SHRM N ch13

CHAPTER 13:

EMPLOYEE SEPARATION

Copyright © 2005 South-Western. All rights reserved.


Employee SeparationEmployee SeparationEmployee SeparationEmployee Separation

• Reasons for employee separationsReasons for employee separations– Pressures on firms to remain competitive & efficientPressures on firms to remain competitive & efficient– Decline in employee commitment to employersDecline in employee commitment to employers

• Importance of managing separationsImportance of managing separations– Transitions of employees out of firm go smoothlyTransitions of employees out of firm go smoothly– Continuing operations of firm not disruptedContinuing operations of firm not disrupted– Important professional relationships not damagedImportant professional relationships not damaged

• Types of separationsTypes of separations– Reductions-in-force, turnover, & retirementsReductions-in-force, turnover, & retirements

• Reasons for employee separationsReasons for employee separations– Pressures on firms to remain competitive & efficientPressures on firms to remain competitive & efficient– Decline in employee commitment to employersDecline in employee commitment to employers

• Importance of managing separationsImportance of managing separations– Transitions of employees out of firm go smoothlyTransitions of employees out of firm go smoothly– Continuing operations of firm not disruptedContinuing operations of firm not disrupted– Important professional relationships not damagedImportant professional relationships not damaged

• Types of separationsTypes of separations– Reductions-in-force, turnover, & retirementsReductions-in-force, turnover, & retirements


Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)

• Causes of reductionsCauses of reductions– Restructuring as a result of mergers & acquisitionsRestructuring as a result of mergers & acquisitions– Attempts to make organization more cost competitiveAttempts to make organization more cost competitive– Adjustments to declining business environment conditionsAdjustments to declining business environment conditions

• Reasons for reductionsReasons for reductions– Inefficiency in operationsInefficiency in operations– Lack of adaptability in marketplaceLack of adaptability in marketplace– Weakened competitive position in industryWeakened competitive position in industry

• Methods for dealing with reductionsMethods for dealing with reductions– Continuance pay & outplacement programsContinuance pay & outplacement programs

• Causes of reductionsCauses of reductions– Restructuring as a result of mergers & acquisitionsRestructuring as a result of mergers & acquisitions– Attempts to make organization more cost competitiveAttempts to make organization more cost competitive– Adjustments to declining business environment conditionsAdjustments to declining business environment conditions

• Reasons for reductionsReasons for reductions– Inefficiency in operationsInefficiency in operations– Lack of adaptability in marketplaceLack of adaptability in marketplace– Weakened competitive position in industryWeakened competitive position in industry

• Methods for dealing with reductionsMethods for dealing with reductions– Continuance pay & outplacement programsContinuance pay & outplacement programs


Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)Reductions-in-Force (RIFs)

• Worker Adjustment Retraining & Notification Act Worker Adjustment Retraining & Notification Act (WARN) of 1989(WARN) of 1989

– Requires employers with more than 100 employees to Requires employers with more than 100 employees to provide sixty days written notice of any facility closings or provide sixty days written notice of any facility closings or large-scale layoffs of 50 or more employeeslarge-scale layoffs of 50 or more employees

– WARN does no apply to governmental agenciesWARN does no apply to governmental agencies– Exceptions to WARNExceptions to WARN

• ““Faltering company”Faltering company”

• ““Unforeseeable circumstance”Unforeseeable circumstance”

• Natural disasterNatural disaster

• ““Temporary facility”Temporary facility”

• Worker Adjustment Retraining & Notification Act Worker Adjustment Retraining & Notification Act (WARN) of 1989(WARN) of 1989

– Requires employers with more than 100 employees to Requires employers with more than 100 employees to provide sixty days written notice of any facility closings or provide sixty days written notice of any facility closings or large-scale layoffs of 50 or more employeeslarge-scale layoffs of 50 or more employees

– WARN does no apply to governmental agenciesWARN does no apply to governmental agencies– Exceptions to WARNExceptions to WARN

• ““Faltering company”Faltering company”

• ““Unforeseeable circumstance”Unforeseeable circumstance”

