Exit Management

Introduction

In this learning blog entry, I am going to present key concepts, theories and models from Chapter 6: Managing Employee Separations, Downsizing and Outplacement, from the eight edition (2016) of Managing Human Resources by Gómez-Mejía, Balkin and Cardy. I am going to summarize the key concepts from this chapter including Defining Employee Separations, Types of Employee Separations, Managing Early Retirements, managing Layoffs and Outplacement. I will also present three different cases “Nokia closes plant in Germany and relocates in Romania”, “Nokia cuts 3500 jobs ”to ensure profitability”, and “Hundreds of Nokia’s outsourced Symbian developers leaving Accenture.”continuing with two other articles related to this topic.

Managing Employee Separations, Downsizing, and Outplacement

What are Employee Separations?

Employee separations occur when employees terminate the members of an organization. The turnover rate is a measure of the rate at which employees leave the firm. Separations and outplacement can be managed effectively. In well managed companies they monitor the turnover rate at which employees leave the firm. By proactive strategies managers should prepare. (Gómez-Mejía. Balkin & Cardy 2016, 210.)

for the outflow of their human resources.The separations within workers have both costs and benefits. (Gómez-Mejía. Balkin & Cardy 2016, 210.)

The costs include

1. Recruitment costs
   • The recruitment costs can include advertising the work vacancy and hiring a skilled recruiter to travel to various locations
2. Selection costs
   • Selection costs are associated with selecting, hiring and placing a new employee in a job. Interviewing the job applicant includes the costs associated with travel to the interview site and effectively organize the interviews and arranging meeting to make selection decisions. Also testing the applicant, a conducting reference checks, relocation and housing costs might occur.
3. Training costs
   • Most new employees need some specific training to do their job effectively. Training costs also include costs associated with an orientation to the company’s values and culture. There also might be costs of instruction, books and materials for training courses.
4. Separation costs
   • A company incurs separation costs for all the employees who leave, whether they will be replaced. The largest separation cost is compensation in terms of pay and benefits. Other separation costs are associated with the administration of the separation itself. It often includes exit interview, an employees’ final interview to find out the reason why the employee is leaving or to provide counseling and assistance in finding a new job. It is common practice in bigger companies to provide departing employees with outplacement assistance, a program in which companies help their departing employees find jobs more rapidly by providing  them with training in job-search skills. (Gómez-Mejía. Balkin & Cardy 2016, 210-213.)

The benefits include

1. Reduced labor costs
   • By reducing the size of its workforce, a company will reduce its overall labor costs. While separation costs may be significant in a layoff, the wage savings resulting from the loss of certain workers will easily outweigh the separation compensation and other layoff related expenses.
2. Replacement of poor performers
   • Identifying poor performers and helping them improve their performance are an important part of management. If an employee does not respond to coaching or suggestions, it could be better to fire him or her so that they can bring in a new, more skilled employee.
3. Increased innovation
   • Separations create opportunities for the enhancement of productive individuals. They also open up entry-level jobs as it attracts workers from inside. New hires recruited from outside are an essential source of creativity in companies and can provide a fresh perspective.
4. Opportunity for greater diversity
   • Separations create opportunities to recruit workers from a diverse background and to redistribute the workforce’s ethnic and gender diversity while maintaining control over recruiting practices and consistency with government policies. (Gómez-Mejía. Balkin & Cardy 2016, 210-213.)

Types of Employee Separations

Employees can willingly or involuntarily leave. Voluntary separations require retirements and quits. Discharges and layoffs include the involuntary separations. If an employee is forced to leave involuntarily, a much higher level of documentation is needed to prove that the decision by a manager to fire the employee is fair.(Gómez-Mejía. Balkin & Cardy 2016, 214-215.)

Managing Early Retirements

Early retirement policies include two features:

1. A package of financial incentives
   • that makes it attractive for senior employees to retire earlier than they had planned
2. An open window that restricts eligibility to s fairly short period of time,
   • after the window is closed, the incentives are no longer available.

Downsizing is a company strategy to reduce the scale and scope of its business in order to improve the company’s financial performance. When downsizing, an organization, managers may elect to use voluntary early retirements as an alternative to layoffs. Rightsizing is the process of reorganizing a company’s workers to improve their productivity. Possible early retirement plans must be handled in such a way that qualifying workers do not feel to be forced to retire. (Gómez-Mejía. Balkin & Cardy 2016, 214-217.)

Managing Layoffs

After all cost-cutting options are exhausted, layoffs will be used as a last resort. Important factors in the implementation of a separation policy include:

1. Notifying employees
2. Developing layoff criteria
3. Communicating to laid-off employees
4. Coordinating media relations
5. Maintaining security
6. Reassuring survivors of the layoff

Attrition is an employment policy designed to reduce the company’s workforce by not refilling job vacancies that are created by turnover

Hiring freeze is an employment policy designed to reduce the company’s workforce by not hiring any new employees into the company.

Outplacement

It is a good idea for the company to use outplacement programs to help separated workers deal with their concerns and to decrease the amount of time they are unemployed, no matter what strategy is used to reduce the workforce. (Gómez-Mejía. Balkin & Cardy 2016, 218-223.)

Case 7 A: ”Nokia closes plant in Germany and relocates in Romania”

This article was published on 17th of January 2008, in Communicating Labor Rights Blog. In this news is described how The German government asked Nokia to reconsider closing a plant in Germany, with plenty of job cuts and the transfer of the factory to Romania. The Finnish management of the world’s leading cell phone manufacturer has announced the abolition of 4,000 jobs without the slightest knowledge or consultation, according to the ETUC. (Yle 2008.)

