Home > Articles

  • Print
  • + Share This
This chapter is from the book

Organizational Exit

Objective: Gain an Understanding of Organizational Exit

It is up to the SPHR to strategically manage organizational exit so that it is, to the extent possible, controllable, involuntary, and functional. Organizational exit is controllable when it is the employer that determines when employees leave the organization. It is involuntary when employees leave the organization because of organizational mandates, not the employees’ desire to do so. Voluntary organizational exit (also called turnover) is frequently a significant problem in organizations, and often it is the best employees that leave. Involuntary organization exit involves termination for poor performance or layoffs or termination of excess employees when they are no longer needed by the organization. Functional organizational exit means that the organization is more efficient and/or effective after the exit occurs. Dysfunctional organizational exit results in a decrease in the human capital of the organization and decreased organizational capacity.

Organizational exit is the process of managing the conditions under which employees leave the organization and is often referred to as decruitment. An employee might be required to leave the organization because of his or her own actions, or the exit might be mandated based on organizational strategy that is beyond the control of the individual. Layoffs are discussed in the first section, along with strategies that can be employed to either avert the layoff or lessen its impact on the employee. After that, discussion moves on to involuntary terminations based on employee performance or conduct. If organizational exit is to be controllable, involuntary, and functional, the organization must know why exit occurs, particularly voluntary exit. One of the ways of determining this is by conducting exit interviews. Strategies and practices associated with exit interviews are discussed. Finally, this section addresses the issue of wrongful terminations.

Layoffs

There are a number of reasons why an employer might desire to reduce the total number of employees. Some of the more common reasons include the following:

  • Downturns in overall operations caused by economic conditions or drop in product or service demand; commonly referred to as downsizing
  • Concentrating on core competencies; commonly referred to as rightsizing
  • Mergers or acquisitions that create redundant or duplicate positions
  • Increases in production or introduction of new technology requiring fewer employees
  • Competitive decisions, such as movement of plants to lower cost labor areas domestically or internationally (offshoring)
  • Competitive decisions to outsource work currently being done internally

Any of these reasons might result in a decruitment situation in which the employer has a surplus of employees and must reduce the overall size of its workforce or must change the composition of its workforce in terms of employee capabilities.

Decisions to terminate or lay off employees have significant organizational implications. First the organization should evaluate the impact of layoffs on its diversity programs and the potential for creating adverse impact. Although seniority is generally considered to be a defense in adverse impact situations, the organization might be able to craft a layoff scenario that avoids adverse impact. Next the organization must consider the impact of layoffs on its important stakeholders. Layoffs send a mixed message to customers and investors. Even though the process might be perceived by these constituencies as prudent business decision-making, there is equal likelihood that it could be considered a sign of organizational, product, or service weakness, impacting demand and access to capital. The organization must consider the impact that such activities might have on the communities in which it operates, balancing business goals with social responsibilities. Finally, and most importantly, organizations should consider the impact of layoffs both on those employees directly affected and those who remain.

Because of these factors, the SPHR must be able to lead the organization in the development of programs that might permit the organization to avoid layoffs entirely or reduce the total number of employees that are laid off and programs that lessen the impact personal impact if an employee is in fact laid off. They are discussed the following sections.

Strategies to Avoid Layoffs

Even though the organization has decided to reduce the total size of the workforce, there are many strategies for accomplishing this goal without involuntarily laying off or terminating employees. These strategies frequently take some time to have impact; consequently, they might not be feasible if the immediacy of action is critical. However, in other situations the strategies discussed in the following section might avoid it totally or reduce the number of layoffs required.

Early Retirement Incentives

Many workers are willing to retire early if provided with the right incentives. Early retirement options that provide added benefits and that do not violate the Older Workers Benefit Protection Act, discussed in Chapter 5, can facilitate reductions in workforce levels. However, a major concern with this strategy is that it is often the best workers that are attracted by the offer. They are those who have additional options, such as second careers.

Part-time Work and Job Sharing

Many employees are interested in reducing the total number of hours worked, either through part-time work or job-sharing arrangements. This strategy can often accommodate family lifestyle needs and reduce total compensation costs.

