerings –May not be wise to focus primarily on money –Incorporate nonfinancial rewards into compensation programs –Enlist high performers in solving business problems –Recognize employee efforts more informally, more personally, & more frequently Motivation & compensationMotivation & compensation –Many companies are willing to match financial offerings –May not be wise to focus primarily on money –Incorporate nonfinancial rewards into compensation programs –Enlist high performers in solving business problems –Recognize employee efforts more informally, more personally, & more frequently

Copyright © 2005 South-Western. All rights reserved. Reading 13.1 Holding on to High Performers: A Strategic Approach to Retention Final recommendationsFinal recommendations –Design strategies that reflect particular situation –Evaluate effectiveness of efforts as systematically as possible –Conduct exit interviews Final recommendationsFinal recommendations –Design strategies that reflect particular situation –Evaluate effectiveness of efforts as systematically as possible –Conduct exit interviews

Copyright © 2005 South-Western. All rights reserved. Reading 13.2 Strategies for Responsible Restructuring Economic consequences of employment downsizingEconomic consequences of employment downsizing –Neither employment nor asset downsizing strategies yielded long-term payoffs significantly larger than those generated by stable employers –Not possible for firms to “save” or “shrink” their way to prosperity –Prosperity was only possible by growing businesses –Firms cannot assume that layoffs are quick fix Economic consequences of employment downsizingEconomic consequences of employment downsizing –Neither employment nor asset downsizing strategies yielded long-term payoffs significantly larger than those generated by stable employers –Not possible for firms to “save” or “shrink” their way to prosperity –Prosperity was only possible by growing businesses –Firms cannot assume that layoffs are quick fix

Copyright © 2005 South-Western. All rights reserved. Reading 13.2 Strategies for Responsible Restructuring What’s different about current layoffs?What’s different about current layoffs? –Healthy companies hoping to reduce costs & boost earnings by reducing head count –At same time firms are firing some people, are hiring others –More managers are briefing employees regularly about economic status of companies, which raises awareness & prepares employees –Outplacement centers have become America’s new hiring halls –Phenomenon of layoffs not limited to U.S. What’s different about current layoffs?What’s different about current layoffs? –Healthy companies hoping to reduce costs & boost earnings by reducing head count –At same time firms are firing some people, are hiring others –More managers are briefing employees regularly about economic status of companies, which raises awareness & prepares employees –Outplacement centers have become America’s new hiring halls –Phenomenon of layoffs not limited to U.S.

Copyright © 2005 South-Western. All rights reserved. Reading 13.2 Strategies for Responsible Restructuring Ten mistakes to avoid when restructuringTen mistakes to avoid when restructuring 1.Failure to be clear about long- & short-term goals 2.Use of downsizing as first resort, rather than as last 3.Use of non-selective downsizing 4.Failure to change ways work is done 5.Failure to involve workers in restructuring process 6.Failure to communicate openly & honestly 7.Inept handling of those who lose jobs 8.Failure to manage survivors effectively 9.Ignoring effects on other stakeholders 10.Failure to evaluate results & learn from mistakes Ten mistakes to avoid when restructuringTen mistakes to avoid when restructuring 1.Failure to be clear about long- & short-term goals 2.Use of downsizing as first resort, rather than as last 3.Use of non-selective downsizing 4.Failure to change ways work is done 5.Failure to involve workers in restructuring process 6.Failure to communicate openly & honestly 7.Inept handling of those who lose jobs 8.Failure to manage survivors effectively 9.Ignoring effects on other stakeholders 10.Failure to evaluate results & learn from mistakes

Copyright © 2005 South-Western. All rights reserved. Reading 13.2 Strategies for Responsible Restructuring What to doWhat to do –Carefully consider rationale behind restructuring –Consider virtues of stability –Managers make concerns known to employees & seek input –Don’t use downsizing as “quick fix” to achieve short- term goals in face of long-term problems –Be sure employees perceive process as fair What to doWhat to do –Carefully consider rationale behind restructuring –Consider virtues of stability –Managers make concerns known to employees & seek input –Don’t use downsizing as “quick fix” to achieve short- term goals in face of long-term problems –Be sure employees perceive process as fair

