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Managing Turnover

Turnover, Layoffs and Buyouts. Turnover is not always badThere is an optimal mix" of experienceOlder workers have greater firm-specific human capital.Younger workers have greater general human capitalOptimal ratio young to old higher when:rapid technological changeOJT is less important than g

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Managing Turnover

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    1. Managing Turnover

    2. Turnover, Layoffs and Buyouts Turnover is not always bad There is an optimal “mix” of experience Older workers have greater firm-specific human capital. Younger workers have greater general human capital Optimal ratio young to old higher when: rapid technological change OJT is less important than general skills the firm’s experiences are not idiosyncratic

    3. Who should the firm layoff? PDV(earnings)>PDV(productivity) Young workers with little investment Older workers where high productivity is in the past

    4. Issue :Management wants to reduce the size of your workforce

    5. Who should the firm layoff? PDV(Earnings)=PDV(Productivity) during career Difference between V(t) and W(t) is greatest for midcareer people

    6. Who should the firm layoff? Now something changes to make the value decline to bV(t)

    7. Who should the firm layoff? Now something changes to make the value decline to bV(t)

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