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Solution Manual for Managing Human

Resources 7th Edition Gomez Mejia Balkin
Cardy 0132729822 9780132729826
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7th-edition-gomez-mejia-balkin-cardy-0132729822-9780132729826/

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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 that 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. Identify the costs and benefits associated with employee separations.
2. Understand the differences between voluntary and involuntary separations.
3. Avoid problems in the design of early retirement policies.
4. Design HRM policies for downsizing the organization that are alternatives to
a layoff; and, when all else fails, develop a layoff program that is effective
and fair to the firm’s stakeholders.
5. Understand the significance and value of outplacement programs.

ANNOTATED OUTLINE

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CHALLENGE 1
Identify the costs and benefits associated with employee separations.

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

While 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
Understand the differences between voluntary and involuntary 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.

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CHALLENGE 3
Avoid problems in the design of early retirement policies.

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
Design HRM policies for downsizing the organization that are alternatives to a layoff;
and, when all else fails, develop a layoff program that is effective and fair to the firm’s
stakeholders.

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: employment policies, changes in job design, pay and benefits
policies, and training.

B. Implementing a Layoff

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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 to laid-off employees, coordinating media relations,
maintaining security, and reassuring survivors of the layoff.

CHALLENGE 5
Understand the significance and value of outplacement programs.

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

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 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

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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.

2. The Manager’s Notebook, “ Job Hopping: Voluntary Is Part of the Business

Environment in India and China, “ addressed job-hopping. Do you think it is
becoming more prevalent? As a manager do you think job-hopping is an issue? How
would you deal with it?

Answers to this question will vary. Managers who poach from other employers may
not have a problem with it but managers who are losing good employees may. One
way for managers to deal with this issue is to make sure that not only are they
developing employees but giving them the opportunities to use their new skills or
seek out challenges. Not doing so can lead to more job-hopping among talented
individuals.

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 work force becomes complacent and fails to generate innovative ideas.

4. In an age when more and more companies are downsizing, an increasingly

trendy concept is the "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.

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?

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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
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. 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.

7. "The people who actually have the face-to-face contact with the person who is
being laid off aren't the ones who made the decision. They often didn't have any
input into which of their people would go," says a technician at a firm that
experienced large-scale layoffs. What role should managers—who have the "face-
to-face" contact with employees—play in implementing a layoff? Do you think
managers and HR staff members always agree on how employee separations should
be handled? Why or why not?

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 which have not been identified as layoff criteria.

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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?

Concerns should include: How can I keep my employees motivated? Am I going

to lose more good employees because of the stress? How can I keep morale from
plummeting? What about sabotage? Are my employees going to be overloaded as
a result of fewer people in the department?

Human resource staff can provide assistance in many ways. They can make sure
that information continues to flow to the survivors. They can also provide
counseling as well as social opportunities to help employees recover morale. The
list can go on and on.

9. Why should management be concerned with helping employees retire from

their organization successfully?

Besides the fact that it is the right thing to do, current and prospective employees
are watching. If this transition is not successful, morale of existing employees will
suffer (and probably productivity as well) and prospective employees may choose
to go elsewhere.

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.

Global Case 6.1

Retraining! Great Concept, but You Have to Execute

Critical Thinking Questions

1. Do you think people can be retrained? Why or why not?

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Students’ answers will vary, but students may focus on the idea that each individual
is different. Retraining is a great option for individuals that have the desire and
drive to try something new but it can be difficult for people to move to a completely
different field and basically start over.

2. Retraining can’t be expected to solve an attitude problem. When would

retraining be expected to make a different in someone’s employability? That is,
what kind of deficit or problem would retraining be expected to fix?

Retraining can fix a skills or knowledge deficit but individuals who don’t see the
change as positive will not be motivated to learn the information necessary to be
successful.

3. Do you think the ineffectiveness of the retraining could be solved? How?

Students’ answers will vary but will focus on many of the answers given in
response to question #1.

Ethics Case 6.2

Employment-at-Will: Fair Policy?

Critical Thinking Questions

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

Students’ answers will vary.

2. 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.

3. 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.

Answers will vary, however the litigious nature of the U.S. 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.

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For these reasons, documentation of discipline issues as well as a well-formed

employee discipline policy removes some of the burden from the employer.