• Natural disasterNatural disaster

• ““Temporary facility”Temporary facility”


Workforce Management StrategiesWorkforce Management StrategiesWorkforce Management StrategiesWorkforce Management Strategies


TurnoverTurnoverTurnoverTurnover

• Involuntary turnoverInvoluntary turnover– Employees asked to leave organization for cause or Employees asked to leave organization for cause or

due to circumstances that cause reduction-in-forcedue to circumstances that cause reduction-in-force

• Voluntary turnoverVoluntary turnover– Employees who leave organization on own initiativeEmployees who leave organization on own initiative

• ““Beneficial” turnoverBeneficial” turnover– Low performing employees depart &/or new higher Low performing employees depart &/or new higher

performing employees promoted or hired as performing employees promoted or hired as replacementsreplacements

• Involuntary turnoverInvoluntary turnover– Employees asked to leave organization for cause or Employees asked to leave organization for cause or

due to circumstances that cause reduction-in-forcedue to circumstances that cause reduction-in-force

• Voluntary turnoverVoluntary turnover– Employees who leave organization on own initiativeEmployees who leave organization on own initiative

• ““Beneficial” turnoverBeneficial” turnover– Low performing employees depart &/or new higher Low performing employees depart &/or new higher

performing employees promoted or hired as performing employees promoted or hired as replacementsreplacements


Exhibit 13-2Exhibit 13-2

Performance-Replaceability Strategy Performance-Replaceability Strategy MatrixMatrix


Performance-Replaceability Strategy Performance-Replaceability Strategy MatrixMatrix



Strategic Management of Turnover & Strategic Management of Turnover & RetentionRetention


Strategic Management of Turnover & Strategic Management of Turnover & RetentionRetention


Retention of High PerformersRetention of High PerformersRetention of High PerformersRetention of High Performers

• Critical HR issueCritical HR issue– Development of policies & programs to retain Development of policies & programs to retain

high performers &/or those difficult to replacehigh performers &/or those difficult to replace

• Employers face competition from Employers face competition from – Other organizations Other organizations – From employees they are attempting to retain From employees they are attempting to retain

(to start-ups)(to start-ups)

• Critical HR issueCritical HR issue– Development of policies & programs to retain Development of policies & programs to retain

high performers &/or those difficult to replacehigh performers &/or those difficult to replace

• Employers face competition from Employers face competition from – Other organizations Other organizations – From employees they are attempting to retain From employees they are attempting to retain

(to start-ups)(to start-ups)


RetirementRetirementRetirementRetirement

• Age Discrimination Act of 1967Age Discrimination Act of 1967– Prohibits employer from setting mandatory retirement age Prohibits employer from setting mandatory retirement age

except in certain occupations (e.g. pilots)except in certain occupations (e.g. pilots)

• RetirementRetirement– Creates advancement opportunities for younger employees Creates advancement opportunities for younger employees

& reduces payroll costs& reduces payroll costs– Can cause loss of vital historical knowledge of organization, Can cause loss of vital historical knowledge of organization,

industry & marketplaceindustry & marketplace– Part-time & consulting work can ease transition of older Part-time & consulting work can ease transition of older

workers into retirementworkers into retirement

• Age Discrimination Act of 1967Age Discrimination Act of 1967– Prohibits employer from setting mandatory retirement age Prohibits employer from setting mandatory retirement age

except in certain occupations (e.g. pilots)except in certain occupations (e.g. pilots)

• RetirementRetirement– Creates advancement opportunities for younger employees Creates advancement opportunities for younger employees

& reduces payroll costs& reduces payroll costs– Can cause loss of vital historical knowledge of organization, Can cause loss of vital historical knowledge of organization,

industry & marketplaceindustry & marketplace– Part-time & consulting work can ease transition of older Part-time & consulting work can ease transition of older

workers into retirementworkers into retirement


Reading 13.1Reading 13.1

Holding on to High Performers:Holding on to High Performers:A Strategic Approach to RetentionA Strategic Approach to Retention



