I find the game ‘The boat is sinking’ similar with companies reducing their labor force or employee layoffs as some would call it. I noticed that this game at kids’ parties has mechanics of kids grouping themselves according to the given number of the party host and let go of others in order to win the game; same way, companies from different industries also let go of employees to reduce costs and be more competitive in the market whether domestically or globally.
Creating a business is not just about earning profit for the company. It involves a lot of responsibilities, and along with such responsibilities is handling people or employees, who are one of the stakeholders of the company.
Ways of leaving the company
According to Jeffrey Mello, author of the book entitled Strategic Management of Human Resources, societal changes affecting consumer lifestyles, technology and economy have brought companies continuous pressure to change and adapt. With this, change in consumer lifestyles alter preferences for certain types of products and services, change in technology impacts production efficiency, and change in economy makes decision to be made within a global context.
Hence, for companies to stay competitive in the market, they also need to be flexible in dealing with skill obsolescence among their employees. To become more efficient, adaptable, and competitive in the industry they belong, some companies reduce their workforce while some employees resign or retire. Given this situation, Mello stated that there are three major ways that employees leave the company: through reduction in force, turnover, or retirement.
Reduction in force is not the only solution
First, reduction in force is initiated by employers often caused by organizational restructuring from merger or acquisition activity of companies. Some companies which opted to reduce their workforce forget that it is not the only solution to reduce costs and fight skill obsolescence.
These companies could also find a balance of supply and demand on their labor force by implementing good strategic human resource planning, which involves utilizing hiring freezes, not replacing departing employees, offering early retirement incentives, cross-training of employees to develop skills needed by the company, loaning or subcontracting employees, offering voluntary leaves, implementing across-the-board salary reductions, or redeploying workers to other functions, sites or units. This means that there are a lot of alternatives for companies to reduce costs in business operations without jumping to layoffs instantly to better protect employees’ job security while performing efficiently.
Maximize benefits and minimize costs from turnovers
Second, turnover is initiated by either the employers or employees. Either it is the employers’ or the employees’ decision, turnover would cost companies staffing and training expenses as well as downtime for the new employees to gain proficiency in their jobs.
However, while turnover can be costly for the companies, it can also be beneficial to them in terms of hiring new employees with more current training and fresh ideas as well as lower payroll expenses. With this, again, implementing good strategic human resource plan must be conducted by the companies to maximize the benefit of turnover and minimize the costs incurred with the process.
Plan retirement process
Third, retirement is initiated by employees since employers cannot set mandatory retirement ages, force employees to retire, or treat older workers in a discriminatory manner in any employment decision because of the implementation of Republic Act No. 10911, otherwise known as the “Anti-Age Discrimination in Employment Act.” With retirement, companies will have opportunities to hire new employees which may cost them less than the older workers. But, along with these opportunities, companies will also lose these retirees’ wealth of knowledge about the industry and the marketplace. Hence, companies can hire these retirees on a part-time or consulting basis. This means that good strategic human resource plan on retirement process must also be implemented by companies to maximize organizational benefit from retirees.
Need to implement a good strategic HR plan
Looking at these three major ways that employees leave the company, I think companies need to implement good strategic human resource plan in managing employees. As much as possible, companies must use all means to prevent layoffs; but if these companies have no other choice but to lay off employees, they must do it strategically. This, therefore, highlights the role of human resource department in each company. HR’s role is: to ensure smooth transition whenever employees leave without disrupting business operations; to maintain companies’ good relationship with exiting employees; to ensure retained employees adjust to changes; and to offer retention program to retained employees.
Some companies were able to maintain good relationship with their exiting employees despite of layoffs such as Kodak and Charles Scwab; while some were able to provide good retention program with their remaining employees such as Kraft Foods, Sprint PCS, United Airlines and Intel. One thing these companies have in common is their consideration to both the remaining and terminated employees. These companies’ HR were able to provide retention program, and training and development for retained employees, as well as transition package, and rehiring bonus for terminated employees.
If companies will look beyond profit and start considering its employees by aligning their strategic plans together with their human resources, then these employees will also look beyond salaries and start helping these companies to stand up and prosper as one team.
Maricris C. Sim is a Doctor of Business Administration student at De La Salle University. She can be reached at maricris.sim@dlsu.edu.ph.
The views expressed here are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.