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In the modern world of business, companies have to engage in stiff competition in order to survive in the market. Competitive struggles are not always successful, and firms experiencing problems might have to start practicing unpopular methods such as layoffs to reduce their spending. This paper discusses the issues pertaining to layoffs in detail. In particular, three ways that a manager may utilize to help different parties cope with adverse emotions related to layoffs are discussed; the process of conducting a dismissal meeting is described; some possible ways that a company can use to compensate workers for the compulsory redundancy are offered, and a timeline for doing so is provided; finally, three ways in which a layoff may affect the organization are debated.
Coping With Negative Emotions Accompanying an Employee Layoff
Due to the fact that compulsory redundancies usually cause negative emotions in all the parties involved in or related to the process, it is paramount to be able to adequately address these emotions so as to reduce their adverse effects (Lavelle, Folger, & Manegold, 2016; López Bohle, Bal, Jansen, Leiva, & Alonso, 2016). Three methods for dealing with such emotions in different parties are provided below.
- For the manager who informs the employees about their layoffs, it is possible to deal with negative emotions involved in this process by realizing that the layoff is usually caused by financial problems of the organization and that layoffs in some cases are necessary if the company is to remain operational and provide employment for the rest of its staff.
- As for the worker who has been laid off, it is pivotal for the manager to be respectful and honest, and not to make up reasons for dismissal. The manager should explain to the employee that they are being laid off because of the tough situation the firm is in (or due to restructuring, etc.), and not because of their skills or qualities. If true, it is possible to explain to the worker that because of the adverse situation the organization is in, it is likely that the firm could go bankrupt if no tough decisions were made, and the worker would lose their job anyway.
- As for the workers who remained in the firm’s employment, it is also possible to explain that the layoffs were dictated by the firm’s adverse situation and that it was decided to lay off several workers rather than go bankrupt and not be able to provide employment for anyone. It is possible to make appeals to the workers’ feelings, asking them to keep working so as to help the company retain its capabilities and live through the crisis.
Conducting a Dismissal Meeting
Prior to conducting a dismissal meeting with an employee, it is of paramount importance to prepare for this meeting to be able to deliver the news to the employee in a manner that would allow for causing the minimal amount of harm to their feelings, psychological state, and self-esteem. Preparation is also critical for the manager to be able to appropriately answer the employee’s questions, as well as to avoid harmful mistakes during the process of layoff.
A dismissal meeting could be prepared, organized, and carried out in the following manner (Domijan, n.d.; Lavelle et al., 2016):
- The manager should prepare for the dismissal meeting by writing an official notification for the employee that will be laid off. It is pivotal to maintain a respectful and formal tone throughout the text of the notification, as well as to explain the real reasons behind the action of making the worker redundant. This notification should be printed so as to be handed to the worker during the meeting.
- The manager should invite the employee to a private office in which they will be alone during the meeting. It is crucial that the meeting takes place during the business time and in the office; the notification about the layoff should not take place in an unofficial atmosphere or during the employee’s off-hours, for if a manager meets with the worker who is to be fired in an unofficial setting or after work, the employee might least expect such a blow, and is likely to be hurt more by the experience.
- Once the employee arrives in the office in which the meeting is to take place, the manager should deliver the news right at the beginning of the conversation (i.e., after the employee was asked to sit down). The manager should not delay or talk about other topics, for the employee will least expect to be fired after such a conversation, and the blow might be stronger.
- The manager should be very polite and show a considerable degree of compassion towards the worker who is being made redundant. It is critical that the manager apologizes for this situation. The official layoff notification should be handed to the worker immediately after they have been notified orally.
- It is only natural that the worker will engage in self-assessment so as to make an attempt to understand why it is they that are being made redundant, and not someone else. In order to prevent the worker from finding faults in their work, blaming themselves, or ruining their own self-esteem, it is essential to explain the real reasons behind the action of making them redundant. The manager should elaborate on the situation that the company is currently in and that the layoff is necessary due to structural or financial reasons rather than because of any characteristics of the worker.
- The manager should also propose to provide the employee with any additional benefits if these are available.
- After delivering the news, the manager ought to answer all the questions of the worker that they may have.
- It is paramount that the manager maintains a respectful tone throughout the meeting, as well as shows compassion towards the employee. The worker in question should feel that they will indeed be missed in the company.