• Major turnover trendsMajor turnover trends– Increasing turnover rates having significant impact on Increasing turnover rates having significant impact on

organizational successorganizational success– Costs associated with turnover, especially of high Costs associated with turnover, especially of high

performers, continues to escalateperformers, continues to escalate

• Why companies fail to address turnover issueWhy companies fail to address turnover issue– Pervasive belief that high turnover is inevitable in strong Pervasive belief that high turnover is inevitable in strong

economyeconomy– Failure of companies to develop effective strategies for Failure of companies to develop effective strategies for

managing employee turnovermanaging employee turnover

• Major turnover trendsMajor turnover trends– Increasing turnover rates having significant impact on Increasing turnover rates having significant impact on

organizational successorganizational success– Costs associated with turnover, especially of high Costs associated with turnover, especially of high

performers, continues to escalateperformers, continues to escalate

• Why companies fail to address turnover issueWhy companies fail to address turnover issue– Pervasive belief that high turnover is inevitable in strong Pervasive belief that high turnover is inevitable in strong

economyeconomy– Failure of companies to develop effective strategies for Failure of companies to develop effective strategies for

managing employee turnovermanaging employee turnover






• Well-planned & coordinated retention strategyWell-planned & coordinated retention strategy– Selection & orientationSelection & orientation– Training & career managementTraining & career management– Motivation & compensationMotivation & compensation

• Selection & orientationSelection & orientation– Recruitment practices that focus on cultural fitRecruitment practices that focus on cultural fit– Define critical “success factors” for jobDefine critical “success factors” for job– Behavioral-based selection interviewingBehavioral-based selection interviewing– Effective orientationEffective orientation

• Well-planned & coordinated retention strategyWell-planned & coordinated retention strategy– Selection & orientationSelection & orientation– Training & career managementTraining & career management– Motivation & compensationMotivation & compensation

• Selection & orientationSelection & orientation– Recruitment practices that focus on cultural fitRecruitment practices that focus on cultural fit– Define critical “success factors” for jobDefine critical “success factors” for job– Behavioral-based selection interviewingBehavioral-based selection interviewing– Effective orientationEffective orientation






• Training & career managementTraining & career management– Create learning environmentCreate learning environment– Adopt interactive approach to training & Adopt interactive approach to training &

developmentdevelopment– Establish development as line responsibilityEstablish development as line responsibility– Offer variety of development opportunitiesOffer variety of development opportunities

• Training & career managementTraining & career management– Create learning environmentCreate learning environment– Adopt interactive approach to training & Adopt interactive approach to training &

developmentdevelopment– Establish development as line responsibilityEstablish development as line responsibility– Offer variety of development opportunitiesOffer variety of development opportunities






• Motivation & compensationMotivation & compensation– Many companies are willing to match financial Many companies are willing to match financial

offeringsofferings– May not be wise to focus primarily on moneyMay not be wise to focus primarily on money– Incorporate nonfinancial rewards into compensation Incorporate nonfinancial rewards into compensation

programsprograms– Enlist high performers in solving business problemsEnlist high performers in solving business problems– Recognize employee efforts more informally, more Recognize employee efforts more informally, more

personally, & more frequentlypersonally, & more frequently

• Motivation & compensationMotivation & compensation– Many companies are willing to match financial Many companies are willing to match financial

offeringsofferings– May not be wise to focus primarily on moneyMay not be wise to focus primarily on money– Incorporate nonfinancial rewards into compensation Incorporate nonfinancial rewards into compensation

programsprograms– Enlist high performers in solving business problemsEnlist high performers in solving business problems– Recognize employee efforts more informally, more Recognize employee efforts more informally, more

personally, & more frequentlypersonally, & more frequently






• Final recommendationsFinal recommendations– Design strategies that reflect particular Design strategies that reflect particular

situationsituation– Evaluate effectiveness of efforts as Evaluate effectiveness of efforts as

systematically as possiblesystematically as possible– Conduct exit interviewsConduct exit interviews

• Final recommendationsFinal recommendations– Design strategies that reflect particular Design strategies that reflect particular

situationsituation– Evaluate effectiveness of efforts as Evaluate effectiveness of efforts as

systematically as possiblesystematically as possible– Conduct exit interviewsConduct exit interviews



