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In the current healthcare industry, reimbursement rates have decreased, the cost of supplies has increased, and inpatient stays have declined leading to an economic downturn in the financial status of many hospitals. Because of the recent economic situation healthcare facilities have either merged with others, consolidated services at specific campuses, entered into purchasing buying groups or have closed their doors. In many of these situations employees have lost their positions and are now facing unemployment. Terms such as "reduction in force" (RIF), "layoff" or "downsizing" seems to be the vocabulary of choice. Is there a difference in these terms? Ultimately the employee is without a job however there are subtle differences that differentiate reduction in force versus layoff.
The term layoff is when an employee or a group of employees is not longer getting paid by the organization. This usually occurs because of lack of work or an employer cannot meet payroll obligations. A Reduction in force is the total elimination of a job or position. A reduction in force (RIF) typically occurs because of a lack of work or funding to pay multiple employees for a particular job. (Unknown, 2010)
The reduction in force process has a greater effect on the organization members than the actual reduction itself. This paper describes the proper steps to have a successful reduction in force to lessen the negative outcomes. If the process is not performed in a humanistic and professional manner the organization and surviving employees are negatively impacted lessening the potential for future growth.
Reduction in Force Activators
Mergers and Acquisitions
Reasons for a reduction in force include mergers of hospital systems or purchasing of smaller facilities to expand marketing territory or due to financial pressures. May 2008 Excela Health Westmoreland purchased the Mercy Jeanette campus and opened the doors under the name Westmoreland at Jeannette. The laboratory services provided by the Mercy Jeannette facility were extensive but costly to the system. The laboratory would decrease the laboratory test menu from a full service laboratory to a STAT laboratory. The acquisition of the facility did not warrant the usage of all current employees. The cytology staff and histology staff were absorbed into other campuses however many of the general laboratory staff were not. Approximately 8 full time equivalents lost their positions as a result of an acquisition.
Duplication of Services and Roles
Due to mergers, many services are duplicated as well as positions within the system warranting services to be eliminated at a certain locations and consolidated at another facility. Recent events at Excela Health Westmoreland and Westmoreland at Jeannette are an example of consolidating services. March 2010 Westmoreland at Jeanette no longer provided inpatient stays or surgeries due to lack of physicians admitting patients and performing surgery at that campus. The patients, RN's and supporting staff would be incorporated into the Westmoreland Campus. However, the laboratory at WJH would close. The Full Time Equivalents (FTE) needed to staff the laboratory 24 hours at WJH would not be needed at the WH campus. The workload would be incorporated into the current processes. The result was to reduce the number of FTE's in laboratory by 15. The laboratory suffered the greatest impact due to the reduction of services at Westmoreland at Jeannette campus. Most recently in 2010 Excela Health has been eliminating managerial positions when there is a duplicate role with manager and a director. Either the manager or the director has been eliminated, leaving the survivor with additional duties. In hospitals, 81 % have reduced their employee staffs through layoffs or attrition, and nearly half of the hospitals laid off managers. (Fallon and McConnell, 2007)
Reengineering has entered the healthcare system as it did in manufacturing. Lean practices and the efficiencies that it brings can decrease the overall costs however the fallout can be a decrease in workforce. Non-essential services such as housekeeping and dietary have suffered position decreases to eliminate overhead and reduce expenses in non-patient care areas. The current economy is decreasing business revenues and hospitals are seeing a decline in voluntary surgeries. Decreased capital means a necessary reduction in expenses. Again, within the last year the goal of Excela Health was to decrease expenses to create a 2 % profit margin. This goal was reached in the system by decreasing inventory costs, consolidating purchase groups with other healthcare facilities and of course increasing safety standards. Along with achieving this goal the consolidation of the purchasing group to a "neutral" area with the Heritage Valley Health System eliminated positions at both facilities. The employees from both facilities had to bid on positions within the new Consolidated Supply Chain Services, LLC. Not all employees obtained employment and thus lost their jobs. The new alliance supposedly saved the two health systems money but to what extent? In my opinion, the "neutral" facility located in Cranberry Twp, PA has not lived up to the business plan. Previous employees that understood the individual departments needs were no longer in these positions or because they have decided not to continue employment due to the commute from Westmoreland county. The "soft" costs have created an expense themselves.
