Human Resources Management Chapter 6

Managing Human Resources, 8e (Gomez-Mejia et al.
)
Chapter 6 Managing Employee Separations, Downsizing, and Outplacement
1) An employee separation occurs when:

A) employee turnover reaches maximum capacity.
B) global competition increases beyond labor supply.
C) an employee ceases to be a member of an organization.
D) technologies are introduced into a new industry.
Answer: C
Diff: 2
AACSB: Analytical thinking
Skill: Concept
LO: 6.1: Understand what employee separations are
2) A company wants to know the rate at which employees voluntarily leave the firm. The
company most likely needs to:
A) measure its turnover rate.
B) conduct an HR audit.
C) implement a diversity audit.
D) track reasons for
discharges. Answer: A
Diff: 1
Skill: Concept
3) Companies most likely attempt to manage their turnover rates because of:
A) potential problems associated with public relations.
B) legal requirements regarding layoff notifications.
C) inadequate affirmative action plans.
D) high employee replacement costs.
Answer: D
Diff: 2
Skill: Concept
4) The costs of employee separations primarily depend upon which of the following?
A) Whether the employee was a member of a protected class or not
B) Whether the employee had a voluntary separation
C) Whether the employee will be replaced or not
D) Whether the employee was a new hire
Answer: C
Diff: 2
Skill: Concept
1
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5) Which of the following is a recruitment cost associated with employee
replacement?
6) A) Outplacement
B) Reference checks
C) Orientation
D) Advertising
Answer: D
Diff: 1
Skill: Concept
7) Which of the following factors is the LEAST common reason for turnover among
Chinese workers?
A) Lack of development opportunities
B) Manager-employee relationships
C) Insufficient compensation
Tedious work
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Skill: Concept
8) Which of the following is a selection cost of employee replacement?

A) Advertising
B) Outplacement
C) Search firm fees
D) Reference checks
Answer: D
Diff: 1
Skill: Concept
8) Martin is reviewing HR's costs for interviewing, testing, and checking references for new
hires. Martin is most likely reviewing the ________ costs of employee replacement.
A) training
B) selection
C) separation
D) recruitment
Answer: B
Diff: 2
Skill: Application
2
9) Which of the following is a replacement cost associated with training new
employees?
A) Employment testing
B) Outplacement services
C) Recruiter time
D) Lost productivity
Answer: D
Diff: 2
Skill: Concept
10) Which of the following is the most significant separation cost for employers?
A) Search firm fees
B) Lost productivity
C) Outplacement assistance
D) Compensation
Answer: D
Diff: 1
Skill: Concept
11) The time and cost of exit interviews are part of the ________ costs of an
employee separation.
A) recruitment
B) selection
C) training
D) separation
Answer: D
Diff: 1
Skill: Concept
12) Which term refers to an employee's final interview following separation?

A) Exit interview
B) Follow-up interview
C) Appraisal interview
D) Outplacement
interview Answer: A
Diff: 1
Skill: Concept
3
13) Your company is planning a layoff. As you explain the process to the management team, you
tell them that outplacement assistance is available, which means that the:
A) employee will receive a final interview.
B) company will help departing employees find new jobs.
C) company will measure the rate of employee separations.
D) company can terminate the relationship with the employee for any
reason. Answer: B
Diff: 2
Skill: Application
14) What is the primary reason for holding exit interviews?

A) Providing counseling to departing employees
B) Assisting departing employees with job-search skills
C) Determining the reason for the employee's departure
D) Allowing the employee's co-workers to provide
feedback Answer: C
Diff: 3
Skill: Concept
15) Carlie quit her job as a data analyst at APEX Designs, and she is scheduled to participate in
an exit interview. Which of the following individuals would be the most appropriate to conduct
Carlie's exit interview?
A) Subordinate
B) Co-worker
C) HR representative
D) Immediate supervisor
Answer: C
Diff: 2
Skill: Concept
16) Sanford Enterprises provides outplacement assistance through its HR department. The firm is
most likely attempting to:
A) lower unemployment insurance
taxes.
B) help departing employees find jobs.
C) improve employee motivation.
D) comply with EEOC rules.
Answer: B
Diff: 2
Skill: Application
4
17) Which of the following is most likely true about employee
separations?
A) Salary savings often outweigh other separation costs.
B) Innovation declines as people take their ideas with them.
C) The best workers tend to quit, so workforce quality declines over time.
D) Most separations are due to unfair employment practices by the employer.
Answer: A
Diff: 3
Skill: Concept
18) Which of the following is most likely a benefit of employee separations for
employers?
A) Employees are grouped into teams.
B) The workforce becomes more homogenous.
C) Surviving employees work more conscientiously. D)
They open doors for promotion within the company.
Answer: D
Diff: 3
Skill: Concept
5
Additional Case 6.1
Central Enterprises is suffering an economic downturn, and the workforce needs to be reduced.
Upper-level managers are debating the costs and benefits of various employee separations. Brian
argues that the company needs to make immediate cuts to both management and labor. The cuts
need to be made in such a way that the scope of the company and its markets are not affected.
The firm needs to do more with fewer people according to Brian.
Other managers want to take a long-term, less traumatic approach. According to Natalie, the firm
has time to consider the problems and gradually reduce the workforce rather than making sudden
staff cuts. Natalie points out that 35% of the workforce is over age 62.
The VP of HR, LaTisha, wants the least disruptive reduction process possible. LaTisha just
finished a major labor negotiation with the union and is not ready for another. She points out that
turnover has been fairly high. Along with considering workforce reductions, LaTisha wants to
know why people are leaving the company voluntarily.
19) Refer to Additional Case 6.1. To answer LaTisha's question about why people are leaving,
the company should most likely institute:
A) outplacement services.
B) orientation sessions.
C) exit interviews.
D) appraisals.
Answer: C
Diff: 2
AACSB: Reflective thinking
Skill: Application
20) Yao-Huan is reviewing the rate at which employees have been leaving his firm. He is
reviewing the firm's turnover rate.
Answer: TRUE
Diff: 1
Skill: Concept
21) A firm with an extremely high turnover rate compared to other firms in the same industry
most likely needs to address HR issues.
Answer: FALSE
Diff: 2
Skill: Concept
6
22) The costs to replace a departing employee primarily include: recruitment, selection,
and long-term health care benefits.
Answer: FALSE
Diff: 2
Skill: Concept
23) Selection costs include relocation costs, training costs, orientation, and severance pay.
Answer: FALSE
Diff: 2
Skill: Concept
24) Marissa quit her current employer for a new job. She is talking with the director of HR about
why she left. Marissa is most likely receiving outplacement assistance.
Answer: FALSE
Diff: 2
Skill: Concept
25) When conducting exit interviews, the interviewer should be one of the employee's former
supervisors.
Answer: FALSE
Diff: 2
Skill: Concept
26) Web-based exit interviews are used by firms that assume former employees may prefer to
avoid face-to-face interaction.
Answer: TRUE
Diff: 2
AACSB: Information technology
Skill: Concept
27) Employee separations can stimulate innovation and create opportunities for workplace
diversity.
Answer: TRUE
Diff: 1
Skill: Concept
7
28) The termination of an employee's membership in an organization is referred to as ________.
Answer: employee separation
Diff: 2
Skill: Concept
29) The rate of employee separations in an organization is referred to as ________.

