Solution Manual for Managing Human Resources

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Chapter 6
Managing Employee Separations, Downsizing, and Outplacement

CHAPTER OVERVIEW

Conducting a termination or layoff is one of the most sensitive and difficult things that a
manager will ever have to do. There are a number of factors to consider when
conducting this process, and the manner in which the termination or layoff is performed
and managed has impact on not only the affected employee but also those who remain
with the organization in its aftermath. Additionally, many separations (voluntary or
involuntary) can be avoided through good management practices. The cost of separations
to the organization are much higher than many people realize, making good management
practices even more important.

CHALLENGES

After reading this chapter, students should be able to deal more effectively with the
following challenges:
1. Understand what are employee separations.
2. Gain mastery in identifying types of employee separations.
3. Have familiarity with managing early retirements.
4. Learn practices for managing layoffs.
5. Recognize the role of outplacement.

ANNOTATED OUTLINE

CHALLENGE 1
Understand what are employee separations.

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I. What Are Employee Separations?

An employee separation occurs when an employee ceases to be a member of an

organization. The rate of employee separations in an organization (the turnover
rate) is a measure of the rate at which employees leave the firm.

A. The Costs of Employee Separations

There are always costs associated with employee separations. The cost may
be more or less, depending on whether managers intend to eliminate the
position or to replace the departing employee. Costs included in separations
include recruitment costs, selection costs, training costs, and separation costs.

B. The Benefits of Employee Separations

Although many people understand the costs of employee separations, there are
benefits as well. Some of the benefits of separations include reduced labor
costs, replacement of poor performers, increased innovation, and opportunity
for greater diversity.

CHALLENGE 2
Gain mastery in identifying types of employee separations.

II. Types of Employee Separations

Employee separations can be divided into two categories based on who initiates the
termination of the employment relationship. Voluntary separations (quits and
retirements) are initiated by the employee. Involuntary separations (discharges and
layoffs) are initiated by the employer.

A. Voluntary Separations

Voluntary separations occur when an employee decides to end the relationship

with the employer. These separations include quits and retirements.

B. Involuntary Separations

Involuntary separations occur when management decides to terminate its

relationship with an employee due to economic necessity or a poor fit between
the employee and the organization. Involuntary separations include
discharges, layoffs, and downsizing and rightsizing.

CHALLENGE 3
Have familiarity with managing early retirements.

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III. Managing Early Retirements

When a company realizes that it needs to downsize its scale of operations, its first
task is to examine alternatives to layoffs. One of the most popular of these methods
is early retirement.

A. The Features of Early Retirement Policies

Early retirement policies consist of two features: (a) a package of financial

incentives that make it attractive for senior employees to retire earlier than
they planned and (b) an open window that restricts eligibility to a fairly short
period. After the window is closed, the incentives are no longer available to
senior employees.

B. Avoiding Problems with Early Retirements

Managing early retirement policies requires careful design, implementation,

and administration. When not properly managed, early retirement policies can
cause a host of problems. All managers with senior employees should make
certain that they do not treat senior employees any differently than other
employees.

CHALLENGE 4
Learn practices for managing layoffs.

IV. Managing Layoffs

Generally, an organization will institute a layoff when it cannot reduce its labor
costs by any other means. Managers should first try to reduce labor costs with
layoff alternatives.

A. Alternatives to Layoffs

There are many alternative methods of reducing labor costs that management
should explore before deciding to conduct a layoff. These alternatives include
things such as changes in employment policies, job design, pay and benefits
policies, and training.

B. Implementing a Layoff

A layoff can be a traumatic event that affects the lives of thousands of people,
so managers must implement the layoff carefully. Issues that need to be
considered include notifying employees, developing layoff criteria,
communicating with laid-off employees, coordinating media relations,
maintaining security, and reassuring survivors of the layoff.

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 CHALLENGE 5
Recognize the role of outplacement.

V. Outplacement

Outplacement is a human resource program created to help separated employees

deal with the emotional stress of job loss and to provide assistance in finding a new
job.

A. The Goals of Outplacement

The goals of outplacement reflect the organization's need to maintain

employee productivity. The most important of these goals are (1) reducing
the morale problems of employees who will be laid off so that they will
remain productive, (2) minimizing the amount of litigation initiated by
separated employees, and (3) assisting separated employees in quickly finding
comparable jobs.

B. Outplacement Services

The most common outplacement services provided to separated employees are

emotional support and job-search assistance. These services can help achieve
the goals of outplacement.

ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS

Suggested responses to the starred questions in this section can be found in MyManagementLab.