Emerging Trends Case 6.3

From Turnover to Retention: Managing to Keep Your Workers

Critical Thinking Questions

1. 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. While 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.

2. 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.

3. Given your response to item 2, how would these measures be useful? What
could they be used for?

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

#2. 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.

4. 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
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

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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).

Ethics Case 6.4

Why Me? Procedural Justice in the Layoff Process

Critical Thinking Questions

1. Which of the three approaches do you think would be seen as the most
procedurally just basis for selecting workers to be laid off?

The answers from students will vary but students may focus on the seniority or
performance option as being the most procedurally-just because these can be
justified with rational logic. Someone who was hired last should go before someone
who has been at the organization longer or someone who has been an outstanding
performer should be kept in favor of releasing a poor performer. There is no sense
of fairness in randomly selecting people to be let go.

2. Let’s suppose that your organization rated most workers as performing above-
average. In most cases then, you don’t have a basis for merit-based layoff selection.
What approach would you recommend in that situation?

In this case the seniority-based option makes the most sense. On a side note, HR
needs to rethink their performance appraisal system if most people are being rated
above-average. This could be a sign of a leniency bias that needs to be addressed so
this problem does not happen again in the future.

3. Some organizations try to withhold any preliminary information about

impending layoffs because it is assumed that a downturn in productivity will occur.
Do you think this is a good approach? Why?

Students’ answers will vary. Some will look at it from the organizational
perspective that focuses on the profit side. Some will look at it from the employee’s
view that they should be kept aware of what is going on so they can begin to make
plans if necessary to find a new job.

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?

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There are several things that a company can do to assist a community that will be
affected by their 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
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 they need 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 is
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?

While 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 this 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, etc., that may make it difficult for an employer to willingly do so.
Others may argue that advance notice is not as important as much as is a good
severance package that will allow them time to search for another job. This subject
should spark some good discussion.

Contemporary Cinema Exercise

Roger & Me (1989, Warner Bros., Start: 35:29 End: 46:21 )

For the class:

This film is a documentary/comedy about the closure of General Motors plant at Flint,
Michigan, which resulted in the loss of 30,000 jobs. It details the attempts of filmmaker
Michael Moore to get an interview with GM CEO Roger Smith.

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For the instructor:

While this entire film would be a worthwhile case study in downsizing management, this
clip sums up the human element of GM’s massive layoffs at Flint, Michigan. These
scenes begin with a clip from the CBS evening news with Dan Rather. The scenes
outline the plans for the downsizing and some of the ramifications; this clip ends with
Michael Moore’s voice-over explaining the theft of the cash register from the Ronald
Reagan meeting.

Questions:
1. What non-textbook issues about downsizing does this clip demonstrate?
2. Many individuals classify the sole goal of the organization as “maximizing
shareholder wealth”; do you still feel this way after watching this clip? When
people say “maximize” what do they really mean? At what cost should wealth be
maximized?
3. The text discusses “coordinating media relations.” How well do you think GM
coordinated “media relations” in light of this example?
4. Were textbook “outplacement goals” met in this GM situation? How realistic are
these goals in light of this example? What were GM’s options in this situation?

Analysis:
This clip serves as a brief case study in the Flint GM layoffs. The clip begins with an
ineffective media relations strategy employed by GM and its CEO Roger Smith and the
backlash toward the company after hearing of the layoffs. Most importantly, the laid off
worker in the mental institution shows the frustration and difficulty that some employees
face when improperly outplaced. Further, and perhaps most importantly, the montage of
scenes shown along with the Beach Boys’ “Wouldn’t It Be Nice” shows how destitute
some communities might become when their primary industry is wiped out.
Academically, students are taught to seek alternative job placement and training for laid
off employees. This real life case shows how in practice this is not always the case.
Employees have embeddedness issues keeping them tied to the local community and
many times are blindsided by cutbacks when firms are reporting record earnings.
Overall, this clip serves as a great discussion starter to allow students to see the
human, media, firm, and outside observer reactions to massive downsizing. While the
“downsize/don’t downsize” argument comes about, a focus on the realistic discussion of
when cuts are necessary, the importance of the proper methods of communication, and
realistic reactions to these situations serves the students well in employee relations and
human resource training.

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