Strategies for Responsible Strategies for Responsible RestructuringRestructuring



• Economic consequences of employment Economic consequences of employment downsizingdownsizing– Neither employment nor asset downsizing strategies Neither employment nor asset downsizing strategies

yielded long-term payoffs significantly larger than yielded long-term payoffs significantly larger than those generated by stable employersthose generated by stable employers

– Not possible for firms to “save” or “shrink” their way Not possible for firms to “save” or “shrink” their way to prosperity to prosperity

– Prosperity was only possible by growing businessesProsperity was only possible by growing businesses– Firms cannot assume that layoffs are quick fixFirms cannot assume that layoffs are quick fix

• Economic consequences of employment Economic consequences of employment downsizingdownsizing– Neither employment nor asset downsizing strategies Neither employment nor asset downsizing strategies

yielded long-term payoffs significantly larger than yielded long-term payoffs significantly larger than those generated by stable employersthose generated by stable employers

– Not possible for firms to “save” or “shrink” their way Not possible for firms to “save” or “shrink” their way to prosperity to prosperity

– Prosperity was only possible by growing businessesProsperity was only possible by growing businesses– Firms cannot assume that layoffs are quick fixFirms cannot assume that layoffs are quick fix






• What’s different about current layoffs?What’s different about current layoffs?– Healthy companies hoping to reduce costs & boost earnings Healthy companies hoping to reduce costs & boost earnings

by reducing head countby reducing head count– At same time firms are firing some people, are hiring othersAt same time firms are firing some people, are hiring others– More managers are briefing employees regularly about More managers are briefing employees regularly about

economic status of companies, which raises awareness & economic status of companies, which raises awareness & prepares employeesprepares employees

– Outplacement centers have become America’s new hiring Outplacement centers have become America’s new hiring hallshalls

– Phenomenon of layoffs not limited to U.S.Phenomenon of layoffs not limited to U.S.

• What’s different about current layoffs?What’s different about current layoffs?– Healthy companies hoping to reduce costs & boost earnings Healthy companies hoping to reduce costs & boost earnings

by reducing head countby reducing head count– At same time firms are firing some people, are hiring othersAt same time firms are firing some people, are hiring others– More managers are briefing employees regularly about More managers are briefing employees regularly about

economic status of companies, which raises awareness & economic status of companies, which raises awareness & prepares employeesprepares employees

– Outplacement centers have become America’s new hiring Outplacement centers have become America’s new hiring hallshalls

– Phenomenon of layoffs not limited to U.S.Phenomenon of layoffs not limited to U.S.






• Ten mistakes to avoid when restructuringTen mistakes to avoid when restructuring1.1. Failure to be clear about long- & short-term goalsFailure to be clear about long- & short-term goals2.2. Use of downsizing as first resort, rather than as lastUse of downsizing as first resort, rather than as last3.3. Use of non-selective downsizingUse of non-selective downsizing4.4. Failure to change ways work is doneFailure to change ways work is done5.5. Failure to involve workers in restructuring processFailure to involve workers in restructuring process6.6. Failure to communicate openly & honestlyFailure to communicate openly & honestly7.7. Inept handling of those who lose jobsInept handling of those who lose jobs8.8. Failure to manage survivors effectivelyFailure to manage survivors effectively9.9. Ignoring effects on other stakeholdersIgnoring effects on other stakeholders10.10. Failure to evaluate results & learn from mistakesFailure to evaluate results & learn from mistakes

• Ten mistakes to avoid when restructuringTen mistakes to avoid when restructuring1.1. Failure to be clear about long- & short-term goalsFailure to be clear about long- & short-term goals2.2. Use of downsizing as first resort, rather than as lastUse of downsizing as first resort, rather than as last3.3. Use of non-selective downsizingUse of non-selective downsizing4.4. Failure to change ways work is doneFailure to change ways work is done5.5. Failure to involve workers in restructuring processFailure to involve workers in restructuring process6.6. Failure to communicate openly & honestlyFailure to communicate openly & honestly7.7. Inept handling of those who lose jobsInept handling of those who lose jobs8.8. Failure to manage survivors effectivelyFailure to manage survivors effectively9.9. Ignoring effects on other stakeholdersIgnoring effects on other stakeholders10.10. Failure to evaluate results & learn from mistakesFailure to evaluate results & learn from mistakes