Answer: turnover rate
Diff: 1
Skill: Concept
30) The purpose of a(n) ________ is to find out the reasons why the employee is leaving or
to provide counseling and/or assistance in finding a new job.
Answer: exit interview
Diff: 1
Skill: Concept
31) A program in which companies help their departing employees find jobs more rapidly by
providing them with training in job-search skills is called ________.
Answer: outplacement assistance
Diff: 2
Skill: Concept
32) Hernando is working with management to calculate the costs of employee turnover. What
issues or costs should Hernando raise to management?
Answer: Summary of suggested answer - The details of the answer will vary, but the costs
should include:
• Recruitment - ads, recruiter time, etc.
• Selection - interviewing, testing, relocation, etc.
• Training - orientation, lost productivity, trainer's time, etc.
• Separation - benefits, unemployment, exit interview, etc.
Diff: 3
Skill: Application
8
33) What problems are frequently associated with early retirement programs? How can HR
minimize such problems? What benefits might a firm experience from such employee
separations?
Answer: Summary of suggested answer -
Problems -
• too many participate
• employees leave who you want to keep
• leaving employees become competitors, some employees feel coerced into participation by
their managers
Solutions -
• set criteria to restrict the total number eligible
• plan to hire back, as consultants, any good employees who got away
• explain to managers what they can and cannot say
• don't start changing performance evaluations, lower raises, or hint at possible layoffs to older
employees
Benefits -
• reduced labor costs
• replacement of poor performers
• increased motivation
• opportunity for greater diversity
Diff: 3
Skill: Synthesis
9
Additional Case 6.3
MedEquip, a medical services company with 500 employees, has experienced an extensive
business downturn, and a layoff is necessary. MedEquip managers expect a layoff to be
problematic because the firm made verbal commitments to workers for lifetime employment.
You are an HR consultant brought in to assist with the layoff. The firm has also hired a PR
specialist to handle the press releases and public communications about the layoff. Although
MedEquip is a large company, the firm has built a family atmosphere. Corporate headquarters is
located in a small community of about 10,000 people.
The firm is planning to implement a layoff of 20% of its hourly and managerial employees.
Because of time demands and financial pressures, the layoff will occur in 30 days. The firm
plans to use work performance as the layoff criterion. Three areas of the business will be
affected: MIS, facilities, and accounting. Management is concerned about security in these areas.
Olivia, a middle manager who will not be laid off, has decided to hold group meetings with the
units affected by the layoff. Employees will not receive information in writing regarding the
layoff to avoid litigation issues. Instead, affected employees will receive verbal communications
from Olivia about the layoff. Employees at the firm who are not losing their jobs will receive e-
mails that summarize the current situation at MedEquip.
34) Refer to Additional Case 6.3. Which of the following questions is LEAST relevant to
MedEquip at this time?
A) How will MedEquip's community reputation be affected?
B) How can MedEquip maintain the morale of surviving employees?
C) How do MedEquip's competitors handle employee security during layoffs?
D) What policies exist regarding separation pay for laid-off MedEquip employees?
Answer: C
Diff: 3
Skill: Synthesis
10
35) Your CEO asks you, as the director of HR, to lead a layoff planning session. What layoff
alternatives are available to the firm? If layoffs are necessary, what separation costs would the
firm most likely incur?
Alternatives:
• change employment policies using attrition and/or a hiring freeze
• redesign jobs using bumping
• job sharing, reducing hours, etc.
• change pay and benefits policies, such as pay freezes, pay cuts, profit sharing, and training.
Separation Costs:
• separation pay
• benefits
• unemployment insurance costs
• exit interviews
• outplacement
Diff: 3
Skill: Synthesis
36) Resignations and retirements are examples of:

A) essential downsizing measures.
B) involuntary separations.
C) voluntary separations.
D) discharges.
Answer: C
Diff: 1
Skill: Concept
LO: 6.2: Gain mastery in identifying types of employee separations
37) Studies show that approximately ________ of voluntary employee separations are avoidable.
A) 20%
B) 40% C)
60% D)
80%
Answer: D
Diff: 1
Skill: Concept
11
38) Voluntary separations may include:
A) early retirements.
B) hiring freezes.
C) discharges.
D) job redesigns.
Answer: A Diff:
1
Skill: Concept
39) Similar to a quit, a ________ is initiated by the employee, but in this case the employee
is unlikely to search for another job.
A) layoff
B) retirement
C) discharge
D) buyout
Answer: B
Diff: 1
Skill: Concept
40) Sara is 57 years old and she has been a division manager for Elf Cookies for 32 years.
Recently, the business has seen an increase in efficiency and has a surplus of labor. Elf Cookies
is offering employees who are 55 and older, and who have worked for the company for over 30
years, specific benefits and financial incentives to retire within the next 60 days. Sara does so.
She has:
A) quit.
B) been bought out.
C) taken early
retirement. D) been
discharged. Answer: C
Diff: 1
Skill: Application
12
41) The decision to terminate an employee is management's role. HR's primary role is to:
A) implement outplacement services immediately.
B) serve as the employee's advocate against management.
C) make certain the employee receives due process.
D) document poor performance so the termination can be
justified. Answer: C
Diff: 3
Skill: Concept
42) Alex is a first-line supervisor with an employee who has a performance problem. After
coaching the employee with no improvement, Alex decides to terminate the employment
relationship. Which term refers to this type of separation?
A) Layoff B)
Discharge C)
Rightsizing
D) Early retirement
Answer: B
Diff: 2
Skill: Application
43) Bertha wishes to discharge one of her poorly performing employees. She has tried
progressive discipline with no effect. She asks you, the HR manager, what she must do to
discharge the employee. You should most likely tell her the policy and procedures, and then ask
her if she has ________ in order to protect the company from a wrongful discharge suit.
A) documented the inappropriate behavior
B) given sixty days notice as required by
law C) used non-progressive disciplinary
actions D) analyzed the department's
diversity levels Answer: A
Diff: 3
Skill: Application
13
44) Delmus' performance reports have been increasingly poor, and he seems to have negative
relationships with other workers in his department. His line manager has taken him aside twice to
discuss his behavior and work and has offered him time to improve, but there has been very little
positive progress. Management decides to end the employment relationship with Delmus. This is
an example of a:
A) layoff.
B) quit.
C) discharge.
D) buyout.
Answer: C
Diff: 2
Skill: Application
45) The primary difference between a layoff and a discharge is:

A) a layoff is an involuntary separation and a discharge is a voluntary separation.
B) a layoff is a voluntary separation and a discharge is an involuntary separation.
C) a discharge occurs when the company's strategy forces it to reduce its workforce and a layoff
occurs when there is a poor fit between the employee and the organization.
D) a layoff occurs when the company's strategy forces it to reduce its workforce and a discharge
occurs when there is a poor fit between the employee and the organization.
Answer: D
Diff: 3
Skill: Critical Thinking
46) Layoffs are most likely to occur because:

A) the firm offers lucrative incentives to reduce the workforce.
B) adequate documentation exists of the worker's poor performance.
C) a poor fit exists between the employee and the company.
D) the company's strategy forces a reduction in its workforce.
Answer: D
Diff: 2
Skill: Concept
14
47) All of the following are primary reasons for layoffs EXCEPT:
A) mergers
B) misconduct
C) global competition
D) technology advancements
Answer: B
Diff: 2
Skill: Concept
48) Dixon Enterprises needs to reduce its long-term workforce. The firm wants to reduce the
scale and scope of its business to improve financial performance. The company is most likely:
A) conducting a layoff.
B) downsizing.
C) buying out the workforce.
D) rightsizing.
Answer: B
Diff: 2
Skill: Concept
49) If a business is downsizing, it is most likely:

A) offering training and development opportunities to new hires.
B) improving worker efficiency through reorganization.
C) reducing the size and scope of the business.
D) offering early retirements to older workers.
Answer: C
Diff: 2
Skill: Concept
50) A firm with too many management layers and bureaucratic work processes would most
likely benefit from:
A) rightsizing.
B) discharges.
C) downsizing.
D) early retirements.
Answer: A
Diff: 2
Skill: Concept
15
51) The major difference between downsizing and rightsizing is that:
A) rightsizing reduces the size and scope of a business, while downsizing reorganizes
the business.
B) more workers are likely to lose their jobs during rightsizing than during downsizing.
C) downsizing reduces the size and scope of a business, while rightsizing reorganizes the
business.
D) rightsizing attempts to improve financial performance, while downsizing attempts to increase
efficiency.
Answer: C
Diff: 3
Skill: Application
Additional Case 6.1