In a knowledge/service economy, such as healthcare, the labor expense is one of the largest expense items that can impact an organization in a period of time. However, in a knowledge/service economy, the workforce (the labor expense) is the key catalyst of value creation. (Garbis, 2010)
Eliminated Unprofitable Services or Products
Another example of a reduction in force would be a hospital no longer offering a particular service. This occurred at Excela Health in 2009 when the organization decided outpatient behavioral services was not profitable enough to warrant offering. The organization worked with the community to make sure the population did not suffer because of the downgrade. Behavioral health employees were no longer needed and their positions eliminated. If an employer just wants to decrease production they have to be careful. The employer has to come up with a plan to identify which workers will be eliminated. Typically the selection decision will be based on factors such as past performance and years of service
Reduction in Force Alternatives
Reduction in force can be caused by a lack of future funding. Fortunately this can be forecasted by previous budgets and strategy solutions. The sooner the shortage can be anticipated the more time a viable alternative to a reduction in force can be designed. Private sector businesses can adjust the shortage by increasing prices, however government and hospital facilities cannot. The alternatives can be to decrease expenditures and cost of goods. (Caubler, 1982) Suggestions include becoming self-insured for liability insurance and workers compensation. The cost of a risk manager to monitor would offset by the high cost of insurance through third-party insurance company. Unemployment compensation costs can be decreased utilizing the reimbursable method versus the tax method. The reimbursable method is only paid out when a claim is warranted whereas the tax method is based on the past history of the organization and a rate is determined. (Caubler, 1982) Eliminating capital purchases and if needed using a leasing or cost-per-reportable (CPR) method of payment for needed equipment is another viable option. The CPR is used in a laboratory setting when capital is not available to purchase a new analyzer but it has replaced due to overuse or because it is technically outdated equipment.
Inventory is probably one of the two biggest assets on your company's balance sheet. Reducing the cost of inventory will free up capital that can be used elsewhere besides sitting on the floor. Utilizing the LEAN process of Just -in-Time delivery will decrease the amount of inventory on the floor and the capital expenditures that go along with it. (Liker, 2004)
Labor expenses can be decreased by implementing delays in hiring and implementing hiring freezes and accepting voluntary terminations. Job-sharing positions can offset expenses as well as increase morale. It has been proven that work-sharing can improve efficiency, effectiveness, morale and turnover as well as reduce costs from training and benefits. Pay freezing and reduction in benefits can off-set a reduction in force. (Caubler, 1982)
Only once these alternatives have been addressed should the organization move into planning a reduction-in-force. Remember that every alternative is going to hurt, however the bottom line is how much is going to hurt the least in respect to the people and the programs. (Caubler, 1982)
Unfortunately even though these alternatives were put into action the organization of Excela Health needed to move forward and develop a plan for a reduction-in-force as described in the examples provided above in the reduction-of-force causes.
Planning the RIF
The Reduction-in-force can be devastating to an employee and an organization. Careful planning eliminates legal disputes and decreased emotional decision making. The executives and board of directors determine a reduction-in-force is a necessary step to the viability of the organization. Careful planning of the reduction in force must take place in order for the process to be successful and cost reducing for the organization. The reduction in force process can take months but may have to be reduced due to economic status. If not careful the cost savings for the reduction in force will be eliminated with liability issues. (Jackson/Lewis, 2009)
Advance planning gives the organization the ability to carefully structure the reduction-in-force and decrease potential lawsuits, decrease productivity disruptions to the employees, customers and the community. Communicating properly to the employees, both survivors and eliminated, and the community will build trust and respect for the future growth of the organization.
The process can be a complex one that involves a multitude of issues involving technical tasks, legal considerations and potential litigation, financial concerns, human issues and emotions, communication requirements, security questions, and the health of the "new" organization after the layoffs are completed. (PFADENHAUER, 2009)
Human Resources Role
Human resources role in the reduction in force includes the selection of positions to be eliminated and the selection process. The executives should relay information concerning what services are going to be eliminated or consolidated and how many employees will be necessary to continue the quality of care with the services.
Human resources should validate the reduction-in-force policies and procedures to verify they are up to date prior to the selection process.
