MGTO 231Human Resources ManagementSeparations and downsizing

Dr. Kin Fai Ellick WONG

Prologue: 楚漢驕雄

史記　淮陰侯列傳 項 梁 敗 ， 又 屬 項 羽 ， 羽 以 為 郎 中 ． 數 以 策 干

項 羽 ， 羽 不 用 ． This was not just a simple “separation”…

漢 王 （即劉邦）之 入 蜀 ， 信 （即淮陰侯）亡 楚 歸 漢 …

The separation not only led 項羽 to lose one strong subordinate, but also…

led his competitor 劉邦 to have the strongest subordinate

History revealed that:十面埋伏　四面楚歌項羽 was defeated by 劉邦，韓信 was the

Highest Commander of the troop History might have changed if 項羽 did

not let 韓信 go…

OutlineOutline

Basic conceptsBasic concepts

Types of employee separationsTypes of employee separations

Managing layoffsManaging layoffs

Alternatives to layoffsAlternatives to layoffs

Basic concepts

Employee separation

The termination of an employee’s membership in an organization 天下無不散之筵席 (There is no everlasting meeting) 話說天下大勢，合久必分，分久必合 (The natural

trend is that merging is followed by separation and separation is followed by merging)

Could be terminated by either side Separations need cost

Recruitment, selection, training, and separation costs

Recruitment costs Advertising, campus visits, recruiter’s time, search firm

fees Selection costs

Interview, testing, reference checks, relocation Training costs

Orientation, assessment, direct training, evaluation, trainer’s time

Separation costs Separation pay, benefits, vacant positions

So, the higher the turnover rate, the more the cost of employee separations

Turnover rate The rate of employee separations in an organization

Some organizations may organize exit interview and outplacement assistance after employees’ separations

Given that separations need costs, why are they so common?

Some benefits of employee separation

Reduces labor costs瘦身 (“fat” reduction)The salary savings may outweigh the

separation costs Replaces poor performers

The increase in productivity and performance after replacement may outweigh the separation costs

Increases innovation Opening a possibility of “fresh mind” joining Carrying new approaches to old systems or problems

Increases diversity within a firm Employees within an organization may become more

homogeneous as time goes by Remember Darwin’s theory of evolution?

OutlineOutline

Basic conceptsBasic concepts

Types of employee separationsTypes of employee separations

Managing layoffsManaging layoffs

Alternatives to layoffsAlternatives to layoffs

Types of employee separations

Two major types

Voluntary separations 自願離職 Employee decides, for personal or professional

reasons, to end the relationship with the employer Involuntary separations

解僱 Employer decides to terminate the relationship with

the employee due to economic reasons or a poor fit between the organization and the employee

Voluntary separations

QuitsCould be due to

Employee is not satisfied with the present job There are other attractive alternatives

RetirementsOccur at the end of an employee’s careerEarly retirement incentives

Involuntary separations

Discharges Management decides that there is a poor fit between

the organization and the employee 炒魷

Layoffs Employees lost their jobs because of a change in the

company’s environment or strategy 裁員

DownsizingA company strategy to reduce the scale and

scope of its business in order to improve the company’s financial performance

瘦身 (fat reduction) Rightsizing

The process of reorganizing a company’s employees to improve their efficiency

OutlineOutline

Basic conceptsBasic concepts

Types of employee separationsTypes of employee separations

Managing layoffsManaging layoffs

Alternatives to layoffsAlternatives to layoffs

Managing layoffs

Key issues in implementing a layoff

Notifying employees 1 week, 1 month, or 3 months of notifying, depending

on the employment status Give compensation if less than that period

Developing layoff criteria Seniority (last in, first out) Employee performance To maintain perceived justice for the layoff decisions

Communicating to laid-off employeesThe 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 explanations 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

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

OutlineOutline

Basic conceptsBasic concepts

Types of employee separationsTypes of employee separations

Managing layoffsManaging layoffs

Alternatives to layoffsAlternatives to layoffs

Alternatives to layoffs

Employment policies

Reduction through attrition Attrition: an employment policy designed to reduce

the company’s workforce by not refilling job vacancies that are created by turnover 自然流失

Hiring freeze Cut part-time employees Internships Reducing working hours

Changes in job design

Transfers Relocation Job sharing Demotions

Pay and benefits policies

Pay freeze Cut overtime pay Use vacation and leave days Pay cuts Profit sharing or variable pay

Exercise

3M is a worldwide well-known hi-tech firm. McKnight's (an early 3M’s president) business philosophy is to create “a culture that encourages employee initiative, innovation and provides secure employment”

In the past few years, because of the economic downturn, many organizations in this industry (e.g., HP, IBM, Cisco, etc.) chose layoff as one of the the major ways for cost reduction. Perhaps because of McKnight’s principle, 3M did not follow this trend. 3M gave the following reason “Good minds are difficult to recruit and retain. They won’t

come back (after layoff) if they were not treated well”. Do you agree, and why?