Managing Employee Separations, Downsizing, and Outplacement Dr. Jeanne Michalski 1

What Are Employee Separations? Employee separations—termination of an employee’s employment with an organization Turnover rate—rate of employee separations in an organization Annualized turnover rate = number of employees leaving * (12) _ average # of employees # months in period during the period

Types of Employee Separations Voluntary separation—the employee ends the relationship with the employer Quits Retirements Involuntary separation—the employer terminates the employment relationship Discharges Layoffs, downsizing, and rightsizing

Costs of Employee Separations

Benefits of Employee Separations Reduced labor costs Replacement of poor performers Increased innovation Opportunity for greater diversity

Managing Early Retirements Features of early retirement policies: Financial incentives package Open window Can substantially reduce size of workforce Must be managed

Managing Early Retirements Possible problems with early retirements: Too many employees accept retirement offer Wrong employees may leave Employees may feel they are being forced out Management: Can ask how employees would respond to early retirement offer Should treat senior employees like all others

Managing Layoffs

Alternatives to Layoffs Attrition Hiring freeze Not renewing contract workers Encourage voluntary time off Redesign jobs Transfers and Relocations Job sharing Freeze or cut pay Retrain workers

Implementing a Layoff Developing Layoff Criteria Notifying employees Developing Layoff Criteria Seniority vs. Employee Performance Communicating to laid-off employees Face-to-face discussion Middle of the week

Implementing a Layoff Coordinating media relations Rumors can be very damaging Maintaining security Some employees need to be escorted out Reassuring survivors of the layoffs Minimize survivor anxiety Listen to survivors’ concerns Create upbeat, energetic climate Show employees you appreciate their work

Outplacement Three goals: Program for separated employees Emotional support Job search assistance Three goals: Reducing the morale problems Minimize litigation initiated by separated employees Assist separated employees in finding comparable jobs as quickly as possible

Summary and Conclusions Separations have both costs and benefits Separations—voluntarily or involuntarily Consider voluntary early retirement as alternative to layoffs Layoffs should be a last resort Use other cost cutting measures first Outplacement services can help separated employees