Human resources should present the following questions to the executives and the board if not already determined:
If the policies include severance pay what protocols will be used to determine the length and amount?
If using job performance as a basis for reduction-in-force are the criteria for job performance objective enough to avoid litigation?
Have the benefit plans and retirement plans been reviewed and verified that no large group that will be vested or eligible be impacted?
Will outplacement services be provided?
Is there a notification process established to notify third party insurers of terminated employees and their beneficiaries according to the COBRA/HIPPA notices? (Morgan, 2002)
Once these questions are answered the Human Resources department can follow the reduction-in-force policies and procedures developed by the organization. The criteria for the selection process included in the policy and procedure must be followed to avoid any discrimination lawsuits.
Human resources must verify that supervisors and managers are trained sufficiently for questions that will be asked by employees, organize outplacement services if they are to be provided, develop an action plan for employees eligible for other positions in the system, determine the communication to the media, employees and surviving staff and most importantly notify the appropriate authorities of the reduction-in-force.
Human resources should meet one-on-one with reduced employees to provide information concerning the severance package, unemployment compensation, benefits, other positions available if eligible and outplacement services if provided.
The Human resources department plays a very important role in the process. The staff is responsible for the humanistic issues as well as the legal ramifications that may result.
Unfortunately I was involved in the communication to the eliminated laboratory staff. Human resources developed the list of employees that would be let go and passed to the manager of the laboratory. The selection process was based on the following:
Most recent hires
Performance rating in evaluations
The manager and two supervisors relayed the message to the employee their position had been eliminated as of May 2010 and their services will no longer be needed. Each employee was contacted individually however once the word got out about the reduction technological advances created a wave of panic amongst the lab staff. The staff initiated texting, telephoning and emailing each other to find out who was laid off. Some employees were contacted by fellow staff before they received the message to contact the manager. I believe that notification process at Excela Health could have been better planned and information concerning the individuals' employment handled in a more discreet manner.
Consulting Groups Usage
Many organizations utilize consulting groups for reengineering processes. The use of outside consultants although expensive allows for a non-biased opinion and broader point of view concerning the organizations future. Because the consultant is not a financial or emotional stakeholder, a better strategy can be implemented for the organization without discriminations or concern for their employment status. (McConnell, 2007) However, there is a substantial cost to using a consulting group. In my opinion, this would be perceived as a waste of funding and possibly employees positions could have been saved with this allocation of expenses.
Employer Risks of RIF
Careful planning of the reduction in force can eliminate the risk of discrimination lawsuits.
Schanfield recommends conducting a preliminary evaluation before finalizing layoff decisions to determine whether a particular class may be disproportionately affected by the layoff. If so, the employer must be certain that it can articulate legitimate business reasons for its action and that it has written records supporting its reasoning. Schanfield also suggests consultation with counsel to protect against its disclosure in the event of subsequent litigation. Consideration to employees concerning the impact the layoff will have for those who are on Family or Medical Leave or workers' compensation leave or employees about to vested in benefit plans. These employees may have claims that are interfered with their protected rights. The employer can make informed decisions as to how best to structure the reduction-in-force to accomplish its business needs while minimizing the risk of claims. (Schanfield, 2008)
A release of claims related to workplace discrimination must be "knowing and voluntary." One federal law, the Older Worker Benefits Protection Act (OWBPA) specifies that for a release of federal age-discrimination claims by an individual employee to be knowing and voluntary, the employee must have had at least 21 days to consider the agreement before signing it. Although most discrimination laws aren't this specific, offering 21 days for consideration of the full agreement, not only the release of age-related claims, offers considerable protection to the employer. In addition, the separation agreement should be written in such a way that the employee who signs it can reasonably be expected to understand it. (Schanfield, 2008)
The OWBPA imposes a series of very specific steps that must be taken when two or more employees are affected by a layoff and are asked to release claims for age discrimination under federal law. Since many employees who are "riffed" are age 40 or older, these requirements are often relevant. In these situations employees must receive up to 45 days to consider the agreement. In addition, the employer must provide each employee who is asked to sign a release with the name, job title, age, and other information about co-workers who were and were not selected for the reduction-in-force within the particular decisional unit. An employer who does not strictly comply with the OWBPA's requirements risks paying severance only to find that a lawsuit for age discrimination is not barred by the signed agreement. (Schanfield, 2008)
Execution of Steps for RIF
Organizations that are undergoing reduction-in-force in their labor force are widely believed to experience a number of negative or dysfunctional attributes as a consequence. A set of "best practices" should be followed to decrease negative consequences associated with reductions in the workforce. Certain "progressive" workforce-reduction practices preceding, during, and subsequent to the downsizing process may play an important role in mitigating some of these dysfunctional organizational consequences. (Weil, 2003)
A business plan should be developed as to how the organization will look following the reduction in force proceedings. Only after the organization has determined that a reduction in force is needed, the timing of this decision and the reasons the layoff is necessary should be documented. (PFADENHAUER 2009)
Besides the human resources department determining the selection process another method can be employed, the development of a committee. The committee should be organizational and culturally diverse.
