PM 108- ORGANIZATIONAL DEVELOPMENT

Case Study: F-01 Professor: Dr. Precillano E. Echavia

“EMPLOYEE LAYOFFS AT ST. ANDREW MEDICAL CENTER”

St. Andrew Medical Center is a medium-sized 300-bed capacity hospital

in ARNOLDUS 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 Mercy Buenafe, the CEO of the hospital for eight years,
presented a rather bleak financial picture during the most recent quarterly
meeting of the Board of Directors. 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 statement of Income and
Expenditures. Such declines have not been unusual for this industry because
of increasing competition. So far, the only response to these changes has
been a tightening of requirements for equipment and supply purchases. The
projected deficit for the coming year is around P35 million unless some
additional revenues are identified or some additional savings can be found.
The recommendation of the Board is employee layoffs which according to
them is the only realistic alternative. They recommend laying off up to 25%
of the hospital’s employees.

Marlyn Ramirez, the hospital’s Human Resource Director was given the
task to implement the recommendation of the board.

YOUR TASK: HELP Sister Mercy and Ms. Marlyn solve this problem by
following these steps:

1. State the main problem faced by the hospital.

- The main problem faced by the hospital is the massive decline in its
revenue and net loss because of the opening of the biggest government
hospital in the province leading to fiercer competition and declining
occupancy rate of St. Andrew Medical Center. This situation led the
board of directors to apply drastic measures to cut costs and
recommended laying off up to 25% of the hospital’s employees. There
is also the difficult decision that Sister Mercy Buenafe must make
while taking into consideration the consequences of her allowing the
 25% layoff of their employees because of the impact it would have on
the operations of the hospital and its history of having never
experienced employee layoff.

2. State the different areas of consideration by presenting a SWOT

ANALYSIS:
2.1 – Strengths of the Hospital

- The strengths of the hospital is their experience operating in the

industry and is already well known and trusted by the people; it
is one of the largest hospitals in the city catering 300 medium
sized bed capacity; and the history of never having experienced
employee layoff which is generally a major advantage in
recruiting highly skilled employees and shows how they value
their people.

2.2 – Weaknesses of the hospital

- The weaknesses that the hospital faces is the decreasing

occupancy rates due to the fierce competition especially the
opening of the biggest government hospital in the province; Major
financial loss, the hospital projected a deficit of 35 million which
resulted in its financial instability to pay its current expenses;
the unionized personnel is very tricky when laying off just to cut
expenses because it would lead to conflict, envy, and decrease in
moral of the employees.

2.3 Opportunities of the hospital

- The opportunities of the hospital are implementing different way

of cutting cost such as improving its operational efficiency and
removing all the unnecessary things that would only add cost to
the company without producing much positive results; the
hospital can look for additional methods on generating revenue
such as going out and doing medical related stuff outside the
hospital such as providing people medical training for a fee;
Partnership of collaboration between other hospitals who are
also struggling and have similar situation with them due to the
opening of the biggest government hospital in the province.

2.4 Threats for the hospital

- The biggest threat to St. Andrew Medical Center would be the

emergence of its competitor which is the biggest government
hospital in the province since many people would go there
especially those who are less fortunate folks; the laying off of
employees is also a major threat for hospital because it could
 lower the employees’ morale and other negative consequences;
Their credibility as a hospital who never lays off employees since
its founding will also take a massive hit which could result in
people losing trust in the hospital especially those aspiring
employees that are aiming to work there.

3. Give your proposed solutions/interventions and alternative courses of

action (minimum of 3) to help St. Andrew’s Hospital overcome this
problem.

- Additional Service Offerings to the Public - the hospital could

expand its area of operations through doing some healthcare
services that caters the different needs of the people in the
community and even reach to other places if necessary and not
just limit their operations within the hospital structures itself.
- Altering the Schedule and Salary of the Employees to meet the
Expenses without having to Layoff Employees with a suggestion
from a financial expert - by limiting the amount of time an
employee can work and pay them on hourly basis the company
can still cut costs and retain its employees. The employees who
are not satisfied with these due to the lower wages could look for
a sideline aside from working in the hospital to generate another
income. Together with the supervision of a financial expert the
chances of cutting costs without losing employees will increase.
- Collaborating and partnering with other hospitals who are facing
the same situation with them - this will strengthen their hospitals
and lower the number of competitors they will have to face in
their industry as well as increasing the chances of facing the
biggest threat which is the emergence of the biggest government
hospital in the province.

4. State your recommendations based on the Alternative Courses of

Actions being presented.

- Additional Service Offerings to the Public - this can be done

through assessing the needs and demands for new services that
are related to medicine or other medical services and creating a
solution to address these issues and ensuring profit for each of
the services rendered.
- Altering the Schedule and Salary of the Employees to meet the
expenses without having to layoff employees with a suggestion
from a financial expert - identify the positions that greatly
needed professional expertise and develop a plan that can cater
all the employees to still work for the hospital but on a limited
time and give salary on a timely rate to make it fair for all the
employees. Plan the necessary workforce needed to make the
hospital operational and make room for open communication to
 address future problems and work together with a good financial
expert.
- Collaborating and partnering with other hospitals who are facing
the same situation with them - Identify the hospitals who are in
the same situation with the St. Andrew Medical Center and weigh
in the pros and cons if a collaboration would bring more benefits
or not and if it is beneficial discuss the necessary details for the
said collaboration and ask assistance of experts to ensure that
St. Andrew Medical Center will not be at a disadvantage.
Implement joint ventures and aim to increase profit and recover.

5. Provide a conclusion/ detailed action plan to implement your

recommendations using the table below:

SPECIFIC ACTIVITY PERSON BUDGETARY

RESPONSIBLE TIME FRAME REQUIREMENTS

Additional Service Chief Medical 6 months to 1 Depending on

Offerings to the Public Officer year the potential
revenue and
service offers

- assessing the needs and Operations 6 months to 1 50% of the

demands for new Officer year forecasted
services that are related revenue that will
to medicine or other be generated
medical services
- creating a solution to Chief 6 months to 1 Depending on
address these issues and Operations year the severity of
ensuring profit for each of officer and issue and the
the services rendered Financial profit to be
Analyst gained for
solving it

Altering the Schedule and Chief of the 1 to 6 months Depending on

Salary of the Employees Human the expenses
to meet the expenses Resource that must be cut
without having to layoff Department down
employees with a and Financial
suggestion from a Analyst
financial expert
- Plan the necessary Human 1 to 3 months Salary paid in an
workforce needed to Resource hourly basis
make the hospital Manager
operational and make
room for open
communication
Collaborating and CEO, Chief 6 months to 1 Negotiation
partnering with other Operations year expenses and
hospitals who are facing Officer, Legal other legal fees
the same situation with Council Officer,
them and BOD

- Implement joint Chief 6 months to 1 Negotiation

ventures and develop Operations year expenses, other
collaborative agreements Officer and legal fees, and
and aim to increase profit Legal Council operational
and recover. Officer expenses