Case Study

The University of Medical Center is a medium-sized, 300-bed capacity hospital in

Dasmarińas City. The facilities have grown gradually over the years and considered one
of the largest in the City. Although it is unionized, it has never experienced an employee
layoff since its inception.
Sister Lallaine Buenaobra, the Chief Executive Officer of the hospital for eight
years, presented a rather bleak financial picture during the most recent quarterly meeting
of the board of directors or BOD. This, according to her, is the result of the declining
occupancy rate brought about by the opening of the biggest government hospital in the
province. This has affected the income of the hospital posting  a net loss in its latest
income statement. Such declines have not been unusual for this industry because of
increasing competition. So far, the only response to these changes has been tightening of
requirements for equipment and supply purchases. The projected deficit for the coming
year is around ₱1,300,000 unless some additional revenues are identified or some
additional savings found. The BOD’s recommendation is employee layoffs, which
according to the board is the only realistic alternative. They recommend laying off up to
25% of the hospital’s employees.
Melinda Dumael, The HR director of the hospital was given the task to implement
the recommendation of the board.
Help Melinda and Sister Lallaine solve this problem by following the steps:

1. State the main problem of the hospital.

2. State the different areas of consideration following the guide below.
a. Strengths of the hospital
b. Weaknesses of the hospital
c. Opportunities
d. Threats
3. Give your proposed solutions/alternative courses of action to help the hospital
overcome this problem.
4. State your recommendation based on your Alternative Course of Action
5. Provide a conclusion/detailed action plan to implement your recommendation using
the guide below.
Specific Activity Person Responsible Time Frame Budgetary requirement
 La Consolacion University of the Philippines

City of Malolos, Bulacan

Jennifer C. Samaniego Cecilia D. De Guzman, Ph.D.

Bachelor of Science in Business Administration Professor
Major in Financial Management

Case Study

1. State the main problem of the hospital.

a. Firstly, the hospital is experiencing a net loss in its profit because of the declining
occupancy brought about by the opening of the biggest hospital in the province.
b. Secondly, the hospital’s proposal for employee layoffs is very difficult to execute
as employees will not be receptive about it which can eventually cause a possible
trouble in the long run.
c. Third, hence, if the hospital implements layoff, it will surely create a negative
impact on its image, thus losing its competitiveness.
d. Since the hospital has never experienced an employee layoff, it would surely have
difficulty implementing such layoff. Furthermore, since it would be its first time
to execute an employee layoff, the hospital does not have adequate criteria of
executing it. Even though the hospital has a performance appraisal system, the
criteria would surely not be acceptable to the employees. It is quite evident that
the hospital lacks strategy, as well as HR planning.

2. State the different areas of consideration following the guide below:

a. Strengths of the hospital
Considering the fact that the hospital is considered as one of the largest in the city,
it has the following strengths:
 Special expertise
 Good and extraordinary reputation
 Cultural connections, and
  Facilities have grown gradually over the years.
b. Weaknesses of the hospital
 The hospital needs to address and overcome the following:
 No established specific short-term and long-term marketing plan
 No established annual HR planning model, and
 No differentiation of service lines
c. Opportunities of the hospital
The following are the opportunities of the hospital despite the issue confronting it:
a. Improve facilities and equipment
b. Expansion of building
c. Renovation of building, and
d. Improve quality of health care services

3. Avoiding Layoffs – Alternative Strategies / Alternative Course of Action

After assessing the hospital downturn and the BOD’S recommendation layoffs up to 25
% and likely duration of the strategy to be implemented, evaluating the costs and
savings, and considering any legal ramifications, an employer next must decide on what
strategy(s) will best address its situation.
a. Communicate with Employees to Gain their Support and Obtain their Ideas
 No matter what strategy an employer utilizes, results will hinge on the level of
communication with the workforce. As early as possible after the necessity for
cost-saving measures is identified, educate employees about the state of the
company and possibly about what alternatives to layoff are being considered.
Ideas about what could shave expenditures should then be solicited from the
employees through surveys, emails, focus groups and interviews.
 Not only do employees often offer innovative ideas when their jobs are
directly implicated, but morale will be bolstered by management’s display of
confidence in the workforce. The stronger the communication process, the less
likely that employees will choose to leave the company.
 Loyalty is generated in employees who feel that their employers hear their
voices and care about their jobs.
b. Restructuring
 Restructuring efforts that could preempt a layoff would include closing of
obsolete plants or branches, administrative overhauls, selling of non-core
operations and improving internal processes. As to the latter, employees often
have the best ideas about how their jobs could be performed more effectively
and/or efficiently.
c. Hiring Freeze and Internal Shift to Cover Open Responsibilities
 In a seemingly ironic practice, employers often continue to fill vacant
positions while introducing significant layoffs. This practice sends employees
the message that their needs and livelihoods are unimportant to the
organization.
 By simply placing a freeze on all hiring and then shifting employees internally
to cover all functions, savings are coupled with improved morale. This option,
like the other ways to reduce headcount discussed below, carries the
advantages of minimal risks and costs and is less likely to diminish employee
morale.
 However, the disadvantages are that longer time commitments are required to
realize somewhat limited savings and the internal shifting and reassignments
will cause some level of disorganization.
d. Ensure that procedures used to make decisions are seen as and fair.
 This is known as procedural justice. When laid off employees perceive
downsizing procedures to be fair, they tend to file fewer claims of wrongful
termination, and voluntary turnover among surviving employees is much less
frequent.
e. Be transparent about the current conditions that the organization faces and
the potential impact on the workforce.
 Employees want to hear the truth, and they want to hear it from the CEO.
 Pretending things are fine will only hurt a leader’s credibility. Provide
regular updates at least every four to six weeks, including reports on year
over-year revenue, net income, current business strategy and future
prospects.
 f. Be able to justify the layoff.
 A company has to demonstrate a financial loss for several quarters, not just a
generalized sense that the economy is turning down, before laying off
workers.

4. State your recommendations base on your Alternative Course of Action (ACA)

 Cut temporary staff.
 Eliminate overtime.
 Offer voluntary retirement.
 Freeze salaries.
 Cut salaries.
 Freeze hiring.
 Reduce work hours.
 Use temporary layoffs (furloughs).
 Use furloughs with incentives.
 Cancel business trips and costly perquisites.
 Reduce or suspend matching contributions to company-sponsored savings plans.
 Raise employee contributions to benefits plans.
 Postpone or eliminate bonuses

5. Provide a conclusion/detailed action to implement your recommendations using

the guide below
Specific Activity Person Responsible Time Frame Budgetary
Requirements
Work Attitude and Values Lallaine Buenaobra
Enhancement CEO
 Identify departments and
functions that are Melinda Dumael
strategically critical, along HR Director
with critical employee skill
 sets going forward.
 Identify criteria that reflect
legitimate business needs.
 Document the criteria and
processes used.
 Conduct analyses to ensure
that there is not a
disproportionate effect of
layoffs on members of
protected classes and have
all analyses and
documentation reviewed by
an attorney.