According to Segal (2001) in the committee should be based on:
1. Members should not be selected to serve on the committee solely because they are in a protected
group. Selecting unqualified individuals on this criterion alone can be detrimental to the planning process and may backfire in litigation.
2. It is imperative to include in the committee the CFO or designee, HR representation, the corporate attorney, and a union leadership representative (particularly in setting the criteria for selecting employees for layoff), if there is a union involved.
The committee must look at the new organizational vision, goals, and structure in terms of what services/ products and what skills, knowledge, and experience will be required to accomplish these goals. The focus must be on the positions themselves not on the people. This allows a higher degree of objectivity and reduces discriminatory decision making (Segal 2001).
Factors to consider include the level of urgency in terms of the company's financial condition and the need to make an effort to avoid "key business peaks, major holidays, and vacation periods (both because of the inconvenience and the potential negative PR issues)" (Sullivan 2001).
In my opinion the reduction-in-force should occur within a short span of time. An example is the most recent reductions taken by Excela Health. Thursdays seem to be the day of elimination with a communication coming out on Friday. Thursday was delegated as "doomsday" and if your manager or director made it another week they could relax over the weekend. However, this has added significant tension among the employees and still continues to this day. There has not been communication that the process has ended therefore it is perceived "doomsday" will continue.
The Worker Adjustment and Retraining Notification Act (WARN) was enacted on August 4, 1988 and became effective on February 4, 1989. WARN offers protection to workers, their families and communities by requiring employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. This notice must be provided to the affected workers or their union representatives; to the State dislocated worker unit; and to the appropriate unit of local government.
Employers are covered by WARN if they have 100 or more employees. Private, for-profit employers and private, nonprofit employers are covered. Regular Federal, State, and local government entities which provide public services are not covered. Employees entitled to notice under WARN include hourly and salaried workers, as well as managerial and supervisory employees.
The employer must give written notice to the chief elected officer of the exclusive representative(s) or bargaining agency(s) of affected employees and to unrepresented individual workers who may reasonably be expected to experience an employment loss. If an employer cannot identify employees who may lose their jobs through bumping procedures, the employer must provide notice to the incumbents in the jobs which are being eliminated. Employees who have worked less than 6 months in the last 12 months and employees who work an average of less than 20 hours a week are due notice, even though they are not counted when determining the levels of employees.
The employer must also provide notice to the State dislocated worker unit and to the chief elected official of the unit of local government in which the employment site is located.
With three exceptions, notice must be timed to reach the required parties at least 60 days before a closing or layoff. When the individual employment separations for a closing or layoff occur on more than one day, the notices are due to the representative(s), State dislocated worker unit and local government at least 60 days before each separation. If the workers are not represented, each worker's notice is due at least 60 days before that worker's separation.
The exceptions to 60-day notice are:
(1) Faltering company. This exception, to be narrowly construed, covers situations where a company has sought new capital or business in order to stay open and where giving notice would ruin the opportunity to get the new capital or business, and applies only to plant closings;
(2) unforeseeable business circumstances. This exception applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required; and
(3) Natural disaster. This applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought or storm.
If an employer provides less than 60 days advance notice of a closing or layoff and relies on one of these three exceptions, the employer bears the burden of proof that the conditions for the exception have been met. The employer also must give as much notice as is practicable. When the notices are given, they must include a brief statement of the reason for reducing the notice period in addition to the items required in notices.