6-1. After eight years as marketing assistant for the New York office of a large
French bank, Sarah Schiffler was told that her job, in a non-revenue-producing
department, was being eliminated. Her choices: She could either be laid off (with
eight months of severance pay) or stay on and train for the position of credit analyst,
a career route she had turned down in the past. Nervous about making mortgage
payments on her new condo, Sarah agreed to stay, but after six months of feeling
miserable in her new position, she quit. Was her separation from the bank
voluntary or involuntary? Can you think of situations in which a voluntary
separation is really an involuntary separation? What are the managerial
implications of such situations?

Sarah's separation from the bank was a quit, or a voluntary separation. A separation
may be interpreted as an involuntary separation when eligible employees perceive
that they are being forced to resign or retire. Other situations are when an employee
quits because of harassment or intolerable working conditions. In these cases,
courts have sometimes agreed that the separations were, in fact, involuntary.
Occasionally, management will seek to force someone to leave voluntarily in order
to avoid unemployment or other costs. This is not a wise tactic.

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6-2. The Manager’s Notebook “ Volunteer Turnover in China” addressed the high
rate at which workers in China have been choosing to quit their jobs. Do you think
voluntary turnover is becoming more of an issue in the United States? If you are a
manager, do you think that voluntary turnover is an issue? How would you deal
with it?

Answers to this question will vary. Managers who are aware of the likelihood that
employees are now moving from one job to the next will build a system for dealing
with voluntary turnover. One way for managers to deal with this issue is to make
sure that not only are they developing employees but also giving them the
opportunities to use their new skills or seek out challenges. Not doing so can lead to
more turnover among talented individuals.

6-3. Would an employer ever want to increase the rate of employee turnover in a
company? Why or why not?

Employers may want to increase turnover in a company to reduce labor costs, to

replace poor performers, to increase innovations, and to create opportunities for
greater diversity. When turnover rates are too low, few new employees will be
hired and the number of opportunities for promotion is sharply curtailed. In
addition, a persistently low turnover rate may have a negative effect on performance
if the workforce becomes complacent and fails to generate innovative ideas.

6-4. In an age when more and more companies are downsizing, an increasingly
trendy concept is the “virtual corporation." The idea is that a company should have
a core of owners and managers, but that, to the greatest degree possible, workers
should be contingent—temporary, part-time, or on short-term contracts. This gives
the corporation maximum flexibility to shift vendors, cut costs, and avoid long-term
labor commitments. What are the advantages and disadvantages of the virtual
corporation from the point of view of both employers and workers?

Students' answers will vary. An example of a major advantage of the virtual

corporation from the employers' viewpoint is significant reductions in labor costs.
The disadvantages are the probable absence of company loyalty and loss of
employee morale as well as inadequately experienced employees. An example of a
major advantage of the virtual corporation from the workers' viewpoint is flexibility
in deciding work schedules, assignments, and employers. The disadvantages are
the absence of job security and the lack of employee benefits.

6-5. Under what circumstances might a company's managers prefer to use layoffs
instead of early retirements or voluntary severance plans as a way to downsize the
workforce?

An important influence on the likelihood of a layoff is the business's strategy.

Companies with a lifelong employment HR strategy are less likely to lay off
employees because they have developed alternative policies to protect their

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 permanent employees' job security. When early retirement plans may be perceived
as "forced retirement," companies may prefer to use a layoff to avoid age
discrimination complaints. Furthermore, when early retirements or voluntary
severance plans lead to top performers leaving the organization, an employer may
use a layoff to avoid excess resignations and to avoid a "talent drain."

6-6. Under what set of conditions should a company lay off employees without
giving them advance notice?

The Worker Adjustment and Retraining Notification Act of 1988 (WARN) requires
U.S. employers with 100 or more employees to give a 60 days’ advance notice to
employees who will be laid off because of a plant closing or a mass separation of 50
or more workers. Employers who do not give their employees notification must
give them the equivalent of 60 working days of income.

There are many layoff situations that do not fall under the WARN act. There may
be situations where a company might feel the need to keep the layoffs secret until
they are actually implemented. Such situations would include places where the
likelihood and threat of sabotage are great, times when that information would lead
to a competitive disadvantage, and situations where there may be an unfavorable
economic impact if the information is released early.

6-7. Carrying out terminations usually is the responsibility of the manager.

However, the manager may not always be involved in determining who should be let
go. Do you think direct managers should have input into which of their workers
should be laid off? Why or why not? If a manager and HR staff disagree on who
should be laid off, how do you think the disagreement should be resolved?