Copyright © 2005 South-Western. All rights reserved. Reading 13.2 Strategies for Responsible Restructuring What to doWhat to do –Make decisions in consistent manner –Communicate regularly & in variety of ways –Give survivors reason to stay, & prospective new hires reason to join –Train employees & managers in new ways of operating –Examine all HR systems carefully in light of change of strategy or environment facing firm What to doWhat to do –Make decisions in consistent manner –Communicate regularly & in variety of ways –Give survivors reason to stay, & prospective new hires reason to join –Train employees & managers in new ways of operating –Examine all HR systems carefully in light of change of strategy or environment facing firm

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies Mandatory retirement can cause great economic & emotional hardship to many older workersMandatory retirement can cause great economic & emotional hardship to many older workers Shock of compulsory retirement & resulting loss of productive work & earning power may lead to impaired health & mental well-beingShock of compulsory retirement & resulting loss of productive work & earning power may lead to impaired health & mental well-being Mandatory retirement can cause great economic & emotional hardship to many older workersMandatory retirement can cause great economic & emotional hardship to many older workers Shock of compulsory retirement & resulting loss of productive work & earning power may lead to impaired health & mental well-beingShock of compulsory retirement & resulting loss of productive work & earning power may lead to impaired health & mental well-being

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies A strong case for flexible retirement policiesA strong case for flexible retirement policies –Population getting older –People living longer –Labor force is growing at slower rate –Age distribution changing in favor of older groups –Labor market activity declining among older workers –Average retirement age is declining A strong case for flexible retirement policiesA strong case for flexible retirement policies –Population getting older –People living longer –Labor force is growing at slower rate –Age distribution changing in favor of older groups –Labor market activity declining among older workers –Average retirement age is declining

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies Management of labor shortages in some highly skilled trades in next decade will requireManagement of labor shortages in some highly skilled trades in next decade will require –Employment strategies that slow down withdrawal of older workers from areas of highest productivity & growth in economy or –Prevent total loss of such vital skills & expertise in post-retirement period Management of labor shortages in some highly skilled trades in next decade will requireManagement of labor shortages in some highly skilled trades in next decade will require –Employment strategies that slow down withdrawal of older workers from areas of highest productivity & growth in economy or –Prevent total loss of such vital skills & expertise in post-retirement period

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies Age-performance relationshipAge-performance relationship –Individual differences much more important than age group differences –Chronological age accounts for only small percentage of variance in performance –Age & performance appears to be generally unrelated Age-performance relationshipAge-performance relationship –Individual differences much more important than age group differences –Chronological age accounts for only small percentage of variance in performance –Age & performance appears to be generally unrelated

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies Arguments for mandatory retirementArguments for mandatory retirement –Assumes that job performance & age become negatively correlated after worker reaches certain age –Enables “retirement with dignity” & allows for dismissal without cause other than age –Minimizes need to monitor & assess older worker performance –Justifies compensation sequencing schemes that underpay younger workers & overpay older workers –Assumes older workers are less trainable or adaptable –Serves need for organizational planning & renewal Arguments for mandatory retirementArguments for mandatory retirement –Assumes that job performance & age become negatively correlated after worker reaches certain age –Enables “retirement with dignity” & allows for dismissal without cause other than age –Minimizes need to monitor & assess older worker performance –Justifies compensation sequencing schemes that underpay younger workers & overpay older workers –Assumes older workers are less trainable or adaptable –Serves need for organizational planning & renewal

Copyright © 2005 South-Western. All rights reserved. Reading 13.3 Retirement of Older Workers: Issues & Policies Implications for organizational retirement policy developmentImplications for organizational retirement policy development –Monitor retirement policies so they meet requirements of legislation –Undertake human resource planning to insure levels of required skills are maintained & not unduly depleted by retirement programs & policies –Develop age-neutral policies to ensure effective access to & utilization of older workers –Create flexible work & retirement arrangements that met needs of older workers & organization Implications for organizational retirement policy developmentImplications for organizational retirement policy development –Monitor retirement policies so they meet requirements of legislation –Undertake human resource planning to insure levels of required skills are maintained & not unduly depleted by retirement programs & policies –Develop age-neutral policies to ensure effective access to & utilization of older workers –Create flexible work & retirement arrangements that met needs of older workers & organization