Upper-level managers are debating the costs and benefits of various employee separations.
Brian argues that the company needs to make immediate cuts to both management and labor.
The cuts need to be made in such a way that the scope of the company and its markets are not
affected. The firm needs to do more with fewer people according to Brian.
52) Refer to Additional Case 6.1. Brian would most likely advocate a strategy of:
A) attrition.
B) downsizing.
C) rightsizing.
D) early retirements.
Answer: C
Diff: 2
16
Additional Case 6.4
Organizers, Inc. has implemented new business technologies that require fewer employees. Paul,
the firm's CEO, sees the need to eliminate some middle managers and institute work teams to
eliminate ineffective or unnecessary work processes. He believes that such changes won't be
costly to the business. Most of the middle managers have been with the company anywhere
from 10-15 years but are a long way from retirement.
One specific problem that Paul recognizes involves Zena, an upper-level manager. Zena has been
coming to work late, missing deadlines on assignments, and refusing to complete an important
assignment. Paul has warned Zena personally about the consequences for further actions and has
even meted out several proscribed disciplinary actions against Zena. Her work habits have not
improved, and Paul feels he may have to take further action.
53) Refer to Additional Case 6.4. By Paul's estimation, Organizers, Inc. most likely needs to do
which of the following to improve efficiency?
A) Implement internship opportunities
B) Perform a large-scale layoff
C) Downsize
D) Rightsize
Answer: D
Diff: 2
Skill: Application
54) Recent studies have shown that 80% of voluntary separations are unavoidable.
Answer: FALSE
Diff: 1
Skill: Concept
55) A quit and a retirement are similar types of employee separations since both are initiated by
the employee.
Answer: TRUE
Diff: 1
Skill: Concept
56) Employers can force an employee to retire if the employee is 65 years of age or older.
Answer: FALSE
Diff: 1
Skill: Concept
17
57) Involuntary separation results from one of two conditions: 1) economic necessity or 2) a
poor fit between the employee and the organization.
Answer: TRUE
Diff: 1
Skill: Concept
58) Rightsizing is synonymous with downsizing.

Answer: FALSE
Diff: 2
Skill: Concept
59) ________ is a separation that occurs when an employee decides, for personal or
professional reasons, to end the relationship with the employer.
Answer: Voluntary separation
Diff: 1
Skill: Concept
60) A separation that occurs when an employer decides to terminate its relationship with an
employee due to economic necessity or a poor fit between the employee and the organization is
called ________.
Answer: involuntary separation
Diff: 1
Skill: Concept
61) ________ is a company strategy to reduce the scale and scope of its business in order to
improve the company's financial performance.
Answer: Downsizing
Diff: 2
Skill: Concept
62) The process of reorganizing a company's employees to improve their efficiency is referred to
as ________.
Answer: rightsizing
Diff: 2
Skill: Concept
18
63) ________ is an employment policy designed to reduce the company's workforce by
not refilling job vacancies that are created by turnover.
Answer: Attrition
Diff: 2
Skill: Concept
Additional Case 6.4

64) Refer to Additional Case 6.4. Paul believes strongly in trying to provide lifetime employment
and will use a layoff only as a last resort. What would be the best strategy to reduce middle
management?
A) Offering early retirement to employees in middle management.
B) Instituting a pay freeze only for employees in middle management.
C) Encouraging employees in middle management to take voluntary time off for at least 60 days.
D) Developing HR policies regarding the use of pay incentives to encourage middle managers to
quit.
Answer: D
Diff: 3
Skill: Synthesis
19
65) What is an involuntary separation? What are some examples of involuntary separations?
How can the difficulties of involuntary separations be managed with outplacement programs?
Answer: An involuntary separation occurs when management decides to terminate its
relationship with an employee due to (1) economic necessity or (2) a poor fit between the
employee and the organization. Involuntary separations are the result of very serious and painful
decisions that can have a profound effect on the entire organization and especially on the
employee who loses his or her job. A discharge results from poor performance or a failure to
change unacceptable behavior. Layoffs are large-scale discharges related to economic necessity
and the individual does not necessarily have a direct cause for his/her discharge. These can affect
the whole organization. Downsizing/rightsizing is the concept of getting the organization smaller
in scope (downsizing) or getting it to a more efficient size (rightsizing). An outplacement
program can help a firm control the disruption caused by layoffs and other employee separations.
The most important of these goals are (1) reducing the morale problems of employees who are
about to be laid off so that they remain productive until they leave the firm, (2) minimizing the
amount of litigation initiated by separated employees, and (3) assisting separated employees in
finding comparable jobs as quickly as possible. In addition, providing an outplacement service
can help keep the remaining employees focused on their work.
Diff: 3
Skill: Synthesis
66) One of the most popular alternatives to layoffs is:

A) inducing quits.
B) offering early retirement.
C) providing outplacement services.
D) transferring workers to other plants.
Answer: B
Diff: 2
Skill: Concept
LO: 6.3: Have familiarity with managing early retirements
67) What are the two primary features of early retirement

programs? A) Exit interviews and open windows
B) Open windows and financial incentives
C) Outplacement services and financial incentives
D) Health-care benefits and lump-sum payments
Answer: B
Diff: 2
Skill: Concept
20
68) Elizabeth is a 59-year-old account representative at a large bank. Due to the increasing
popularity of online banking, the bank has more employees than it needs. Recently, the bank has
offered early retirement to account representatives between the ages of 55 and 65 who have been
with the company for a minimum of 15 years. Four employees, including Elizabeth, meet these
requirements. It is most likely that:
A) the bank is violating the Equal Pay Act by forcing female employees to retire.
B) the bank is violating the Age Discrimination Act by forcing Elizabeth to retire.
C) Elizabeth has received poor performance appraisals for many years.
D) Elizabeth must make her decision by a specific
date. Answer: D
Diff: 3
Skill: Application
69) It is most likely true that early retirement programs:

A) can substantially reduce the size of a company's workforce.
B) usually drive stock prices up because of the reduced overhead.
C) have minimal effect on reducing the size of a company's workforce.
D) typically require little effort from HR to generate large financial
returns. Answer: A
Diff: 3
Skill: Concept
70) Which of the following is a common problem with early retirement programs?
A) Insufficient management participation
B) Short-term cash flow issues for the firm
C) Excessive unplanned health-care costs
D) Too much participation by eligible employees
Answer: D
Diff: 3
Skill: Concept
71) A firm can best manage participation in an early retirement program by:
A) restricting the program to areas of the business with a redundancy of employees.
B) outsourcing highly skilled employees to competing firms.
C) offering the program only to employees with poor performance appraisals.
D) requiring participating employees to sign no-compete agreements.
Answer: A
Diff: 3
Skill: Concept
21
72) Teresa, a manager at FSE Manufacturing, wants to help employees make decisions about
early retirement. As an HR manager, you should most likely caution Teresa that certain
behaviors on her part will appear coercive. Which of the following activities should Teresa most
likely avoid in this situation?
A) Suddenly lowering an employee's performance appraisals which have been good over
past years
B) Discussing the specific details of the early retirement program with the employees
C) Offering older employees the opportunity to bump younger employees
D) Implementing an across-the-board pay
cut Answer: A
Diff: 3
Skill: Application
73) The key to avoiding lawsuits over early retirement programs is to:
A) give preferential treatment to protected-class individuals.
B) treat all employees the same regardless of their age.
C) study the probable impact on the local community.
D) implement layoffs on a regular basis.
Answer: B
Diff: 2
Skill: Concept
22
Additional Case 6.1
74) Refer to Additional Case 6.1. What relatively quick, but less traumatic, reduction strategy is
suggested by the make-up of the workforce?
A) Rightsizing
B) Employee training
C) A job redesign program
D) An early retirement program
Answer: D
Diff: 2
23
Additional Case 6.2
Terra Alta employs nearly 15,000 workers worldwide. The firm wants to reduce its workforce
through an early retirement program. The firm has hired you to organize and implement the
program.
Employees over age 58 are eligible, but managers don't want to lose key older employees.
Program eligibility should be limited to a short period of time. Terra Alta managers need a fairly
accurate estimate of how many employees will participate in the program.
Terra Alta expects a legal and humane program that avoids litigation issues. Employees should
have an accurate picture of their future if they decide to accept early retirement.
75) Refer to Additional Case 6.2. How could Terra Alta most likely prevent key, older workers
from leaving?
A) Restricting eligibility to areas with redundant
employees B) Establishing an immediate hiring freeze
C) Lowering the eligibility
requirements D) Shortening the
eligibility time frame Answer: A
Diff: 3
76) Refer to Additional Case 6.2. To avoid any legal problems, what would you most likely
recommend?
A) Offer minority employees larger severance packages to minimize discrimination concerns. B)
Tell managers not to treat older workers any differently than they have in the past.
C) Implement a hiring freeze at the same time as early retirement is
offered. D) Avoid giving more than 30 days advance warning of a layoff.
Answer: B
Diff: 3
77) Refer to Additional Case 6.2. How could Terra Alta best manage the number of participants
in the early retirement program?
A) Guarantee jobs to key employees and implement job redesign.
B) Survey senior employees and fine tune incentive packages. C)
Hire retirees as part-time consultants with stock options.
D) Develop an estimate based on industry
data. Answer: B
Diff: 3
24
78) Early retirement programs generally are offered by a business for only a short period of time
and consist of financial incentives to encourage senior employees to retire earlier than they had
planned.
Answer: TRUE
Diff: 2
Skill: Concept
79) Early retirement programs are simple ways to make small reductions in a firm's
workforce. Answer: FALSE
Diff: 1
Skill: Concept
80) A firm that tells employees that if they don't take early retirement they may still lose their
jobs due to future layoffs is most likely open to age discrimination charges.
Answer: TRUE
Diff: 2
Skill: Concept
81) A company can save up to 20% of its payroll during lows in its business cycle by instituting
a profit-sharing compensation program.
Answer: TRUE
Diff: 2
Skill: Concept
82) ________ is an employment policy designed to reduce the company's workforce by

not hiring any new employees into the company.
Answer: Hiring freeze
Diff: 1
Skill: Concept
25
Additional Case 6.2
Terra Alta employs nearly 15,000 workers worldwide. The firm wants to reduce its workforce
through an early retirement program. The firm has hired you to organize and implement the
program.
Employees over age 58 are eligible, but managers don't want to lose key older employees.
Program eligibility should be limited to a short period of time. Terra Alta managers need a fairly
accurate estimate of how many employees will participate in the program.
Terra Alta expects a legal and humane program that avoids litigation issues. Employees should
have an accurate picture of their future if they decide to accept early retirement.
83) Refer to Additional Case 6.2. Given Terra Alta's desires, which of the following would be
the most appropriate HR policy?
A) Creating a formula that accelerates retirement eligibility for low performing
workers B) Implementing outplacement service programs for retiring employees
C) Mandating a leave of absence for all employees near retirement
D) Establishing a 30-day open window for early retirement
Answer: D
Diff: 3
Skill: Synthesis
84) A layoff is typically implemented by an organization when:

