Exit management is the settlement of an employee’s exit from the organisation. To manage the process effectively, organisation must have an exit policy in place.
According to Gomez-Mejia, Balkin and Cardy (2016), management must monitor and identify the causes of turnover to minimise turnover and costs for replacement. Turnover rate, the rate of employee separations, affects the bottom line. When examining the turnover rate, management needs to be aware of the industry standard and consider if the turnover is in line with the standard or if it is caused by problems in the organisation. Turnover costs can be divided into recruitment, selection, training, and separation costs. Total turnover cost is estimated to be between 25 and 300 percent of the lost employee’s annual compensation. Employee separation can also benefit the organisation as it can lead reduced labour cost, replacement of employees with poor performance. In addition, it can open opportunities for innovation and greater diversity.
Types of separation are voluntary (quits and retirements) and involuntary (discharge and layoffs). In case of an involuntary employee separation, a more thorough documentation is needed, compared to a voluntary separation, to prove that the managers decision has been legitimate.
When management is faced with cost reduction, they can apply adjustment on employment policies, such has reduction through attrition, hiring freeze, cut part-time employees, voluntary time off, leaves of absences and reduced working hours. In addition, they can implement retraining or changes in job design (transfers, relocation, job sharing and demotion). Moreover, pay and benefit policies can be adjusted. Early retirement policy can be a substitute for layoffs. Effective management is needed in this case as well, as the employees should not feel like they are being forced to retire. Layoffs are the last alternative. Organisations should have a layoff policy to:
- Notify the employees
- Develop layoff criteria
- Communicate to laid-off employees
- Coordinate media relations
- Maintain security
- Reassuring survivors of the layoff
Criteria for layoffs must be clear. Most common criteria are seniority or performance. Disadvantage of using seniority criteria is that the organisation may lose top performers. In case the layoff decision is based on performance, managers should consider the performance for a long time period.
Outplacement is an HR program for providing separated employees help to cope with stress and job search assistance. Goals of outplacement include
- reducing morale problems of the soon to be laid off staff in order to maintain productivity until they leave
- minimising litigation
- assisting the laid off employees to find new jobs
Organisations offering outplacement can be considered as socially responsible.
(Gomez-Mejia, Balkin & Cardy 2016, 209-225)
Case 1
Nokia closes plant in Germany, relocates in Romania
In 2008 the Nokia announced that they will close their plant in Bochum, Germany and relocate the facility in Romania. Nokia, the world-leading mobile phone producer at the time, said that the plant was not competitive enough so the production would be moved to lower-cost areas. Nokia had received over 80 million euros in German public funding for the Bochum plant. In total the relocation would lead to loss of 4000 jobs. After Nokia’s announcement, Reiner Hoffmann, Deputy General Secretary of the European Trade Union Confederation (ETUC), said that the EU directive on European Works Councils (EWCs) should be revised promptly. Companies should not be able to cannot ride roughshod over European and national workers’ rights without sanctions. It must be ensured that layoffs or transfers cannot be executed without carefully consulting the workers’ representatives and their trade unions (Graham 2008).
This case is connected especially to corporate social responsibility. Financial decisions such as relocation of the Nokia’s Bochum plant, have significant impact on economy and welfare in the community. Although the financial grounds for the decision may exist, Nokia’s actions could be considered as socially irresponsible.
Case 2
Nokia cuts jobs “to ensure profitability”
In 2011, Nokia announced that their plant in Cluj, Romania, would be closed by the end the year. According to the company’s Executive Vice President of Markets, Niklas Savander, the reason for the job cuts was to ensure the company’s profitability. Furthermore, re-evaluation of plants around the world, was expected to result in job losses together with continuing redundancy talks in sales, marketing and support services that had been started earlier in the year. Savander also said the company planned to end the assembly of phones at the Salo plant and transfer operations to Asia (YLE 2011).
Case 3
Nokia’s outsourced Symbian developers leaving Accenture
Nokia transferred 1,200 Symbian developers to Accenture in 2011. They continued to work on the Symbian operating system while contracted to their new employer. Symbian was the operating system that was to be replaced by Windows Phone as the main smartphone platform for Nokia. In 2012 they were offered severance packages. Many of the outsourced developers were disappointed with their new employer, mainly because there was not enough work to do, and were signing leaving agreements. According to shop steward Sami Sallmén, around 40 percent of those who were transferred were claiming the packages, worth from a few months’ salary up to 15 months’ pay. The outsourcing arrangement was criticised by the unions from the start, as they feared that developers’ careers with their new employers would undershoot. Accenture’s communications department said that the lay-off program was voluntary. They said the packages were offered to those former Nokia employees that had not yet found new responsibilities within Accenture. They would not confirm how many former Symbian developers had left (YLE 2012).
It was not the first nor the last time when a company transfers employees to another company. However, in the light of this piece of news, Nokia moving the developers to Accenture seemed like an eyewash. Based on the information from YLE news, the developers did not have enough work to begin with.
All of the cases above are examples of not so well managed exit processes. The structures and factors behind the decisions may be complex but in the big picture, companies should follow ethics and social responsibility by showing that they care about their employees and acting accordingly.
Sources
Managing Human Resources. Global Edition. 8th Edition. Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. Pearson. 2016
Graham, D. 2008. Nokia closes plant in Germany and relocates in Romania. Communicating Labor Rights. URL: https://communicatinglabourrights.wordpress.com/2008/01/17/nokia-closes-plant-in-germany-and-relocates-in-romania/. Accessed: 17 November 2020
YLE 2011. Nokia cuts 3500 jobs “to ensure profitability”. URL: https://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070. Accessed: 17 November 2020
YLE 2012. Hundreds of Nokia’s outsourced Symbian developers leaving Accenture. URL: https://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070. Accessed: 17 November 2020
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