• What to doWhat to do– Carefully consider rationale behind restructuringCarefully consider rationale behind restructuring– Consider virtues of stabilityConsider virtues of stability– Managers make concerns known to employees & Managers make concerns known to employees &

seek inputseek input– Don’t use downsizing as “quick fix” to achieve short-Don’t use downsizing as “quick fix” to achieve short-

term goals in face of long-term problemsterm goals in face of long-term problems– Be sure employees perceive process as fairBe sure employees perceive process as fair

• What to doWhat to do– Carefully consider rationale behind restructuringCarefully consider rationale behind restructuring– Consider virtues of stabilityConsider virtues of stability– Managers make concerns known to employees & Managers make concerns known to employees &

seek inputseek input– Don’t use downsizing as “quick fix” to achieve short-Don’t use downsizing as “quick fix” to achieve short-

term goals in face of long-term problemsterm goals in face of long-term problems– Be sure employees perceive process as fairBe sure employees perceive process as fair






• What to doWhat to do– Make decisions in consistent mannerMake decisions in consistent manner– Communicate regularly & in variety of waysCommunicate regularly & in variety of ways– Give survivors reason to stay, & prospective new Give survivors reason to stay, & prospective new

hires reason to joinhires reason to join– Train employees & managers in new ways of Train employees & managers in new ways of

operatingoperating– Examine all HR systems carefully in light of change Examine all HR systems carefully in light of change

of strategy or environment facing firmof strategy or environment facing firm

• What to doWhat to do– Make decisions in consistent mannerMake decisions in consistent manner– Communicate regularly & in variety of waysCommunicate regularly & in variety of ways– Give survivors reason to stay, & prospective new Give survivors reason to stay, & prospective new

hires reason to joinhires reason to join– Train employees & managers in new ways of Train employees & managers in new ways of

operatingoperating– Examine all HR systems carefully in light of change Examine all HR systems carefully in light of change

of strategy or environment facing firmof strategy or environment facing firm



Retirement of Older Workers: Issues & Retirement of Older Workers: Issues & PoliciesPolicies



• Mandatory retirement can cause great economic & Mandatory retirement can cause great economic & emotional hardship to many older workersemotional hardship to many older workers

• Shock of compulsory retirement & resulting loss Shock of compulsory retirement & resulting loss of productive work & earning power may lead to of productive work & earning power may lead to impaired health & mental well-beingimpaired health & mental well-being

• Mandatory retirement can cause great economic & Mandatory retirement can cause great economic & emotional hardship to many older workersemotional hardship to many older workers

• Shock of compulsory retirement & resulting loss Shock of compulsory retirement & resulting loss of productive work & earning power may lead to of productive work & earning power may lead to impaired health & mental well-beingimpaired health & mental well-being






• A strong case for flexible retirement A strong case for flexible retirement policiespolicies– Population getting olderPopulation getting older– People living longerPeople living longer– Labor force is growing at slower rateLabor force is growing at slower rate– Age distribution changing in favor of older groupsAge distribution changing in favor of older groups– Labor market activity declining among older workersLabor market activity declining among older workers– Average retirement age is decliningAverage retirement age is declining

• A strong case for flexible retirement A strong case for flexible retirement policiespolicies– Population getting olderPopulation getting older– People living longerPeople living longer– Labor force is growing at slower rateLabor force is growing at slower rate– Age distribution changing in favor of older groupsAge distribution changing in favor of older groups– Labor market activity declining among older workersLabor market activity declining among older workers– Average retirement age is decliningAverage retirement age is declining






• Management of labor shortages in some Management of labor shortages in some highly skilled trades in next decade will highly skilled trades in next decade will require require – Employment strategies that slow down withdrawal of Employment strategies that slow down withdrawal of

older workers from areas of highest productivity & older workers from areas of highest productivity & growth in economy or growth in economy or