The managers should provide input in developing the layoff criteria and should
have direct responsibility for making consistent, fair decisions based on those
criteria. The HR department's role should be to advise and guide the process and to
make sure that the decisions are consistent and fair. Managers and HR staff
members do not always agree on how employee separations should be handled.
These differences are in part because of their different roles within the organization
and the tasks and goals of those roles. Managers do have the face-to-face contact
with the individuals, and, as such, the task of choosing individuals for layoffs can
be very traumatic and difficult. They may want to "save" certain individuals
because of factors that have not been identified as layoff criteria.

*6-8. Managing survivors in a layoff is important. As a manager, what concerns

would you have about the surviving workforce after a layoff? How can the HR
management staff be of assistance in providing support for the survivors of a layoff?

*6-9. Why should management be concerned with helping employees retire from
their organization successfully?

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6-10. The departure of senior workers through retirement can mean that years of
experience and knowledge are walking out an organization’s doors. This “brain
drain” can cripple an organization’s ability to remain competitive, particularly if it
is difficult to regularly hire younger talent. What approaches would you recommend
to reduce this problem?

The HR function can provide many approaches to help reduce “brain drain.”
Students might suggest that many retiring employees might be willing to continue
employment on a contract basis for many years after their full-time employment has
ended. Such an arrangement can allow for organizations to maintain tacit
knowledge well past the normal length of employment. Additionally, the
organization might look into the training and development opportunities available at
the organization; perhaps it is the case that younger employees are not able to
advance quickly enough in the organization or are not able to harness the
knowledge necessary to advance.

*6-11. You have noticed that the overall turnover rate for your company is
about average for your industry. Does this average rate mean their turnover isn’t a
problem? Considering the sources and types of turnover discussed in Exhibit 6.1,
describe how this average rate might or might not indicate a problem.

MyManagementLab Assisted-graded and Auto-graded Questions.

Responses to these questions can be found in MyManagementLab.

6-12. Employees have been terminated due to their postings on social media.
Do you think that social media postings should be a cause for termination? Are
there circumstances that might make termination a more justifiable management
action? For example, what if the postings are critical to the company? Describe.

6-13. Can employee turnover be a good thing? Explain. When is employee

turnover a bad thing?

6-14. Survivors of layoffs might be considered the lucky ones who still have a
job. However, layoff survivors can present a number of problems. What kind of
problems might you expect layoff survivors to exhibit? Assuming a layoff of workers
is a necessity, what would you recommend be done to lessen problems with layoff
survivors?

You Manage It! 1: Global

Turnover: A Global Management Issue

Critical Thinking Questions

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6-15. What steps do most companies take to reduce voluntary turnover? Are they
effective?

Students’ answers will vary but students may focus on the idea that each individual
is different. Companies have been using better recruitment, selection, training, and
development programs.

6-16. Do you think the voluntary turnover rate should be considered before opening
a business operation there? Why?

Students’ answers will vary. Although voluntary turnover rates can be considered,
they are not the only consideration. Also, management can impact the rate through
retention programs.

6-17. If your company is opening up an operation in another country in which

voluntary turnover is high, how could this problem be reduced? Specifically, rather
than hiring local talent, talent could be shifted from the home operation of the
business. What are the advantages and disadvantages of this approach?

Students’ answers will vary but will focus on many of the answers given in
response to question 6-15.

You Manage It! 2: Ethics/Social Responsibility

Employment-at-Will: Fair Policy?

Critical Thinking Questions

6-21. Do you agree with the concept of employment-at-will? Why or why not?

Students’ answers will vary.

6-22. If you had a choice, would you rather be employed as an at-will employee or
have some employment protection? Why?

Students’ answers will vary, but it is important to point out that employment-at-
will also provides flexibility for the worker to leave at any time, for any reason as
well.

6-23. Most workers are not covered by explicit or implicit contracts and are at-will
employees. Thus an employer should be able to terminate these workers at any time
and for any reason. A practical reality, however, is that a charge of discrimination
as a basis for a termination needs to be defended against. How can an employer
defend against a charge that a termination decision was based on discrimination?
Does this limit an employer’s right to fire-at-will? Explain.

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 Answers will vary, however, the litigious nature of the United States should be
mentioned. The presence of an implicit contract is many times the basis for an
unfair dismissal complaint; many times employers or agents of the organization
will make some level of commitment to an employee through their words or
actions. For these reasons, documentation of discipline issues as well as a well-
formed employee discipline policy remove some of the burden from the
employer.

