CHAPTER 13 EMPLOYEE SEPARATION Employee Separation Reasons for

CHAPTER 13: EMPLOYEE SEPARATION

Employee Separation • Reasons for employee separations – Pressures on firms to remain competitive & efficient – Decline in employee commitment to employers • Importance of managing separations – – – Transitions of employees out of firm go smoothly Continuing operations of firm not disrupted Important professional relationships not damaged • Types of separations – Reductions-in-force, turnover, & retirements Copyright © 2005 South-Western. All rights reserved.

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

Reductions-in-Force (RIFs) • Worker 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” “Unforeseeable circumstance” Natural disaster “Temporary facility” Copyright © 2005 South-Western. All rights reserved.

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

Turnover • Involuntary turnover – Employees asked to leave organization for cause or due to circumstances that cause reduction-in-force • Voluntary turnover – Employees who leave organization on own initiative • “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 issue – Development of policies & programs to retain high performers &/or those difficult to replace • Employers face competition from – Other organizations – From employees they are attempting to retain (to start-ups) Copyright © 2005 South-Western. All rights reserved.

Retirement • Age Discrimination Act of 1967 – Prohibits employer from setting mandatory retirement age except in certain occupations (e. g. pilots) • Retirement – 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 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 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 strategy – Selection & orientation – Training & career management – Motivation & compensation • Selection & 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 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 & 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 Copyright © 2005 South-Western. All rights reserved.

Reading 13. 1 Holding on to High Performers: A Strategic Approach to Retention • Final 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 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 Copyright © 2005 South-Western. All rights reserved.

Reading 13. 2 Strategies for Responsible Restructuring • 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 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 Copyright © 2005 South-Western. All rights reserved. 10. Failure to evaluate results & learn from mistakes

Reading 13. 2 Strategies for Responsible Restructuring • What 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 longterm problems – Be sure employees perceive process as fair Copyright © 2005 South-Western. All rights reserved.

Reading 13. 2 Strategies for Responsible Restructuring • What 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 workers • Shock 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 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 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 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 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 Copyright 2005 South-Western. All rights for reserved. –©Serves need organizational planning & renewal

Reading 13. 3 Retirement of Older Workers: Issues & Policies • Implications 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 Copyright © 2005 South-Western. All rights reserved.