BUS 532 Strategic Human Resource Management

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BUS 532Strategic Human Resource Management

• 11/16/1998
• Professor Allen

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Agenda

• Recap on Merck
• Case Webster Industries
• Lecture on downsizing
• - Layoffs
• - Termination
• - Buyouts
• - Job security promises

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Layoffs

• Decision rule reduce employment (beyond quits,
  retirements) as long as reduction in payroll
  offsets (1) loss in output and (2) costs of
  layoff
• Costs
• - Severance pay
• - Unemployment Insurance
• - Loss in efficiency after jobs reassigned

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Layoff implementation

• Regulation in U.S. 60 days advance notice,
  discrimination laws (especially EEO, age)
• Regulation abroad longer advance notice,
  severance pay
• Criteria PV(output) lt PV(compensation)
• - Seniority
• - Current performance
• - Future performance

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Communicating layoff decisions

• DO
• Advance warning
• In private, quickly (15 minutes)
• Explain severance benefits in writing
• Outplacement at separate location
• Express appreciation, if appropriate

• DO NOT
• Be ambiguous
• Allow discussion
• Stray from the subject
• Force instant exodus (unless security is a
  concern)
• Pick holiday/birthday to deliver the news
• Forget survivors

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Termination

• Employment-at-will doctrine
• Firm can fire and worker can quit anytime
• Exceptions
• - Union activity
• - Public policy
• - Implicit promises
• - Discrimination
• - Failure to have/follow procedures

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Buyouts

• Retirement decisions factor in
• - Future pay - Social Security
• - Pension income - Health insurance
• Firms can influence via
• - Lump sum payment
• - Bonus years on pension
• - Health carryover

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Buyout implementation

• Uncertainty in numbers
• Uncertainty in quality
• Risk of age discrimination lawsuits
• - Sudden fall in performance evaluation
• - Threats that layoffs will follow if enough do
  not take offer
• - Smaller raises for senior than junior employees

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Promises, promises no-layoff policies

• WHO HAS THEM
• Lincoln Electric
• Southwest Air
• Nucor
• Cisco

• WHO USED TO
• IBM
• Sun
• Kodak
• H-P
• RJR
• Digital
• Bank of America
• Chase Manhattan

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To make your promise credible

• Rapidly growing company
• Develop alternatives to full-time employees
  outsourcing, temps, contract workers
• Cross train
• Offer relocation
• Turn down some business