Leaves of Absence

Organizations have had surprising success with offering unpaid leaves of absence. If the conditions requiring reductions in workforce levels are projected to be temporary, offering leaves of absence might assist in avoiding the need to involuntarily lay off employees.

Attrition and Hiring Freezes

Attrition is the reduction of workforce levels caused by the normal processes of retirement, resignation, termination, and so forth. Hiring freezes prohibit the hiring of new and additional employees and the replacement of current employees that leave the organization.

Voluntary Resignation Programs

Employers might offer bonuses for employees that want to leave the organization voluntarily. Many employees might have other options available to them, but are not eligible for early retirement. Some sort of bonus might be sufficient to motivate them to leave the organization voluntarily. As with early retirements, these types of programs must be crafted to avoid the loss of critical individuals and serious impact on critical departments.

Strategies to Minimize the Impact of Layoffs on Individuals

Two common strategies that can be used to minimize the impact of layoffs on individuals are severance pay and outplacement services. They are discussed in the following sections.

Severance Pay

There is no federal legal requirement for severance pay. However, many organizations offer this benefit to provide former employees with income continuation in the event of involuntary termination. Severance pay is either a one-time lump sum payment or a temporary continuation of salary provided by the employer to terminated workers. Calculations of the total amount to be received are typically based on length of service, and frequently involve one week’s pay for every year of service. Severance pay often makes good business sense because it serves both a humanitarian and public relations purpose.

Outplacement Services

Outplacement services are provided to assist terminated individuals in obtaining new employment. Services provided frequently include employment counseling, assistance with resume preparation, training in job search skills, training to improve interviewing skills, and job referral assistance. Generally, these services are outsourced to vendors that specialize in this area. As discussed earlier in this chapter, outsourcing vendors are often good sources of external recruits.

Exit Interviews

Many, in fact most, employers use exit interviews, which are conducted in an attempt to determine why individuals are leaving the organization. The objective is to determine what is good and what is bad about the organization in order to provide management with information that assists in developing or modifying programs to improve organizational performance.

These interviews are typically conducted by the HR function. There is an assumption that the individual has no reasons to guard his or her remarks and is forthright in observations about the organization when leaving. However, recent research has revealed that changes in the psychological contract may be modifying that paradigm. In today’s environment, employees often do not consider their termination of the employment relationship to be permanent and might want to retain their option to return at some future date. In these situations they are not likely to be totally forthright in evaluating the organization and its programs. To overcome this reluctance current exit interview practice often involves delaying the interview for about 30 days after termination and conducting it via phone, guaranteeing anonymity.

Wrongful Termination

The subject of wrongful termination is also discussed in Chapter 6. Wrongful termination occurs when the termination violates statutory or common law. Wrongful termination actions can be pursued as tort actions in court or under the provisions of the applicable employment law, but generally not both. Three types of wrongful terminations are discussed in this section: terminations that violate law, constructive discharge, and retaliatory discharge.

Terminations That Violate Law

The concept of employment-at-will is discussed in Chapter 6 along with exceptions to the concept. Terminations that violate public policy and implied contracts (both discussed in Chapter 6) and those that violate contract law could be wrongful terminations. Disagreements of this type are tort actions under common law and the former employee can sue for damages of various types.

Constructive Discharge

Constructive discharge occurs when employer actions make the employment relationship so untenable that a reasonable person would have no obligation but to resign. In this case, the resignation is coerced and the employee might have recourse under either common law or certain employment laws. Recourse under common law is typically limited to situations in which the individual gives up a legal property interest in the employment relationship, such as when the individual has an employment contract. Constructive discharge might be another form of illegal discrimination under various employment laws.

Retaliatory Discharge

Retaliatory discharge occurs when the employer terminates the employee for exercising right or obligations under the law. This typically occurs under one of two scenarios:

  • The employee is terminated for filing a complaint or otherwise exercising rights guaranteed under employment legislation. Examples are filing an EEO complaint, reporting OSHA violations, and so forth.
  • The employee is terminated for fulfilling obligations under the law, such as testifying against the employer when summoned to do so in a court of law or reporting employer violations of law.
  • + Share This
  • 🔖 Save To Your Account

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020