You Manage It! 3: Customer-Driven HR

From Turnover to Retention: Managing to Keep Your Workers

Critical Thinking Questions

6-26. The employee equity model provides value, brand, and retention equity
perceptions as important determinants of whether an employee stays with an
organization. Do you think that the three components are independent, or do they
influence each other? Is this a problem for managing retention with the employee
equity model? Why or why not?

As with many HR-related topics, value, brand, and retention equity all interact
with one another. Although managers many times like the simplicity of separate
variables that they can manipulate in order to improve employee retention, the
simplicity of this, as with many other models, is overstated. Viewing all aspects
of employee equity will not only contribute to retention but also result in higher
levels of organizational commitment and performance.

6-27. How would you measure value, brand, and retention equity in an
organization? How often do you think the three characteristics should be measured?

Students’ reactions to this question will be varied; however, answers can be as

simple as “ask the employee.” Discussion should note that employees are
oftentimes the best resource for answers to these sorts of questions. This being
said, it is also likely that there will be broad variance in perception of each type of
equity from employee to employee.

6-28. Given your response to item 6-27, how would these measures be useful?
What could they be used for?

Students’ responses to this question will be contingent upon response to question

6-27. It should be noted that these measures can be used to manage retention with
the employee equity model, recruitment, and performance appraisal, among other
uses.

6-29. Value, brand, and retention characteristics could be used as criteria, or

standards, for assessing management programs and actions. For example, consider
recruitment and/or performance appraisal. If you were trying to maximize

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employee retention, how might you go about recruitment or performance appraisal
so that value, brand, or retention equity is influenced positively?

Students’ answers will vary; however, it is important that recruitment and

performance appraisal be a collaborative effort in order to positively influence
value, brand, and retention equity. By including multiple constituencies in these
processes and listening to their input, these individuals will feel more invested in
the types of employees they seek (recruiting) and how they are evaluated
(performance appraisal).

You Manage It! 4: Technology/Social Media

You’re Fired!

Critical Thinking Questions

6-33. Do you think terminations for the type of incidents presented here are fair?
Why or why not?

Students’ answers will vary. However, the response should show mastery of the
termination process as described in the chapter.

6-34. Assume that the employees or managers in each of the scenarios perform at
an above-average level. Should that matter in the decision to terminate or not
terminate? Why or why not?

Students should take a stand and offer support for their beliefs. Students’ answers
will vary.

6-35. How could these social media–driven issues be prevented? Are there steps
that you, as a manager, could take that would prevent these issues from happening
in the first place?

Students’ answers will vary. The answer may include examples of policies or
codes of ethics.

Additional Exercises
In-Class or Out-of-Class Group Activities

What can a company do to help a community when it decides to close a plant that is
important to the community's economic prosperity?

There are several things that a company can do to assist a community that will be
affected by the decision to close a plant. One major item is early notification. In
fact, before the decision is made, there are usually several years where the question
is being raised. Some companies have begun to signal communities that such

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 actions are being considered several years before making such a move. This allows
the community time to try to attract alternative employers and to prepare for the
economic impact of the departure. Also, in some cases, members of the community
may seek a buyer for the plant. If such overtures are made, it is in the best interest
of the company and the community for agreements to be reached in a timely and
reasonable fashion. Alternatively, the community may seek ways to help the
company regain the profitability that it needs from the plant. Sometimes that is in
increased employee productivity, and other times it is in tax relief and other benefits
granted by the community. In general, the best things a company can do are
communicate clearly and early, and then work with the community to develop
innovative alternatives.

Is it ethical for top managers to receive cash bonuses while at the same time asking
lower-level employees to accept a pay freeze?

It would be interesting to see if there are any students who feel that this is
acceptable and ethical. Most will probably respond that it is not. It certainly does
not create a sense of loyalty or fairness on the part of the employees.

How much notice of a layoff should a company be obligated to give?

Although federal law now requires U.S. employers with more than 100 employees
to give 60 days’ advance notice of layoffs that will affect an entire plant or 50 or
more employees, there are many layoffs that do not meet the criteria. Keep students
focused on those layoffs that are outside of this regulation. Some may argue that
they should give as much notice as possible; let employees know as soon as it
becomes clear that this step will need to be taken. However, as the text discusses,
there are many other impacts of a layoff, including stock prices, competitor
advantages, and so forth, that may make it difficult for an employer to willingly do
so. Others may argue that advance notice is not as important as is a good severance
package that will allow employees time to search for another job. This subject
should spark some good discussion.

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