A) alternative methods for reducing labor costs are unavailable.
B) most employees have less than 15 years of experience.
C) the firm employs fewer than 100 workers.
D) outplacement services are successful.
Answer: A
Diff: 2
Skill: Concept
LO: 6.4: Learn practices for managing layoffs
85) Once a firm has decided to reduce its workforce through voluntary means, its next choice
is: A) whether to discharge employees.
B) if it should downsize or rightsize. C)
what outplacement services to offer.
D) if any alternative strategies are
available. Answer: C
Diff: 2
Skill: Concept
26
86) The least disruptive way to cut labor costs is through:
A) layoffs.
B) attrition.
C) job redesign.
D) hiring
freezes. Answer:
B Diff: 1
Skill: Concept
87) Springtime Water has recently lost a small number of employees through quits and
retirements. The company has decided not to replace these employees. Marion is most likely
reducing its workforce by:
A) outplacement.
B) attrition.
C) rightsizing.
D) downsizing.
Answer: B
Diff: 1
Skill: Application
88) Which of the following alternatives to layoffs is LEAST intrusive on the day-to-day
management of a business?
A) Making changes in job design
B) Implementing a pay freeze C)
Changing benefits policies
D) Modifying employment
policies Answer: D
Diff: 2
Skill: Concept
89) A "rings of defense" strategy in terms of employment security and workforce reductions
is when a firm:
A) freezes employee wages to avoid laying off workers.
B) uses contingency workers for a flexible workforce.
C) implements job sharing in order to keep workers.
D) provides job security for its core
employees. Answer: D
Diff: 2
Skill: Concept
27
90) An example of a change in employment policy that will help reduce the size of a
company's workforce is:
A) reducing work hours.
B) implementing training.
C) offering profit sharing.
D) cutting part-time
employees. Answer: D
Diff: 2
Skill: Concept
91) Farley Enterprises wants to reduce its labor costs in the LEAST disruptive method that
is available. Which of the following is most appropriate?
A) Layoffs B)
Attrition C)
Paycuts D)
Relocation
Answer: B
Diff: 2
Skill: Application
92) Which of the following is an employment policy that serves as an alternative to

layoffs? A) Job sharing
B) Hiring freeze
C) Demotions
D) Pay freeze
Answer: B Diff:
1
Skill: Concept
93) Transferring and relocating employees are both ways to reduce employee costs
through which function?
A) Employment policies
B) Pay and benefits policies
C) Job design methods
D) Outsourcing methods
Answer: C
Diff: 1
Skill: Concept
28
94) Cuts in overtime pay, profit sharing, and encouraging employees to take leave days are all
ways to reduce employee costs in what area?
A) Employment policies
B) Pay and benefits
C) Job design
D) Training
Answer: B
Diff: 1
Skill: Concept
95) Steve's job has been eliminated. Steve, a senior employee, will take a job in a different unit
from an employee with less seniority. Steve's employer is most likely using the practice of:
A) attrition. B)
bumping. C)
job redesign.
D) rightsizing.
Answer: B
Diff: 2
Skill: Application
96) Which term refers to reconfiguring one job into two part-time jobs?
A) Job sharing
B) Job enlargement
C) Rightsizing
D) Bumping
Answer: A
Diff: 1
Skill: Concept
29
97) You are the head of an HR department for a large department store. The general manager,
Frank, comes to you claiming that a pay freeze is needed in order to reduce costs to the store.
Frank wants to freeze pay for the retail staff but not for department line managers. What would
be your most appropriate response?
A) The strategy will encourage the retail staff to advance towards higher positions.
B) The pay freeze should be the same across the board.
C) A layoff would be a much better solution.
D) The firm should institute a ring of defense.
Answer: B
Diff: 3
Skill: Application
98) A company that institutes profit sharing can save approximately ________ of its payroll
costs during downturns in the business cycle.
A) 50% B)
35% C)
20% D)
5%
Answer: C
Diff: 1
Skill: Concept
99) Which of the following is a long-term pay policy that can protect jobs and control labor
costs by linking compensation to production?
A) Internships B)
Overtime pay C)
Profit sharing D)
Early retirement
Answer: C
Diff: 1
Skill: Concept
30
100) Goodwin, Inc. has recently proposed a plan to base 15% of employees' salaries upon their
accomplishment of specific performance goals. Goodwin, Inc. is most likely proposing what type
of pay policy?
A) Profit sharing
B) Variable pay
C) Pay freezing
D) Bumping
Answer: B Diff:
2
Skill: Application
101) Which of the following requires employers to inform employees of impending layoffs?
A) ERISA
B) Title VII
C) EO 11426
D) WARN Act
Answer: D
Diff: 1
Skill: Concept
102) According to the WARN Act, which of the following must provide warning of an
impending layoff?
A) All federal contractors
B) All employers regardless of size
C) Any employer laying off more than 25 workers
D) Any employer with more than 100 employees
Answer: D
Diff: 2
Skill: Concept
103) Workers of companies with over 100 employees are entitled to ________ if they are not
given 60 days advance warning in cases of a mass separation.
A) 30 days income
B) 60 days income
C) 90 days income
D) continuing health
benefits Answer: B
Diff: 2
Skill: Concept
31
104) Critics of the WARN Act argue that employees should not be given notification because:
A) litigation is more likely to occur.
B) employees will demand more pay.
C) employee productivity is likely to decline.
D) competitors may try to hire departing
workers. Answer: C
Diff: 2
Skill: Concept
105) York Enterprises is a unionized firm on the verge of conducting layoffs. Which of the
following factors is most likely the primary determinant in layoff decisions?
A) Age B)
Salary C)
Seniority
D) Performance
Answer: C
Diff: 2
Skill: Concept
106) The use of seniority as a layoff criterion:

A) is not common among most modern organizations.
B) tends to impact women and minorities more than other groups.
C) tends to be the most difficult layoff criterion to implement.
D) is the only safe option in today's HRM legal environment.
Answer: B
Diff: 3
Skill: Concept
107) The use of seniority as a layoff criterion has some drawbacks,

including: A) adverse impacts on white males.
B) the frequent contests from unions.
C) the loss of top performers.
D) documentation difficulties.
Answer: C
Diff: 2
Skill: Concept
32
108) The use of performance as a layoff criterion: A)
usually protects firms from discrimination suits. B)
disproportionately affects women and minorities.
C) tends to eliminate older workers rather than younger workers.
D) can be problematic due to inconsistent management
documentation. Answer: D
Diff: 3
Skill: Concept
109) Glenda has been an employee at your curtain manufacturing company for over 6 years.
During the past six months, Glenda's productivity has decreased by almost 15 percent as
documented by her manager. In addition, you need to reduce the workforce in order to trim
employee costs. Your best option is to:
A) bump Glenda from her job with a younger
employee. B) use performance as the basis for laying
off Glenda. C) force Glenda to take early retirement.
D) offer Glenda incentives to
quit. Answer: B
Diff: 3
Skill: Application
110) When implementing a layoff, employees should first be informed:

A) through a company memo.
B) by their supervisor over the phone.
C) in a work unit meeting with HR present.
D) by their supervisor in a face-to-face
meeting. Answer: D
Diff: 2
AACSB: Written and oral communication
Skill: Concept
111) The information given in the initial meeting between a manager and an employee who
is being laid off should include:
A) reasons why the employee is being laid off.
B) time for the employee to debate the layoff.
C) comments about the employee's recent appraisal. D)
how much severance pay the employee will receive.
Answer: D
Diff: 3
33
112) While no time is a good time for a termination, the best time seems to be:
A) midweek.
B) Friday afternoon.
C) during vacation.
D) early in the workweek.
Answer: A
Diff: 1
Skill: Concept
113) As the head of the HR department for a large technology-production company, you have
been notified that the company is preparing for a mass layoff. Which of the following should be
your greatest priority in preparing for the layoff?
A) Delaying notification to employees
B) Limiting contact with the media C)
Coordinating media relations
D) Organizing outplacement services
Answer: C
Diff: 2
Skill: Application
114) Which of the following is most common among survivors of a layoff?

