MGTO 231 Human Resources Management

1. MGTO 231Human Resources Management Separations and downsizing Dr. Kin Fai Ellick WONG

2. 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

3. 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…

5. Basic concepts

6. 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

7. 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

8. 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?

9. 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

10. 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?

12. Types of employee separations

13. 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

14. Voluntary separations • Quits • Could be due to • Employee is not satisfied with the present job • There are other attractive alternatives • Retirements • Occur at the end of an employee’s career • Early retirement incentives

15. 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

16. Downsizing • A 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

18. Managing layoffs

19. 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

20. Communicating to laid-off employees • The Dos and Don’ts of terminating/laying off employees

21. 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

22. 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

23. 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

24. 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

26. Alternatives to layoffs

27. 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

28. Changes in job design • Transfers • Relocation • Job sharing • Demotions

29. Pay and benefits policies • Pay freeze • Cut overtime pay • Use vacation and leave days • Pay cuts • Profit sharing or variable pay

30. 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?