Employee separation, downsizing and outplacement
As we´ve talked about the beginning of employment through selection and recruitment all the way to training and development. Today’s subject is unfortunately layoffs. As economical situations and business environments change, situations where employee contract needs to be terminated has been constant. This articles objective is to go through some of the more common terms, benefits and negative sides of employee separations.
Employee separation that takes place in an organization due to employee´s decision (whether personal or professional reason) is voluntary separation. However, separation by employer’s decision to terminate relationship, due to economic necessity or lack of professionalism is called involuntary separation, which includes discharge and layoff. Layoff divers from discharge in the reason of termination of work contract. Discharge is usually the direct result of the employees work quality. Situations where employee is forced to leave involuntarily, a greater level of documentations is required to show the detailed reason for the termination of employee contract. (Gomez-Meija, Balkin & Cardy 2016, 214 – 217; lawteacher 2018.)
Then we have unfortunate situations where the organizations must separate multiply workers at the same time. These situations can be caused by number of reasons like of poor economic environment, merger between two companies or lose of customers. Laying-off multiple employees in these types of situations is called downsizing. Companies practice downsizing for many reasons and well go through some of theme in this article. However, it’s worth mentioning that downsizing is usually not because of lack of commitment of individual worker. Efforts to help the employees that have been the subject of downsizing by their former employer is called outplacement. Outplacement is meant to assist the former employees through the transaction and help them to get a new job and is payed for by the previous employer. Outplacement can be done one-on-one sessions or as a group format and it can include practical and psychological support. (Doyle 2020; lawteacher 2018.)
Negative impacts of employee separation
- Recruitment cost
- Selection cost
- Training cost
- Separation cost
Positive impacts of employee separation
- Reduce labor cost
- Replace employees with bad performance
- Increase innovation
- Opportunity for greater diversity
(Gomez-Meija, Balkin & Cardy 2016, 213 – 214; lawreacher 2018.)
Before starting the process of layoff usually other methods are or at least should be looked at. So, before going into the `how to layoff effectively´ lets talk about the alternatives. Employment policies can be modified to fit the ongoing economic environment of the company, for example attrition is commonly used where job vacancies that created by turnover are not refilled. Hiring freeze on the other hand is an employment policy in which new employees are not hired. Job descriptions can be modified where people in different units can compensate cost-effectively vacancies. Pay freeze is an option/policy to be used where salaries or wages won’t be increased for a period of time. To avoid discrimination this policy should be used equally for everyone. (Gomez-Meija, Balkin & Cardy 2016, 219 – 220.)
Implementing a layoff should be done in good ethic. The event might very well be traumatic to the employee. Notifying employees at least weeks before the actual layoff is socially and professionally correct. Before the process begins the criteria for layoff should be clear, so that the managers can fair and consistent decisions. Seniority criteria for example is can be used in which you look at the time the individual worker have spent with the company. The decision to layoff won’t be easy on either party. Hence, communicating clearly and honestly to the effected employee is crucial. Reassuring the survivors of the layoff should not be taken lightly. Imagine your colleague was laid off and your thinking that you might be next. As a manager it’s your responsibility to communicate the situation openly to the remaining employees. (Gomez-Meija, Balkin & Cardy 2016, 221 – 222.)
Early retirements and managing them
Companies that face the situation where they need to reshape or reduce their staff number an consider early retirement as an option. Depending on how the early retirement is planned it can have positive or negative impacts for example too many might take the retirement plan, which might lead to loosing valuable workforce. Early retirements are voluntary separation option to layoffs. Hence, the eligible employees should not get the feeling that they are targeted or forced out of the company. Another way to manage early retirement programs is to simply ask how they would respond to a program and too many answers in favor and leave then the criteria can be modified. (Gomez-Meija, Balkin & Cardy 2016, 218.)
The Finnish mobile giant became quickly the world’s bestselling mobile brand. The company had plants around the globe. Without getting into the rise part, lets go straight to the downsizing part. According to a blog by labor rights Nokia announced they would relocate a plant based in Germany to Romania. Which would result to 4,000 jobs lost. The idea was to cut loses. However, Nokia was attacked for their lack of communication of the situation and the amount of financial support they had received from Germany. The relocated plant in Romania was four years later closed and they received a similar judgment from the media. Downsizing a corporation of that magnitude will have problems. In this case Accenture, a consulting firm was burned right along Nokia. Nokia had outsourced 1,200 Symbian developers to Accenture and when amount of work decreased Accenture had to start their own downsizing by providing severance packages. At the end the point is to ensure that the company remains profitable in the future. However, the process might lead to irreparable damage to the image. (Labour right 2008; YLE 2011; YLE 2012.)
Doyle, A. 14 April 2020. What is Downsizing?. The balance career. URL: https://www.thebalancecareers.com/what-happens-when-a-company-downsizes-2061972. Accessed: 22.04.2020.
Gomez – Meija L., Balkin D. & Cardy R. 2016. Managing human resources. Eight edition. Pearson.
Lawteacher 02 February 2018. Managing Employee Separations, Downsizing and Outplacement. URL: https://www.lawteacher.net/free-law-essays/employment-law/managing-employee-separations-downsizing-and-outplacement-law-essay.php. Accessed: 22.04.2020.
Labour right 17 january 2008. Nokia closes plant in Germany and relocates in Romania. Communicating Labour rights. URL: https://communicatinglabourrights.wordpress.com/2008/01/17/nokia-closes-plant-in-germany-and-relocates-in-romania/. Accessed: 22.04.2020.
YLE 02 April 2012. Hundreds of Nokia's outsourced Symbian developers leaving Accenture. News. URL: https://yle.fi/uutiset/osasto/news/hundreds_of_nokias_outsourced_symbian_developers_leaving_accenture/5252177. Accessed: 22.04.2020.
YLE 29 September 2011. Nokia cuts 3500 jobs "to ensure profitability". News. URL: https://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070. Accessed: 22.04.2020.