An employer who violates the WARN provisions by ordering a plant closing or mass layoff without providing appropriate notice is liable to each aggrieved employee for an amount including back pay and benefits for the period of violation, up to 60 days. The employer's liability may be reduced by such items as wages paid by the employer to the employee during the period of the violation and voluntary and unconditional payments made by the employer to the employee.
An employer who fails to provide notice as required to a unit of local government is subject to a civil penalty not to exceed $500 for each day of violation. This penalty may be avoided if the employer satisfies the liability to each aggrieved employee within 3 weeks after the closing or layoff is ordered by the employer
(U.S. Department of Labor, 1989)
Failure to comply with this law can result in liability for back pay, benefits, civil damages, and the payment of the employees' attorneys fees. (Schanfield, 2008)
Human resources should validate the reduction-in-force policies and procedures to verify they are up to date prior to the selection process. The policies and procedures must be followed in order to discourage lawsuits based on discrimination.
Process of Selection
The Human resources staff or the committee developed for the selection determines the employees to be let go. Utilizing a diverse group will allow the organization to be ruled non-disparate in the decision making process.
The employer should be trying to keep its best, most qualified workers. It can't use a Reduction-in-force to discriminate against specific employees. In other words, it can't use a RIF to terminate employees based upon things like their age, race, or gender. (Unknown, 2010)
Selection solely on the basis of seniority is not without disadvantage or risk. It may result in the sacrifice of exceptional, less-senior employees who would benefit the future organization far more than senior employees performing at a substandard level. Even with its high degree of objectivity, seniority does not necessarily provide full insulation against claims of discrimination since more recently hired employees often include protected groups such as women and minorities. (PFADENHAUER 2009)
The legal department typically suggests these types of reductions in order to reduce litigation issues and making the reduction swift. The legal department is no concerned with retaining quality employees. Most corporate attorneys will advise laying off employees on a last-hired, first-fired basis across all departments. The method for downsizing that is most clearly defensible in a court of law is to lay off 10 percent of employees across all departments on a seniority-only basis. This way no employee can claim that he or she was dismissed based on discrimination. Eliminating employees by this method is not rational when only certain services/product lines are affected. The decision of how many employees to reduce from each department should be based on business needs and not statistics. The choice of employees for a layoff should be based on a redistribution of the work, not the date the individual employee was hired. Sometimes an employee of 18 months has a skill far more valuable than one with 18 years' seniority. (Downs, 2010)
Job Elimination Based:
Job elimination based on the needs of the organization provides another method for the selection of employees to be reduced. Elimination of a position may due to technological advances, products or services that will no longer be offered, or functions that will be absorbed by others in the organization. Use of this criterion in an objective manner requires thoughtful and thorough planning for the "new" organization and requires the development of a new organizational chart; explication of positions, skills, and experience required in the new organizational structure; and revision and/or creation of new job descriptions as indicated. (PFADENHAUER 2009)
Performance-based criteria can be loaded with risks for subjectivity, discrimination, or disparate-treatment claims. The effectiveness and level of objectivity of using performance criteria are highly dependent on the quality of the organization's performance appraisal system and the consistency in which supervisors utilized the system. A numerical ranking system may be beneficial since existing performance appraisals typically do not evaluate an employee's performance relative to that of other employees. Factors considered for ranking must be well defined, clearly linked to position responsibilities, and documented with as much objectivity as possible. (Segal 2001)
Multiple Methods Combined:
Multiple methods of selection including performance-based and seniority can be applied together to determine the selection decisions. For example, performance may be utilized as an initial method of selection, with employees having unsatisfactory performance appraisals and/or formal performance-related disciplinary action being eliminated first, with seniority applied as the determining criteria for remaining employees (Segal 2001). Excela Health utilized this method as previously mentioned.
Once the preliminary selections have been determined the results should be reviewed and evaluated to verify that protected groups were not adversely impacted. If any issues are revealed they should be addressed and documented prior to the final determinations. Determining whether statistically significant differences exist despite the use of well-developed and uniformly applied criteria prior to finalizing layoff decisions (rather than in response to discrimination claims) allows the employer to proactively reduce the risk of discrimination and disparate treatment claims (Segal 2001).