The Compensation That May Be Provided for a Laid-Off Worker
In order to alleviate the adversity that an employee is faced with due to made redundant, the company might be able to provide that worker with a number of benefits compensating for the layoff (Hsieh, Ren, & Lirely, 2016). It is clear that the company should pay the worker any money that is owed to them. In addition, it is possible to name several methods which could serve as a (partial) compensation for the employee, for example:
- An additional sum of money provided for the worker to compensate for the layoff;
- Assistance with getting unemployment benefits from the state, if such benefits are available;
- An offer of a provision of recommendations to any company that the laid-off employee may be interested in working for in the future;
- An extension of medical insurance for additional several months, or until the laid-off employee finds a new job.
Of course, many of these options (such as the medical insurance or the additional sum of money) might usually not be available, especially if one takes into account that firms usually lay off their workers when those firms’ situation is not positive. However, in a case when the senior management of the company could be willing to provide such benefits, they probably would help the laid-off employees considerably.
Timeline for the Disbursement of the Compensation
In order to disburse the compensation for the worker, which includes, e.g., an additional sum of money for the former member of the staff, as well as medical insurance lasting 3 months, it is possible to utilize the following timeline:
Three Possible Effects of Layoffs on the Company
Although companies assume that making workers redundant might be helpful in reducing spending, there are several potential adverse effects of layoffs which could deal a considerable amount of damage to firms that practice compulsory redundancies. Three of such effects are discussed below (Lowrie, n.d.).
- First, laying off workers in spite of the fact that they did not perform badly while doing their duties reduces the overall morale of the company’s personnel (López Bohle et al., 2016). The staff will most likely feel sympathy towards their colleagues who were made redundant. They might also feel anger towards the senior management of the company, which will decrease their loyalty to the company and might lower their productivity (López Bohle et al., 2016). In addition, the workers may fear that it will soon be their turn to be laid off, so they might start seeking employment in other organizations, which will result in workforce turnover and the loss of talented employees.
- Second, practicing layoffs may result in a situation when the workers who were made redundant make an attempt to gain compensation for being laid off (Boeri, Garibaldi, & Moen, 2017). If the workers make a legal suit and win, the company will be forced to pay compensation/severance pay or take some similar steps (Boeri et al., 2017), and that might mean that the spending will not be reduced (at least in the short term), which often is the primary purpose of layoffs.
- Finally, layoffs may result in decreased client loyalty (Lowrie, n.d.). Some customers may be used to work only with some particular employees, and when those employees are fired, the customers may be lost as well. In addition, when clients note that the company practices compulsory redundancy, they might think that the business experiences problems, and be wary of dealing with it.
Therefore, although layoffs are often aimed at reducing the company’s spending, they often may only exacerbate the already though situation that the company is in.
On the whole, it should be stressed that compulsory redundancies are sometimes practiced by companies experiencing problems in the market and wishing to cut their spending, but laying off personnel may often bring more harm than good to the enterprise. When practicing compulsory redundancies, it is paramount to show compassion, regret, and respect for the laid-off workers; managers should thoroughly prepare for the dismissal meeting. It may sometimes be possible to provide a number of benefits for laid-off employees, but it is likely that they will often not be available, for compulsory redundancies are usually made when the company is struggling.
Boeri, T., Garibaldi, P., & Moen, E. R. (2017). Inside severance pay. Journal of Public Economics, 145, 211-225.
Domijan, J. (n.d.). How to lay off employees: A scripted guide on what, and what NOT, to say.
Hsieh, C., Ren, Y., & Lirely, R. (2016). Earnings management, executive compensation and layoffs. Academy of Accounting and Financial Studies Journal, 20(3), 84-102.
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Lavelle, J. J., Folger, R., & Manegold, J. G. (2016). Delivering bad news: How procedural unfairness affects messengers’ distancing and refusals. Journal of Business Ethics, 136(1), 43-55.
López Bohle, S., Bal, P. M., Jansen, P. G., Leiva, P. I., & Alonso, A. M. (2016). How mass layoffs are related to lower job performance and OCB among surviving employees in Chile: An investigation of the essential role of psychological contract. The International Journal of Human Resource Management, 2016, 1-24. doi:10.1080/09585192.2016.1138988
Lowrie, L. (n.d.). How a layoff affects an organization.