THE PHILIPPINE WOMEN’S UNIVERSITY

Graduate Studies

Presented to the Faculty of the

Conrado Benitez Institute of Business Education

Philippine Women’s University

PROFESSOR

Dr. Lilia Chio

In Partial Fulfilment of the Course

MASTERS IN BUSINESS ADMINISTRATION

Human Resource Management

MBBC 516

By:

Aquino, Jam Xabryl

Ecalnir, Karen

Hitta, Anna Rose M.

Newell’s Decision to Downsize: An Ethical Dilemma

I. Executive Summary
Newell Corporation is a medium-sized manufacturer of navigational systems for
commuter and larger airplanes. The company operates two plants—one in Atlanta,
Georgia, and the other in Norwood, California. In 2011, the Norwood plant employed 273
employees, most of them engaged in the manufacture and technical support of company
products. The company has always prided itself on its proactive HR policies and the
excellent relationship it holds with employees. This positive employee-management setting
has been, and continues to be, a primary goal of the organization. In February 2011, Tom
Malcom, Norwood’s director of HR; Steven L. Davis, corporate vice president for
manufacturing; and Mary Umali, Norwood’s plant manager,
decided to downsize the workforce at the Norwood facility due to the decline in demand
which was projected to be moderate for 2007, 2008 and 2009. The ethical dilemma faced
by senior management in this lay off decision is how to equitably treat employees while
obtaining the desired level of employment. Specifically, should the company lay off junior
employees, most of whom would be minorities, or should all employees, regardless of
seniority, be subject to termination. If the decision is to lay off according to seniority, the
company defeats its objective to increase the minority levels of its work force and, arguably,
the clear purpose of the corporation’s vision and value statement. However, disregarding
seniority in the downsizing decision will likely expect senior employees bringing into
question the companies traditional HR practices long respected and favored by employees.

II. Statement Of the Problem

How to lay off employees in a manner that would be fair and equitable to individuals and
legally defensible while maintaining the integrity of Newell?

III. Perspective
Senior Management (HR Director)

IV. Objective
 To identify ethical dilemma face by the management
 To know the options might Newell employ in its downsizing decision

V. Areas of Consideration
 SWOT ANALYSIS
Alternative Course of Action

ACA 1: Buyout package to senior employees: offer early retirement, provide outplacement
services and give reasonable severance pay
Advantage Disadvantage
 Lean Operations  Loss of senior employees
 Eliminate function redundancy  Disruption of interpersonal
 Saving business relationships at work
 Waste Reduction  Negative Business Impact
 Reduce cost of high wages  Legal Risks

ACA 2: Retain employees: slim down the Operating Margin, offer work from home program,
shorter work weeks and eliminate overtime

Advantage Disadvantage
 Lowers Costs  Demotivated employees
 Solidifies Employer-employee  Unable to weed out low-skilled
Relations employee
 Fosters an Optimistic Company  Furlough employees may be
Culture encouraged to seek other
employment

ACA 3: Lay-off employees: Based upon the performance and skill level of employees, provide
outplacement services and give reasonable severance pay

Advantage Disadvantage
 Retain productive employees  Lower Morale of the laid-off
 Eliminate function redundancy employees
 Saving business  Disruption of interpersonal
 Credit hard work of employees relationships at work
 Loss of Poor Performers  Negative Business Impact
 Legal Risks

Decision Matrix ACA 1 ACA 2 ACA 3

1. Risk 1 2 3
2. Control 3 1 2
3. Cost 2 3 1
4. Ease of Implementation 2 1 3
5. Savings 2 1 3
TOTAL 11 10 15

Legend Low =1 (worst) through High= 3 (best)

VI. Conclusion
 If minorities are primarily laid off, the company loses its goal of increasing the
minority composition of its workforce. Furthermore, diversity as a corporate goal
becomes questionable. Minorities may feel discriminated against and possibly
file discrimination charges. The company’s excellent reputation in the
community may surfer especially among the minority population.
 Newell will have lost the training investment in minority employees. Also, it can
be assumed that future promotions to management positions would come from
minorities, another setback to the company’s diversity goals.
 If mostly senior Caucasian employees are laid off, this could cause negative
feeling toward the company or, at worst, racial tensions toward minority
employees. Charges of reverse discrimination may be heard. The tradition of
using seniority in employment decisions will be questioned.
 Laying off senior employees reduces the company’s most experienced
employees— employees highly needed in an economic downturn situation
VII. Recommendation
We recommend choosing the ACA #3 as the best option wherein the company could discard
using seniority in employment decisions electing instead to lay off employees based upon the
performance and skill levels of employees. Here, the layoff would be gauged on the merit of
employees. This option would allow the company to retain its most productive employees while
dismissing poor or average performers. This would be a good choice given the economic plight
of the company

VIII. Action Plan

ACTIVITIES Person-in-charge Lead Time

Meeting with HR Executive Leadership 1 day

Team

Develop a systematic transition HR 7 days

plan (create a timeline considering
target date and administrative
changes)
Meeting with the middle Senior Management 1 day
management to implement the plan

Plan communication strategy (one- HR 1 day

on-one, town halls and team
meeting)

Communicate the downsizing plan HR 3 months

to employees and DOLE (at least
30 days prior to the intended date
of layoff)
Offer outplacement services the HR 7 days
departing employees (career
transition and re-employment
workshops)