Communication is the key to the success of the reduction-in-force as the organization can be perceived differently from the employee standpoint as well as the community's. Written communication from the organization should be made available to all employees especially the closely affected.
Informational packets provided by the Human Resources department should include:
Frequently asked questions,
Contact information for company departments and outside agencies available to assist them
Information regarding assistance with job searches, education or training opportunities.
The communication plan can make or break an organizational layoff. Effective communication can reduce uncertainty not only for employees but also for customers, shareholders, venders, and the public at large. Once the decisions are made, the task of developing a comprehensive communications plan needs to be quickly developed and its implementation carefully formulated and monitored.
Communication written or spoken must be authorized by human resources experts, legal experts, and the marketing experts. Authorized communicators should be clearly identified to the media. Contact information for those chosen must be made available for questions. Supervisors should be well informed because they will front most of the questions posed by front-line employees.
Presenters of information regarding the reduction-in-force must be provided with approved talking points and should be given a list of anticipated questions and their corresponding approved answers. Follow-up meetings with affected individuals should be quickly scheduled to discuss their particular situations. These meetings should be one-on-one with HR. Meetings with survivors must be scheduled quickly to address the effects on their jobs. (PFADENHAUER 2009)
The media response to an announced layoff is usually negative, naturally. The organization should be ready to engage the media in order to tell their side of the story before erroneous conclusions can be drawn with unclear facts and scant information. (PFADENHAUER 2009)
Behavioral communication is just as important as written communication from the organization. How the layoff is handled communicates far more than decisions or words about the organizations humanistic side. Poorly executed plans communicate the extent to which the employer cares about its employees and whether it really is concerned about continuing as a viable entity. Treating employees in a shoddy manner on their way out is likely to be translated into unspoken messages as a lack of concern.
A quote from an eliminated employee makes me think about my dedication to the Excela Health organization. The employee stated "after 37 years of service I was taken by surprise and I am still in shock. I dedicated my life and this is the thanks I get."
HR leaders state the degree of openness used in announcing the work force reduction affects the environment for the remaining employees. Communication builds the trust factor. Employees should be told about the reduction before it happens, when it is to happen and when it is done. (Griffin,2001 )
Before offering separation agreements to employees, it is critical to review all individual employment contracts, as well as existing policies, practices and collective bargaining agreements, and carefully comply with any requirements they contain. Careful drafting is the key to enforceable release agreements. Simply reusing a template used in the past isn't a reliable approach. Schanfield, 2008)
Organizational Changes after Reduction in Force
Cost reduction processes usually eliminate seminars, continuing education opportunities off campus and education reimbursement programs. The commitment to the survivors of the reduction-in-force should continue by offering the education opportunities. To make the organization viable in the future an investment should be made in the staff by continuing their education with new techniques, research trends higher learning.
Studies have shown that technicians with high layoff exposure were significantly more likely to engage in direct action coping than those who had never experienced the layoff of a co-worker. The four items of the direct action coping scale referred to devoting more time and energy to doing one's job, working faster and more efficiently, giving it one's best effort, and working harder, longer hours. Technicians with high layoff exposure may be working harder because they have had to undertake the job duties of those laid off. However, it may be that technicians who have survived a number of layoffs feel that the reason they were not laid off is because of their effort /performance on the job. This would encourage them to continue to work harder in the belief that as long as they work hard they will retain their jobs. (Armstrong-Stassen,M.,& Latack,J.1992).
