|
Line |
Amount |
|
|---|---|---|
|
Long-Term Savings |
||
|
1 |
Annual total compensation cost per employee |
(Annual total compensation cost/employee) |
|
2 |
Total number of
|
(No.of employees to be laid off) |
|
3 |
Total Long-Term cost savings |
(Annual total compensation cost/employee No.to be laid off) |
|
Short-Term Cost to Implement |
||
|
4 |
Outplacement services (
|
($ in outplacement services per employee) |
|
5 |
Severance package per employee (generally several weeks pay and benefit continuation for each year of service) |
($ in salary and benefit continuation per employee) |
|
6 |
|
($ in accumulated vacation per employee) |
|
7 |
Total cost per employee |
(Sum Lines 4–6) |
|
8 |
Total cost to implement layoff |
(Multiply Line 2 Line 7) |
|
9 |
Net Short-Term Cost Savings (Benefit) |
(Line 3 Line 8) |
|
Line |
Item |
Amount |
|---|---|---|
|
1 |
Recruitment,selection,and orientation cost expended per employee laid off (can amount to $12,500 to screen and $7500 to
|
($ per employee laid off) |
|
2 |
Training investment per employee
|
($ per employee laid off) |
|
3 |
Recruitment,selection,and orientation cost expended per employee hired as a replacement (can amount to $12,500 to screen and $ 7500 to orient) |
($ per employee laid off) |
|
4 |
Market premium paid to
|
($ difference between salary of the laid-off person and salary
|
|
5 |
Cost of additional supervision (estimate the percentage of a supervisor’s time required during the first year times the supervisor’s salary) |
(% of additional supervisor’s time required supervisor’s salary) |
|
6 |
Economic opportunity cost of lower productivity during first year of the replacement’s employment |
(% at which the new person works estimate of the value of his work output during the first year) |
|
7 |
Total long-term cost per replacement |
(Sum Lines 1–6) |
|
8 |
Number laid off |
(No.laid off) |
|
9 |
Total long-term cost for replacing those laid off |
Line 7 Line 8 |
The key factor in determining whom to cut and whom to keep is mission critical skills and competencies.
Mission critical skills and competencies must be defined for the organization as a whole and for each department.
Employees should be assessed regarding mission critical skills and competencies.
Once these skills and competencies are assessed, the company can make smart choices about which staff to cut and which to keep.
The way should now be clear to plan for the three rounds of cost cutting that comprise the headcount solution: (1) making across-the-board compensation cuts that can be accomplished without layoffs; (2) instituting alternatives to traditional
At this point in a company’s schedule, time is critical. Managers won’t have a lot of time to reflect and gather facts. The steps that follow don’t take long—perhaps one-half to one day of a department manager’s attention. But the decision must be made methodically and acted upon swiftly. The worst thing to do at this juncture is to act scared and helpless like a deer caught in the headlights of a car. The key, instead, is to focus and
A large amount of data and analysis is not necessary to make effective decisions about cutting and keeping people. Here’s a blueprint of how to approach this task. Most information will be in employee files. Make sure the human resources staff can secure the following data for each employee, preferably in electronic form:
Job assignment
Last three performance reviews if available
Current salary
Years with the department
Years with the company
Department managers should conduct this analysis of their departments. Why? Because it is necessary to act quickly, without a lot of time spent on lengthy
Keep in mind the goal is to get the costs out while holding onto the talent needed to make the company thrive again. The choices made will translate cost-cutting economics into an action plan that identifies whom to cut and keep. The decision is best made in three steps:
|
Step 1: |
Establish human capital priorities. List the skills and competencies that are most critical to a department’s mission and
|
|
Step 2: |
Determine the appropriate combination of alternative work arrangements and layoffs. This will help to identify the options such as job/skill sharing and temporary assignments that are
|
|
Step 3: |
Match people with employment choices. Make the final choices of who will be retained in full employment, who will be
|