– Prevent total loss of such vital skills & expertise in Prevent total loss of such vital skills & expertise in post-retirement periodpost-retirement period

• Management of labor shortages in some Management of labor shortages in some highly skilled trades in next decade will highly skilled trades in next decade will require require – Employment strategies that slow down withdrawal of Employment strategies that slow down withdrawal of

older workers from areas of highest productivity & older workers from areas of highest productivity & growth in economy or growth in economy or

– Prevent total loss of such vital skills & expertise in Prevent total loss of such vital skills & expertise in post-retirement periodpost-retirement period






• Age-performance relationshipAge-performance relationship– Individual differences much more important Individual differences much more important

than age group differencesthan age group differences– Chronological age accounts for only small Chronological age accounts for only small

percentage of variance in performancepercentage of variance in performance– Age & performance appears to be generally Age & performance appears to be generally

unrelatedunrelated

• Age-performance relationshipAge-performance relationship– Individual differences much more important Individual differences much more important

than age group differencesthan age group differences– Chronological age accounts for only small Chronological age accounts for only small

percentage of variance in performancepercentage of variance in performance– Age & performance appears to be generally Age & performance appears to be generally

unrelatedunrelated






• Arguments for mandatory retirementArguments for mandatory retirement– Assumes that job performance & age become negatively Assumes that job performance & age become negatively

correlated after worker reaches certain agecorrelated after worker reaches certain age– Enables “retirement with dignity” & allows for dismissal without Enables “retirement with dignity” & allows for dismissal without

cause other than agecause other than age– Minimizes need to monitor & assess older worker performanceMinimizes need to monitor & assess older worker performance– Justifies compensation sequencing schemes that underpay Justifies compensation sequencing schemes that underpay

younger workers & overpay older workersyounger workers & overpay older workers– Assumes older workers are less trainable or adaptableAssumes older workers are less trainable or adaptable– Serves need for organizational planning & renewalServes need for organizational planning & renewal

• Arguments for mandatory retirementArguments for mandatory retirement– Assumes that job performance & age become negatively Assumes that job performance & age become negatively

correlated after worker reaches certain agecorrelated after worker reaches certain age– Enables “retirement with dignity” & allows for dismissal without Enables “retirement with dignity” & allows for dismissal without

cause other than agecause other than age– Minimizes need to monitor & assess older worker performanceMinimizes need to monitor & assess older worker performance– Justifies compensation sequencing schemes that underpay Justifies compensation sequencing schemes that underpay

younger workers & overpay older workersyounger workers & overpay older workers– Assumes older workers are less trainable or adaptableAssumes older workers are less trainable or adaptable– Serves need for organizational planning & renewalServes need for organizational planning & renewal






• Implications for organizational retirement policy Implications for organizational retirement policy developmentdevelopment– Monitor retirement policies so they meet requirements of Monitor retirement policies so they meet requirements of

legislationlegislation– Undertake human resource planning to insure levels of Undertake human resource planning to insure levels of

required skills are maintained & not unduly depleted by required skills are maintained & not unduly depleted by retirement programs & policiesretirement programs & policies

– Develop age-neutral policies to ensure effective access to & Develop age-neutral policies to ensure effective access to & utilization of older workersutilization of older workers

– Create flexible work & retirement arrangements that met Create flexible work & retirement arrangements that met needs of older workers & organizationneeds of older workers & organization

• Implications for organizational retirement policy Implications for organizational retirement policy developmentdevelopment– Monitor retirement policies so they meet requirements of Monitor retirement policies so they meet requirements of

legislationlegislation– Undertake human resource planning to insure levels of Undertake human resource planning to insure levels of

required skills are maintained & not unduly depleted by required skills are maintained & not unduly depleted by retirement programs & policiesretirement programs & policies

– Develop age-neutral policies to ensure effective access to & Develop age-neutral policies to ensure effective access to & utilization of older workersutilization of older workers

– Create flexible work & retirement arrangements that met Create flexible work & retirement arrangements that met needs of older workers & organizationneeds of older workers & organization

Leadership & Management

SHRM N ch13