1. Managing Employee Separations, Downsizing, and Outplacement
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Managing Employee Separations, Downsizing, and Outplacement

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.

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
The costs of employee separations depend on whether managers intend to eliminate the position or to replace the departing employee. By eliminating positions, the company can reduce costs in the long run. This is why many companies in the last decade have downsized their labor forces. However, as this illustration shows, even when positions are eliminated, the separation costs can be considerable.

4. The Benefits of Employee Separations
Reduced Labor Costs
An organization can reduce its total labor costs by reducing the size of its workforce.
Replacement of Poor Performers
If an employee does not respond to coaching or feedback, it may be best to terminate him or her.
Increased Innovation
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
Separations create opportunities to hire employees from diverse backgrounds.
Although many people see separations negatively, they have many benefits; some of which are outlined in this illustration. An employee may receive some potential benefits from a separation as well. An individual may escape from an unpleasant work situation and eventually find one that is less stressful or more personally satisfying.

5. 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.
An employee’s final interview following separation is called an exit interview. The purpose of the interview is to find out the reasons why the employee is leaving (if the separation is voluntary) or to provide counseling and/or assistance in finding a new job. This graphic highlights key elements of successful and effective exit interviews.

6. Voluntary Separation
A separation that occurs when an employee decides, for personal or professional reasons, to end the relationship with the employer.

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.

8. The Layoff Decision and Its Alternatives
Business Needs to
Reduce Labor Costs
Alternatives to Layoffs
and Separations
Voluntary
Separations
Involuntary
Separations
This graphic illustrates some alternatives to layoffs. These alternatives include changes in employment policies, job design, pay and benefit policies, and training. Managers can use these alternatives both to reduce labor costs and to protect the jobs of full-time employees.
Early Retirements
Voluntary Work
Force Reductions
Layoffs
Outplacement

9. Alternatives to Layoffs
Employment
Policies
Changes in
Job Design
Pay and Benefits
Policies
Training
Reduction
through attribution
Hiring freeze
Cut part-time
employees
Cut internships
or co-ops
Give subcontracted
work to in-house
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
This illustration outlines the possible layoff alternatives mentioned in another graphic. Specific examples are given for possible changes in employment policies, job design, pay and benefits policies, and training.

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.

11. Requirements of Advance Notice for Collective Dismissals in Selected Countries
Country
Notice 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)
There are several arguments in favor of giving at least several weeks’ notice prior to a layoff. It is socially and professionally correct to extend employees this courtesy. But there are also arguments in favor of giving no notification. If the labor relations climate is poor, there is the potential for theft or sabotage to company equipment. In addition, the productivity of employees who are losing their jobs may decline. This graphic illustrates how requirements for layoff notification tend to be more restrictive in European countries than in the United States. In Sweden, management must give at least 60 days’ advance notice in layoffs of five or more workers, while in France as few as two workers must get at least 45 days’ notification.

12. The Dos and Don’ts of Terminating/Laying Off Employees
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.
Terminating or laying off employees is difficult and unpleasant. However, there are certain procedures that, if followed, can make the process easier. This illustration highlights consulting firms’ suggestions of procedures that should be followed in order to facilitate terminating or laying off employees.

13. The Dos and Don’ts of Terminating/Laying Off Employees (cont.)
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.
This illustration highlights consulting firms’ suggestions of procedures that should not be followed when terminating or laying off employees.

14. 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.
The goals of an outplacement program reflect the organization’s need to control the disruption caused by layoffs and other employee separations. The most important of these goals are presented here.