Employees with personal layoff contact reported significantly lower job security, higher levels of depression, a greater number of symptoms of poor health, more eating changes, and some degree of increased alcohol consumption. Thus, we conclude that the effects of layoff experiences are magnified if one has some form of personal contact with layoffs, as opposed to just being employed in a downsizing organization. (Probst and Brubaker 2001)
Research has begun to focus on the effects on job insecurity on employee safety outcomes. Employees who perceive their jobs to be insecure report lower levels of safety knowledge and reduced motivation to comply with safety policies. In turn, these variables are related to a decrease in safety compliance and an increase in job-related accidents and injuries. (Probst and Brubaker 2001) theorized that safety is compromised when employees feel insecure about their jobs, because employees may devote more of their time and energy toward meeting production demands in the effort to retain their employment. (Probst 2002)
Adapting to Change
Reduction-in-force creates stress for managers, their behavior reflects that stress. Managers have the tendency to revert to old behavior during periods of stress of command and control than democratic leadership. Managers also are often forced to become more competitive with other departments as cutbacks developed and cooperation between departments declines therefore impacting productivity in a negative way. Department morale may suffer along with productivity. The challenge of management is to keep people motivated to do the work of the organization while worrying about their jobs and futures. Employees often start spending their time looking for other jobs as a protection against unemployment. Thus, management is faced with employees whose efforts are directed more toward new job searches than to working. Reduction-in-force frequently involves integration of new members into a work group due to reassignments. The result is the need for training and lower productivity for a period of time. The laboratory at Excela Health Westmoreland experienced this problem when the new hires from Mercy Jeannette came on board in 2008. The technologists had little training time with a new computer system, new analyzers, new facility and new policies and procedures. The productivity and quality were diminished for a period of time until the staff got up to speed. Previous employees regarded the new employees as the "Jeannette" people and this continued for 2 years. Managers themselves sometimes end up having to supervise or work in unfamiliar situations thus further affecting productivity. Productivity can also decline for the organization when the most productive staff members leave for other opportunities. Usually the most competent staff members are the ones who are able to find other positions. Thus, those who have the potential for being most productive often leave and the manager is forced to attempt to maintain the productivity level with fewer capable employees. (Cayer, N. 1986)
Severance Pay - This may range from two weeks to as much as six months or more at your current salary, plus unused vacation and maybe even sick pay and floating holidays. Your ex-employer may pay it all in one lump sum or in regularly-scheduled paychecks. If you're paid in a lump sum, you'll probably be taxed at a higher rate, right off the top. That's because-in its infinite wisdom, just when you need money the most-the IRS taxes lump severance pay as a bonus! You may get some back in your tax return; not that it helps much if you're laid off at the beginning of the year. Whichever way you're paid, if you need the cash, you might want to ask your ex-employer to stop voluntary deductions, such as contributions to your 401(k).
Separation Agreement - This binding contract outlines the terms of your layoff, and essentially states that you will not disclose trade secrets or hold the company liable for terminating you. If you sign it, you may be entitled to a better severance package. Yup, it's a legal bribe according to a very expensive, California labor attorney with whom this writer consulted. Since it might be a binding, contract-like document in your state too, you may not want to sign it until you've played out all your options.
Outplacement Services - Your ex-employer may contract to consultants, who help you to help yourself. Typically, they don't find you a job per se, but offer seminars and workshops that help you boost your confidence, practice interviewing, and update your résumé. They may also provide free access to computers, printers, phones, fax machines and job listings.
Health Insurance - Coverage may end on the day you're laid off, or shortly thereafter. By US law, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your coverage at group rates, plus a 2% administration fee. But, you may be able to find a better deal. Read more about COBRA.
Life Insurance - Typically ends on the day you're laid off, and is not covered under COBRA. But, your ex-employer may offer you a continuance option. It usually isn't cheap, and you may be able to find a better deal.
Disability Insurance - The same as life insurance. Alternately, you might be covered by your state unemployment plan for free, but the weekly benefit amount may be less than private plans.
Retirement Plan - Information explaining what your options are for 401(k), profit sharing and other retirement accounts.
Stock Options - Information explaining what your choices are for company stocks you're purchasing or have the option to purchase.
Unemployment Benefits - How to contact your state employment service (aka, unemployment office or Career One Stop Center) to file a claim for unemployment or disability compensation, and apply for job services, training programs, and other benefits.
The reduced employees are the first to be called back if they have a hire back status. The laboratory was able to bring back 2 employees after a two part-time employees left for other opportunities. The eliminated employees had to go through the application and interview process but were given priority in the selection process.
Interestingly, research shows that employees that have been let go and then re-hired have a particularly high depression scores. This shows evidence of the lingering effects of unemployment or cycles of hiring, layoffs, and rehiring. (Grunberg, L., Moore, S., & Greenberg, E. 2001)
Information has shown that as long as the reduction-in-force process is not disparate, communicated well and fair the negative side effects on the organization will be insignificant. However, if the proper processes are not followed the reduction can have harmful effects on the future of the organization and the reduction process will have a greater impact than the actual reducation-in-force.