HUMAN RESOURCES

MANAGEMENT (BSMH5013)
JOB ANALYSIS/PLANNING CASE STUDY
PREPARED BY

Employee Layoffs at St. Mary's Hospital

Case 1
BACKGROUND
Third largest hospital in a northwestern city that 1,150 employees work
for. It is entirely nonunion and has never experienced employee layoffs
from the beginning.
Recently, the hospital is in financial difficulties and getting more severe.
The occupancy rate has fallen from 82% to 57%.
The industry is changing reimbursement policy.
Outpatient services are emphasized.
Competitors increase.
The projected deficit for the upcoming year was $3,865,000.
The board recommended that the hospital lay off 10% of all employees
and the CEO agreed with the recommendation.
The director of HR should prepare both a short term plan to save $3
million over the year through staff layoffs, as well as long term plan to
avoid layoffs in the future.

Q 1. Identify the major problem, and

the causes.
MAJOR PROBLEM
Hospital revenue in deficit/financial constraints.

The hospital does not have adequate criteria of executing a

layoff. Even though the hospital has the performance
appraisal system, the criteria is not accepted by
employees.
In addition, if the hospital implement a layoff, since the
layoff also must have a bad effect on survivors, the hospital
may rose competitiveness.
Fundamentally, since the HR planning does not connected
to the environmental environment and the strategy, the
hospital faced laying off employees.

The industry
is changing
reimbursem
ent policies.
The
occupancy
rate has
fallen to
57%.

Emphasis on
outpatient
services.

CAUSE
OF
PROBL
EM

Increasing
competition.

Inadequate
Performan
ce
Appraisal
System

Lack of the
HRs Role
COF
(ANALY
SIS)

INADEQUATE PERFORMANCE APPRAISAL SYSTEM

The present performance appraisal system uses a
traditional checklist rating scale with a summary rating.
Since there is no forced distribution, the average ratings of
employees in different departments vary widely.
Performance Appraisal Summary by Department

Medical Staff

Housekeeping/Maintenance

Oustanding

Dietetics/Nutrition

Satisfactory
Questionable
Unsatisfactory

Central Administration

Allied Health

Nursing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

 There is a strong positive correlation between undervalue rates and

turnover rates. So, adequate performance appraisal is important for core
staffs retention.
20.2

12.8
12.2

11.9
8.7

8.3
7.3

8.4

7.3

5.8
3.5
2.1
Nursing

Allied health

Administration
UNDERVALUATION

Dietetics

Houskeeping

Medical staff

TURNOVER

Especially, the number of employees for the nurse and the allied health is
863 and the portion of them is 75% of all employees. So, they can be seen
as core staff of the hospital.
Even though they have important roles for the hospital, undervaluation
rates are relatively higher than employees for other departments except
the housekeeping.

LACK OF THE HRS ROLE AS THE BUSINESS PARTNER

Since the hospital has never experienced an employee
layoff and even the CEO views the employees as family, the
hospital would have difficulty implementing such a layoff.
Those cultures made the hospital take actions such as
tightening of requirements for equipment or supply
purchases except approaching of the HR.
The hospital should have decreased beds and employees
should have assigned to outpatient services to respond the
trend that the industries emphasized on outpatient
services.
As a result, the hospital did not have the strategy, as well
as the HR planning.

Q 2. What are some alternatives for

dealing with these problems? For
example, is it possible to avoid layoffs
through the use of attrition?
No
Incre
men
t&
Bon
us.
Offer
ing
early
buy
out /
VSS.

Cutti
ng
bene
fits.

Free
ze
Hirin
g

Addi
tiona
l
work
hour
s.

Unp
aid
Leav
es

Q 3. Develop a plan for implementing employee layoffs over the next

year that will generate $3 million in saving. Give specific details
concerning departments affected, the use of seniority versus merit,
the amount of notice, and out- placement activities. What additional
information (if any) will you need ? Provide a rationale for each
recommendation, together with reasons why other alternatives were
not chosen.

SHORT TERM PLAN

1) Saving $3 million over the next year without a
layoff :
Attrition (Retirement) + Unpaid Leaves

Working days for 1 year = 52 week * 5 days = 260 days

Then, unpaid holidays should be 5.9% of 260 days = 15
days

2) Saving $3 million over the next year implementing a

layoff :
Attrition (Retirement) + Layoff

(The core departments : under

departments : over around 10%)

5%,

The

ordinary

SELECTION FOR LAYOFFS

Seniority-based selection
With seniority-based selection, the last hired/first fired concept is used.
Because this system reward employees for their tenure, there is a lower risk
that older workers will sue employers for age discrimination. However, this
system also have potential discrimination against other groups.
Merit-based selection
Although this method is often preferred because of added flexibility for
weeding out marginal or poorly performing employees, in this case, the
performance appraisal is appeared to be inadequate to the employees. So,
this method does not provide an accurate qualitative means for ranking the
differences among individual employees performance in selecting for layoff.

Multiple criteria selection

The hospital should consider several criteria such as seniority, skill, and
attendance history after consultation with employees.

THE 60 DAYS WRITTEN NOTICE BEFORE IMPLEMENTING

LAYOFFS
The hospital should warn those who being laid off by the
written notice.
Outplacement
normally
OUTPLACEMENT ACTIVITIES
: CAREER CONSULTING
AND
consists of individual or group
TRAINING
career consulting and advising.
Since many laid off employees
are unfamiliar with current job
searching techniques, training
in job searching should be
provided.
The
hospital
can
utilize
outplacement firms that help
develop resumes and cover
letters and even apply for jobs
for individuals.
Outplacement
firms
also
provide job leads and follow-up

Q 4. What might be the effects of a layoff plan on

"survivors"
in
terms
of
morale,
job
security,
organizational commitment, productivity, and career
planning? How could you avoid or minimize any
potential problems in these areas?
Morale
If St. Mary's doesn't put out information early the morale of the employees will be low.
To boost morale, the hospital should be available to provide the reasons for the layoff honestly and
ask for their understanding

Job Security
To keep remaining employees, the hospital should recognize good performance with positive
evaluations, merit increases, and promotions.

Organizational Commitment
Pay equal attention to the employees who are going to lose their jobs and those who remain.
Provide multiple twoway communication channels (especially facetoface) between leadership and
employees to give them many opportunities to share their concerns, ask questions and deepen their
understanding of the business realities.

Productivity

Assure job security through communication and training. Training for remaining employees can
reduce the frustration and anxiety.

Career Planning
HR need to create a clear career paths for employees.

Q 5. What long-term solutions do you see for St. Mary's

Hospital once it gets its cash flow problems under
control and eliminates its deficit? What can it do to
increase revenue so that future layoffs will not be
necessary?
HR
Planning
Model
Annually
HR
Strategic
Planning

LONG
TERM
PLAN

Successf
ul
Marketin
g of New
Services

Job
Analysis

Improve
the
Appraisa
l System

Q 6. What difficulties exist in using

performance as a criterion for layoffs? How
can such difficulties be overcome?

The problem is that "performance" criteria and measurement are

not always objective or valid. Because performance selection
criteria are based either in part or in whole on performance
evaluation information (which is not always objective and may
contain rater biases), this method has not been proven to provide
an accurate qualitative means for ranking the differences among
individual employees performance in selecting employees for
layoff.

Such difficulties can be overcome if performance appraisal forms

and processes are developed separately for each major subgroup of
employees. Then employees should have input into both the criteria
and the actual instrument against which their performance will be
measured. Finally, the emphasis of the instrument should be on
employee
performance
rather
than
employee
traits
or
characteristics.

THANK YOU