CHAPTER 13:

EMPLOYEE
SEPARATION

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 Employee Separation

• Reasons for employee separations

– Pressures on firms to remain competitive & efficient
– Decline in employee commitment to employers
• Importance of managing separations
– Transitions of employees out of firm go smoothly
– Continuing operations of firm not disrupted
– Important professional relationships not damaged
• Types of separations
– Reductions-in-force, turnover, & retirements

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 Reductions-in-Force (RIFs)

• Causes of reductions
– Restructuring as a result of mergers & acquisitions
– Attempts to make organization more cost competitive
– Adjustments to declining business environment conditions
• Reasons for reductions
– Inefficiency in operations
– Lack of adaptability in marketplace
– Weakened competitive position in industry
• Methods for dealing with reductions
– Continuance pay & outplacement programs

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 Reductions-in-Force (RIFs)

• Worker Adjustment Retraining & Notification Act

(WARN) of 1989
– Requires employers with more than 100 employees to
provide sixty days written notice of any facility closings or
large-scale layoffs of 50 or more employees
– WARN does no apply to governmental agencies
– Exceptions to WARN
• “Faltering company”
• “Unforeseeable circumstance”
• Natural disaster
• “Temporary facility”

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 Workforce Management Strategies

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 Turnover

• Involuntary turnover
– Employees asked to leave organization for cause or
due to circumstances that cause reduction-in-force
• Voluntary turnover
– Employees who leave organization on own initiative
• “Beneficial” turnover
– Low performing employees depart &/or new higher
performing employees promoted or hired as
replacements

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 Exhibit 13-2
Performance-Replaceability Strategy Matrix

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 Exhibit 13-3
Strategic Management of Turnover & Retention

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 Retention of High Performers

• Critical HR issue
– Development of policies & programs to retain
high performers &/or those difficult to replace
• Employers face competition from
– Other organizations
– From employees they are attempting to retain
(to start-ups)

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 Retirement

• Age Discrimination Act of 1967

– Prohibits employer from setting mandatory retirement age
except in certain occupations (e.g. pilots)
• Retirement
– Creates advancement opportunities for younger employees
& reduces payroll costs
– Can cause loss of vital historical knowledge of organization,
industry & marketplace
– Part-time & consulting work can ease transition of older
workers into retirement

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 Reading 13.1
Holding on to High Performers:
A Strategic Approach to Retention
• Major turnover trends
– Increasing turnover rates having significant impact on
organizational success
– Costs associated with turnover, especially of high
performers, continues to escalate
• Why companies fail to address turnover issue
– Pervasive belief that high turnover is inevitable in strong
economy
– Failure of companies to develop effective strategies for
managing employee turnover

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 Reading 13.1
Holding on to High Performers:
A Strategic Approach to Retention

• Well-planned & coordinated retention strategy

– Selection & orientation
– Training & career management
– Motivation & compensation
• Selection & orientation
– Recruitment practices that focus on cultural fit
– Define critical “success factors” for job
– Behavioral-based selection interviewing
– Effective orientation

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 Reading 13.1
Holding on to High Performers:
A Strategic Approach to Retention

• Training & career management

– Create learning environment
– Adopt interactive approach to training &
development
– Establish development as line responsibility
– Offer variety of development opportunities

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 Reading 13.1
Holding on to High Performers:
A Strategic Approach to Retention
• Motivation & compensation
– Many companies are willing to match financial
offerings
– May not be wise to focus primarily on money
– Incorporate nonfinancial rewards into compensation
programs
– Enlist high performers in solving business problems
– Recognize employee efforts more informally, more
personally, & more frequently
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 Reading 13.1
Holding on to High Performers:
A Strategic Approach to Retention

• Final recommendations
– Design strategies that reflect particular
situation
– Evaluate effectiveness of efforts as
systematically as possible
– Conduct exit interviews

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 Reading 13.2
Strategies for Responsible Restructuring
• Economic consequences of employment
downsizing
– Neither employment nor asset downsizing
strategies yielded long-term payoffs significantly
larger than those generated by stable employers
– Not possible for firms to “save” or “shrink” their way
to prosperity
– Prosperity was only possible by growing businesses
– Firms cannot assume that layoffs are quick fix

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 Reading 13.2
Strategies for Responsible Restructuring
• What’s different about current layoffs?
– Healthy companies hoping to reduce costs & boost earnings
by reducing head count
– At same time firms are firing some people, are hiring others
– More managers are briefing employees regularly about
economic status of companies, which raises awareness &
prepares employees
– Outplacement centers have become America’s new hiring
halls
– Phenomenon of layoffs not limited to U.S.

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 Reading 13.2
Strategies for Responsible Restructuring
• Ten mistakes to avoid when restructuring
1. Failure to be clear about long- & short-term goals
2. Use of downsizing as first resort, rather than as last
3. Use of non-selective downsizing
4. Failure to change ways work is done
5. Failure to involve workers in restructuring process
6. Failure to communicate openly & honestly
7. Inept handling of those who lose jobs
8. Failure to manage survivors effectively
9. Ignoring effects on other stakeholders
10. Failure to evaluate results & learn from mistakes

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 Reading 13.2
Strategies for Responsible Restructuring
• What to do
– Carefully consider rationale behind restructuring
– Consider virtues of stability
– Managers make concerns known to employees &
seek input
– Don’t use downsizing as “quick fix” to achieve short-
term goals in face of long-term problems
– Be sure employees perceive process as fair

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 Reading 13.2
Strategies for Responsible Restructuring
• What to do
– Make decisions in consistent manner
– Communicate regularly & in variety of ways
– Give survivors reason to stay, & prospective new
hires reason to join
– Train employees & managers in new ways of
operating
– Examine all HR systems carefully in light of change
of strategy or environment facing firm

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• Mandatory retirement can cause great economic &

emotional hardship to many older workers
• Shock of compulsory retirement & resulting loss
of productive work & earning power may lead to
impaired health & mental well-being

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• A strong case for flexible retirement

policies
– Population getting older
– People living longer
– Labor force is growing at slower rate
– Age distribution changing in favor of older groups
– Labor market activity declining among older workers
– Average retirement age is declining

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• Management of labor shortages in some

highly skilled trades in next decade will
require
– Employment strategies that slow down withdrawal
of older workers from areas of highest productivity &
growth in economy or
– Prevent total loss of such vital skills & expertise in
post-retirement period

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• Age-performance relationship
– Individual differences much more important
than age group differences
– Chronological age accounts for only small
percentage of variance in performance
– Age & performance appears to be generally
unrelated

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• Arguments for mandatory retirement

– Assumes that job performance & age become negatively
correlated after worker reaches certain age
– Enables “retirement with dignity” & allows for dismissal without
cause other than age
– Minimizes need to monitor & assess older worker performance
– Justifies compensation sequencing schemes that underpay
younger workers & overpay older workers
– Assumes older workers are less trainable or adaptable
– Serves need for organizational planning & renewal

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 Reading 13.3
Retirement of Older Workers: Issues & Policies

• Implications for organizational retirement policy

development
– Monitor retirement policies so they meet requirements of
legislation
– Undertake human resource planning to insure levels of
required skills are maintained & not unduly depleted by
retirement programs & policies
– Develop age-neutral policies to ensure effective access to &
utilization of older workers
– Create flexible work & retirement arrangements that met
needs of older workers & organization

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