What are Involuntary Separations?
An involuntary separation occurs when management decides to terminate its relationship with an employee due to:
(1) Economic necessities or (2) a poor fit between the employee and the organization. Involuntary separations are the result of very serious and painful decisions that can have a profound effect on the entire organization and especially on the employee who loses his or her job. Although managers implement the decision to dismiss an employee, the HR staff makes sure that the dismissed employee receives “due process” and the dismissal is performed within the letter and the spirit of the company’s employment policy.
Cooperation and teamwork between managers and HR staff are essential to effective management of the dismissal process. HR staff can act as valuable advisers to managers in this arena by helping them avoid mistakes that can lead to claims of wrongful discharge. They can also help protect employees whose rights are violated by managers. There are two types of involuntary separations: discharge and layoffs.
A discharge takes place when management decides that there is poor fit between employee and the organization. The discharge is a result of either poor performance or the employee’s failure to change some unacceptable behavior that management has tried repeatedly to correct. Sometimes, employees engage in serious misconduct, such as theft or dishonesty, which may result in immediate termination.
Managers who decide to discharge an employee must make sure they follow the company’s established discipline procedures. Most non-union companies and all unionized firms have a progressive discipline procedure that allows employees the opportunity to correct their behavior before receiving a more severe punishment. For example, an employee who violates a safety rule may be given a verbal warning, followed by a written warning within a specific period of time. If the employee does not stop breaking the safety rule, the employer may choose to discharge the employee. Managers must document the occurrences of the violation and provide evidence that the employee knew about the rule and was warned that the violation could lead to discharge. In this way, managers can prove that the employee was discharged for just cause.
A layoff differs from discharge in several ways. In a layoff, employee loses their jobs because a change in the company’s environment or strategy forces it to reduce its workforce. Global competition, reductions in product demand, changing technologies that reduce the need for workers, and mergers and acquisitions are the primary factors behind most layoffs. In contrast, the actions of most discharged employee have usually been a direct cause of their separation.
Layoffs have a powerful impact on the organization. They can affect the moral of the remaining employees, who may fear losing their jobs in the future. In addition, layoffs can affect a region’s economic vitality, including the merchants who depend on the workers’ patronage to support their business. When layoffs happen, the entire community may suffer.
Investors may be affected by layoffs as well. The investment community may interpret a layoff as a signal that the company is having serious problems. This in turn, may lower the price of the company’s stock on the stock market.
Finally, layoffs can change a company’s image. They can hurt a company’s standing as a good place to work and make it.
Layoffs, Downsizing and Rightsizing
It is appropriate at this point to clarify the differences between a layoff and two concepts that are frequently (but sometimes mistakenly) associated with it: downsizing and rightsizing.
A company that adopts a downsizing strategy reduces the scale (size) and scope of its business to improve its financial performance. When a company decides to downsize, it may choose layoff as one of its several ways of reducing costs or improving profitability. In recent years, many firms have done exactly this, but we want to emphasize that companies can take many other measures to increase profitability without resorting to layoffs.
Rightsizing involves reorganizing a company’s employees to improve their efficiency. An organization needs to rightsize when it becomes bloated with too many management layers or too many bureaucratic work processes that add no value to its products or service. For example, companies that reconfigure their front-line employees into self—managed work teams may find that they are over-staffed and need to reduce their head-count to take advantage of the efficiencies provided by the team structure. The result may be layoffs. But layoffs are not always necessary.
As with downsizing strategy, management may have several alternatives to layoff available when it rightsizes its work force. Managing layoffs is an extremely complex process. Before we examine the specifics, however, it is useful to examine an important alternative to layoffs: early retirements.