In specific, it must be assured that without sanctions businesses would not be able to run roughshod over the rights of European and national workers. In any case, it must be assured that no cuts or changes can be made without proper detailed knowledge and careful consultations with representatives of the workers and their labor unions. (Yle 2008.)

Case 7 B: “Nokia cuts 3500 jobs ”to ensure profitability””

This article was published on 29th of September 2011, in Yle Uutiset.

Nokia informed workers Thursday about recent, dramatic job cuts. There are 3,500 jobs to go. The only four-year-old plant in Cluj, Romania, is scheduled to be closed by the end of this year. Meanwhile the fates of those hanging in the balance in Hungary, Mexico and Salo, Finland. The company’s Executive Vice President of Markets, Niklas Savander told YLE the job cuts were intended to ensure the company remains profitable both now and in the future. (Yle 2011.)

”It is impractical to manufacture products in Europe when one has fly all the components to Europe and then fly the readymade phones back to Asia,” Niklas Savander stated.

Yle 2011

Savander confirmed the company planned to end the assembly of phones at the Salo plant and transfer operations to Asia. (Yle 2011.)

Case 7 C: “Hundreds of Nokia’s outsourced Symbian developers leaving Accenture”

This article was published on 2nd of April 2012, in Yle uutiset. Nokia continued to be in the news due to their employment and economical situation.

The news reported that hundreds of former Nokia workers at the Accenture consulting company are reportedly leaving the company and demanding severance packages. Accenture sold the packages last autumn to staff who were outsourced only by Nokia. Up to 400 former Nokia employees have approved the kits, according to a survey by a shop steward. (Yle 2012.)

“Around 40 percent of those who were transferred have sought [the pay-offs], and a majority of them have signed leaving agreements. That’s based on the survey we commissioned.” – said shop steward Sami Sallmén

Yle 2012

Nokia transferred 1,200 Symbian developers to Accenture. They continued to work on the Symbian operating system while contracted to their new employer. The outsourcing policy had been criticized by Unions right from the start. I had anticipated that the Symbian developers–working with their new employers on an operating system to be replaced by Windows Phone as Nokia’s main mobile platform–will face a short career. (Yle 2012.)

Accenture management keeps the story to a low profile. The marketing department of the company explained by email that there is a voluntary lay-off program. It says the packages were given to those former workers at Nokia who have not yet found new responsibilities within Accenture. The business does not confirm how many former developers had left Symbian. (Yle 2012.)

Article: ”Making Exit Interview Count”

This article was published by Everett Spain and Boris Groysberg, April 2016 in Harvard Business Review.

In the article is explained how Skilled employees are the assets in the knowledge economy which drive organizational success. And organizations have to learn from them — why they stay, why they quit, and how they need to improve the company. A constructive exit interview— whether it’s a face-to-face discussion, questionnaire, survey or combination — can catalyze the communication skills of executives, expose what’s or isn’t working inside the company, identify hidden problems and opportunities, and generate critical competitive intelligence. (Spain & Groysberg 2016.)

By communicating to workers that their interests matter, it can enhance commitment and improve loyalty. And for future years it will turn the leaving employees into business ambassadors.(Spain & Groysberg 2016.)

In the article they suggest six overall goals for a strategic exit interview process and techniques to make it successful.

1. Have interviews conducted by second- or third-line managers.
2. Make exit interviews mandatory for at least some employees. And because standard interviews enable you to spot trends, but unstructured ones elicit unexpected insights, consider combining the two approaches in semi structured interviews.

(Spain & Groysberg 2016.)

Article: ” 3 Ways To Handle The Exit Of Employees”

This article was published by Pallavi Jha, 26th of July 2016, on Entrepreneur India. It lists three ways organisations can handle the exit of employees

1. Have an open conversation
   • Having a transparent conversation with the employee will give you a chance to understand what needs your organisation has not met, that a competitor possibly has.
2. Be supportive
   • an organisation that supports an employee’s decision to move on demonstrates that the company wants the best for its people, thus making the employees feel cared for.
3. Be prepared

Organizations with a clear succession plan are better able to handle change, ensure a smooth transition from the replacement to a new position and have good leadership in place in general.(Jha 2016.)

For an employer, the way in which you treat a resignation affects the perspective on the employee that the rest of the organization should follow.That’s why it is essential to ensure that these resignations are handled with careful insight and wise discretion, thus setting a positive precedent within the company. (Jha 2016.)

References

Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E.

Jha P. July 26, 2016. Entrepreneur India. 3 Ways To Handle The Exit Of Employees. URL: https://www.entrepreneur.com/article/279716 Accessed: 18 March, 2020.

Spain E. & Groysberg B. April 2016. Harvard Business Review. Making Exit Interview Count. URL: https://hbr.org/2016/04/making-exit-interviews-count Accessed: 18 March, 2020.

Yle Uutiset. January 17, 2008. Nokia closes plant in Germany and relocates in Romania. URL: https://communicatinglabourrights.wordpress.com/2008/01/17/nokia-closes-plant-in-germany-and-relocates-in-romania/ Accessed: 18 March, 2020.

Yle Uutiset. September 29, 2011. Nokia cuts 3500 jobs ”to ensure profitability”. URL: https://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070 Accessed: 18 March, 2020.

Yle Uutiset. April 2, 2012. Hundreds of Nokia’s outsourced Symbian developers leaving Accenture. URL: https://yle.fi/uutiset/osasto/news/hundreds_of_nokias_outsourced_symbian_developers_leaving_accenture/5252177 Accessed: 18 March, 2020.