•CHAPTER 12

Employee Separation
and Retention
Management

PowerPoint Presentation by Charlie Cook

Copyright © 2002 South-Western. All rights reserved
 Reductions in Force
Reductions in force or employee layoffs are attempts by employers to
reconfigure their workforces .A reduction in force is sometimes used to
make an organization more competitive by reducing costs.
Organizations reduce the size of their workforces for three main reasons
•inefficiency, lack of adaptability in the marketplace, and a weakened
competitive position within the industry
•In many organizations, labor or payroll is one of the largest expenses,
attempting to reduce labor costs and accomplishing more work with
fewer individuals by redesigning work processes
•One federal law regulates employer actions taken as part of reductions
in force.

Copyright © 2002 South-Western. All rights reserved. 1–2

 Strategies for Managing Employee
Surpluses and Avoiding Layoffs
Long Run Short Run
•Hiring freezes •Loaning or subcontracting
•Attrition labor
•Offer early retirement •Voluntary leaves
incentives •Across-the-board salary
•Cross-training of reductions
employees •Re-deploying employees

Copyright © 2002 South-Western. All rights reserved. 1–3

 Turnover
• Employees who leave the organization at the organization ’s request
(involuntary turnover) as well as those who leave on their own
initiative (voluntary turnover) can cause disruptions in operations,
work team dynamics, and unit performance.
• In some cases, these costs may be short term but have longer-term
benefits; other cases, the costs may be significant and longer lasting
• Costs of turnover include the direct economic costs of staffing and
training new hires as well as the indirect costs of the downtime needed
for the new employee to gain proficiency in his or her job and to
become fully socialized and integrated into the organization. If an
organization has made significant investment in training and
developing its employees, that investment is lost when employees
leave. Excessive turnover can also impact the morale of employees and
the organization’s reputation as being a good place to work, which
makes retention and recruitment more challenging and time consuming

Copyright © 2002 South-Western. All rights reserved. 1–4

 Turnover

• Turnover can, however, be beneficial. It can allow the

organization to hire new employees with more current
training who are not locked into existing ways of doing
things. Fresh ideas from outsiders can be critical to
organizations that have become quiet and are in need of
innovation. Turnover can also lower the average tenure of
employees and translate into lower payroll expenses.
Turnover also affords opportunities to promote talented,
high performers. Finally, when poor performers or
disruptive employees leave the organization, morale can
improve among coworkers.

Copyright © 2002 South-Western. All rights reserved. 1–5

 Retirement
• Employees also leave the organization through retirement
When older workers retire, the organization can hire new
employees to replace older workers who may have less
physical or mental energy or skills that have become dated
or obsolete. These new employees may cost less than the
older workers relative to salaries and health insurance
premiums. Because many older workers are higher in the
organizational hierarchy, promotion opportunities may be
made available when they retire. However, significant
costs are often associated with retirement. Retirees who
have worked for the organization for many years usually
have a wealth of knowledge about the industry and the
marketplace

Copyright © 2002 South-Western. All rights reserved. 1–6

 Human Resource Evaluation
• Evaluation of HRM refers to appraising the degree of
success of HRM being performed in an organization. For a
good evaluation, it is important to assess how well and how
far employees of the organization have been utilized in
achieving the organizational goals.
• With the increasing emphasis placed on strategic
contribution, competitiveness, and cost control, there has
been a greater need to justify the existence of human
resource practices, activities, and programs.
• the evaluation of human resource programs has not been a
high priority in most organizations. Nonetheless, evaluation
will be more important in the future because of the increased
need to demonstrate efficient utilization of resources.
Copyright © 2002 South-Western. All rights reserved. 1–7
 Model of Human Resource Effectiveness

Copyright © 2002 South-Western. All rights reserved. 1–8

 APPROACHES TO EVALUATION

• Audit Approaches
• Analytical Approaches

Copyright © 2002 South-Western. All rights reserved. 1–9

 Audit Approaches

• The first is the audit approach, which relies on (1)

personnel catalogues, such as per-capita recruiting costs,
absenteeism rates, or workers’ compensation experience
rates, or (2) service/user reactions, such as the perceived
equity of the job evaluation system.
• Typically, data pertaining would be obtained through the
use of surveys or interviews.

Copyright © 2002 South-Western. All rights reserved. 1–10

 Analytical Approaches

• The second approach is analytical and involves either

(1) experimental designs, such as the pretest–
posttest control group design, which will be
described later in the discussion of evaluation of
training; or (2) cost–benefit analysis,

Copyright © 2002 South-Western. All rights reserved. 1–11

 EVALUATING STRATEGIC CONTRIBUTIONS
OF TRADITIONAL AREAS

Major human resource functions of obvious strategic

importance are
human resource planning,
staffing,
performance evaluation,
compensation and reward systems,
training and development,
and labor relations.

Copyright © 2002 South-Western. All rights reserved. 1–12

 EVALUATING STRATEGIC CONTRIBUTIONS
IN EMERGING AREAS
• There are a number of challenges from emerging
areas related to human resource management that
have major consequences for most companies. Two
of the most important of these are
• (1) equal employment opportunity and the
management of diversity, and
• (2) quality readiness

Copyright © 2002 South-Western. All rights reserved. 1–13

 EVALUATING STRATEGIC CONTRIBUTIONS
IN EMERGING AREAS

• Equal Employment Opportunity and Management of

Diversity
• The relevance of the management of diversity to the
topic of evaluating human resource effectiveness is
that effective management in this area enables
organizations to tap the potential of their workforces.
Thus, management of diversity can be related to the
effectiveness with which companies avoid labor
shortages. For example, African-American employees
tend to have higher turnover. Evaluations of
effectiveness in this area should measure turnover of
minority and female employees.

Copyright © 2002 South-Western. All rights reserved. 1–14

 EVALUATING STRATEGIC CONTRIBUTIONS
IN EMERGING AREAS
• Quality Readiness
• Under TQM, the ultimate objective is to provide customer
satisfaction. By satisfying customers, a company increases its
market share and enhances the likelihood of increased
profitability. The traditional objectives of the human resource
function, which seek to improve performance, productivity,
employee satisfaction, and motivation, are indirectly related
to customer satisfaction. This is because employee retention
and a well-trained workforce are required for the production
of quality goods and services. Since TQM emphasizes the
importance of a systematic, comprehensive approach toward
quality, the interrelated role of the human resource function
and its indirect impact on the workforce make it critical to
this objective
Copyright © 2002 South-Western. All rights reserved. 1–15