A) Increased diversity
B) Improved morale
C) Increased absenteeism
D) Improved
productivity Answer: C
Diff: 2
Skill: Concept
115) Management can most likely minimize problems with the remaining workforce after
a layoff by:
A) explaining the financial reasons for the layoff. B)
minimizing communication to eliminate rumors.
C) initiating close supervision of the remaining workers.
D) preparing for litigation with former and current
employees. Answer: A
Diff: 3
Skill: Concept
34
116) Which of the following is LEAST likely to be associated with layoff survivors?
A) Performance concerns
B) Compensation losses
C) Work group changes
D) Additional tasks
Answer: B
Diff: 2
Skill: Concept
117) Which of the following actions by an HR manager would most likely improve the morale
of layoff survivors?
A) Avoiding discussion of the firm's financial issues
B) Mandating new work procedures
C) Encouraging workers to set goals
D) Discussing outplacement options
Answer: C
Diff: 2
Skill: Concept
35
Additional Case 6.1
118) Refer to Additional Case 6.1. Which of the following layoff alternatives would LaTisha
most likely support?
A) Implementing a hiring
freeze B) Instituting pay cuts
C) Offering job sharing
D) Retraining workers
Answer: A
Diff: 3
36
Additional Case 6.3
MedEquip, a medical services company with 500 employees, has experienced an extensive
business downturn, and a layoff is necessary. MedEquip managers expect a layoff to be
problematic because the firm made verbal commitments to workers for lifetime employment.
You are an HR consultant brought in to assist with the layoff. The firm has also hired a PR
specialist to handle the press releases and public communications about the layoff. Although
MedEquip is a large company, the firm has built a family atmosphere. Corporate headquarters is
located in a small community of about 10,000 people.
The firm is planning to implement a layoff of 20% of its hourly and managerial employees.
Because of time demands and financial pressures, the layoff will occur in 30 days. The firm
plans to use work performance as the layoff criterion. Three areas of the business will be
affected: MIS, facilities, and accounting. Management is concerned about security in these areas.
Olivia, a middle manager who will not be laid off, has decided to hold group meetings with the
units affected by the layoff. Employees will not receive information in writing regarding the
layoff to avoid litigation issues. Instead, affected employees will receive verbal communications
from Olivia about the layoff. Employees at the firm who are not losing their jobs will receive e-
mails that summarize the current situation at MedEquip.
119) Refer to Additional Case 6.3. Given the situation at MedEquip, which of the following
statements is most likely true?
A) MedEquip must offer laid-off employees 60 days of income to avoid WARN Act violations.
B) MedEquip is in violation of the WARN Act and must extend the layoff deadline by 30 days.
C) MedEquip is not subject to the WARN Act because the business is not bankrupt.
D) MedEquip is not subject to the WARN because the business is too small.
Answer: A
Diff: 3
Skill: Application
120) Refer to Additional Case 6.3. As an HR consultant, you should most likely recommend:
A) escorting affected employees off-site as soon as they are notified.
B) holding the large group termination session at the end of the week.
C) requiring surviving employees to start working overtime and weekends.
D) informing employees that they will be laid off through a corporate
memo. Answer: A
Diff: 3
37
Additional Case 6.4
121) Refer to Additional Case 6.4. Paul's actions regarding Zena are most likely an example of:
A) discrimination.
B) forced retirement.
C) progressive discipline.
D) a ring of defense.
Answer: C
Diff: 2
Skill: Application
122) A firm's overall HR strategy influences its employee workforce reduction strategy.
Answer: TRUE
Diff: 1
Skill: Concept
123) Generally, the first alternative to layoffs that companies use to reduce their labor costs is to
redesign existing jobs.
Answer: FALSE
Diff: 2
Skill: Concept
124) Changes in job design may include: job sharing, rings of defense, bumping, and
job relocation.
Answer: FALSE
Diff: 2
Skill: Concept
38
125) WARN requires employers with 200 or more employees to give 100 days' warning of
layoffs of more than 10% of its employees.
Answer: FALSE
Diff: 2
Skill: Concept
126) One of the most commonly used layoff criterion is job seniority.
Answer: TRUE
Diff: 1
Skill: Concept
127) Basing a layoff on performance can be a legal hazard for an employer if the
employee's performance has not been well documented over a period of time.
Answer: TRUE
Diff: 2
Skill: Concept
128) In a termination meeting, a manager should interject personal remarks and discuss
future opportunities for the employee to soften the blow of job loss.
Answer: FALSE
Diff: 2
Skill: Concept
129) Companies should communicate the reasons for a layoff and provide some emotional
support to the survivors of a layoff in order to help them manage their layoff stress.
Answer: TRUE
Diff: 2
Skill: Concept
130) In order to reassure surviving employees of recent layoff information, they should
be informed of the reasons for the layoff and how it occurred.
Answer: TRUE
Diff: 2
Skill: Concept
39
131) A federal law requiring U.S. employers with 100 or more employees to give 60 days'
advance notice to employees who will be laid off as a result of a plant closing or a mass
separation of 50 or more workers is the ________.
Answer: Worker Adjustment and Retraining Notification Act (WARN) of 1988
Diff: 2
Skill: Concept
132) As the director of HR, you have the responsibility of implementing a layoff for a medium-
sized company. List the key issues that must be settled in the implementation.
Key issues -
• notifying employees
• explaining WARN
• developing layoff criteria
• communicating to laid-off employees
• coordinating media relations
• maintaining security
• reassuring survivors
• deciding whether or not to offer outplacement
Diff: 3
133) How can a firm maintain the morale of employees who survive a layoff? How
can outplacement services improve the morale and self-esteem of displaced workers?
• Jobs may be redesigned or enriched to keep the employees interested in their jobs.
• Survivors should be given the reasons for the layoff and how the layoff process occurred.
• Emotional support by small-group discussions, large-group pep talks, or even a party can be
held in order to bolster the confidence and camaraderie of the employees.
Outplacement programs usually provide counseling to help employees deal with the emotions
associated with job loss–shock, anger, denial, and lowered self-esteem. Because the family may
suffer if the breadwinner becomes unemployed, sometimes family members are included in the
counseling as well.
Diff: 3
Skill: Synthesis
40
134) Companies provide outplacement to terminated workers for a number of reasons, such as:
A) meeting federal requirements.
B) decreasing unemployment taxes.
C) lowering absenteeism among remaining workers.
D) reducing morale problems associated with laid-off workers.
Answer: D
Diff: 3
Skill: Concept
LO: 6.5: Recognize the role of outplacement
135) Which of the following typically handles outplacement activities?

A) External consultants hired by the firm
B) Local employment agencies
C) HR specialists at the firm
D) Federal agencies
Answer: A
Diff: 2
Skill: Concept
136) The use of outplacement services among large corporations serves all of the following goals
EXCEPT:
A) minimizing litigation.
B) implementing HR strategies. C)
protecting the firm's reputation.
D) helping separated workers find jobs.
Answer: B
Diff: 2
Skill: Concept
137) Anita, an HR manager, has been asked to design a job-search assistance program as part of
her employer's outplacement services. Which of the following skills would LEAST likely be
addressed in the program?
A) Resume writing
B) Career planning
C) Downsizing D)
Interviewing
Answer: C
Diff: 1
Skill: Application
41
138) An important goal of outplacement services for laid-off workers is to help them remain
productive, pending their layoff.
Answer: TRUE
Diff: 2
Skill: Concept
139) Job-search assistance and emotional support are two functions of a firm's job
design services.
Answer: FALSE
Diff: 1
Skill: Concept
42

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Managing Human Resources, 8e (Gomez-Mejia et al.

1) An employee separation occurs when:

8) Which of the following is a selection cost of employee replacement?

12) Which term refers to an employee's final interview following separation?

14) What is the primary reason for holding exit interviews?

29) The rate of employee separations in an organization is referred to as ________.

36) Resignations and retirements are examples of:

45) The primary difference between a layoff and a discharge is:

46) Layoffs are most likely to occur because:

49) If a business is downsizing, it is most likely:

Additional Case 6.1

58) Rightsizing is synonymous with downsizing.

Additional Case 6.4

66) One of the most popular alternatives to layoffs is:

67) What are the two primary features of early retirement

69) It is most likely true that early retirement programs:

82) ________ is an employment policy designed to reduce the company's workforce by

84) A layoff is typically implemented by an organization when:

92) Which of the following is an employment policy that serves as an alternative to

106) The use of seniority as a layoff criterion:

107) The use of seniority as a layoff criterion has some drawbacks,

110) When implementing a layoff, employees should first be informed:

114) Which of the following is most common among survivors of a layoff?

135) Which of the following typically handles outplacement activities?

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