Downsizing at St Bedes Hospital - Case Study Example

Human Resource Management (HR Case study) Name: Tutor: Course: Date: Executive summary The aim of this report is to establish ways of saving money and taking due consideration to employee capabilities and welfare. The management of St. Bede’s hospital has a daunting task of balancing organizational objectives to market dynamics which have forced major unfavorable changes to be considered and implemented. The hospital management will have to content with the new bargaining arrangement came into force on 1st July 2010, with strong emphasis on enterprise based bargaining. According to the Fair Work Act (2009) this supersedes the previous individual arrangements dominant when the hospital was under the coalition Work Choices legislation which was removed. Doing layoffs or downsizing by St. Bede’s hospital is a toxic solution. Though the hospital can get along with it in the short run as an organizational lifesaver, repeated use of these layoffs without a thoughtful strategy, destroys the organization's effectiveness. Sister Mary Josephine knows that treating her employers well really matters especially to those who leave and them who remain. One downsizing outcome should be preservation of the Hospitals intellectual capital. According to a study by Cameron et al (1991) downsizing should consider the organizations goals, beliefs, philosophy and culture. He concluded that downsizing was an affirmative and necessary approach to become more competitive, and an appropriate response to disproportionate growth in the work force. All the hospital departments are six; Nursing, Allied Health, Central Admin, Dietetics/Nutrition, Housekeeping/Maintenance and Medical staff. The hospital will have to lay 10% of all the departmental staff. The current payroll is $30million so reducing the number of employees by 10% will have saved the hospital more than 3million in salaries. This will mean reducing the size of each department by 1.8%. Hospital management should establish other options such as reducing benefits or cutting wages before downsizing employees. This is because it affects the Hospitals ability to handle increases in service demand. Receiving a surge in customer treatment and consultations is part of recovering from slow economic times. The hospital management should have a clear, well-defined vision before the implementing the layoffs. For management to accomplish layoffs, emphasis should be placed on the new organization and staff numbers needed. Table of Contents The aim of this report is to establish ways of saving money and taking due consideration to employee capabilities and welfare. The management of St. Bede’s hospital has a daunting task of balancing organizational objectives to market dynamics which have forced major unfavorable changes to be considered and implemented. The hospital management will have to content with the new bargaining arrangement came into force on 1st July 2010, with strong emphasis on enterprise based bargaining. According to the Fair Work Act (2009) this supersedes the previous individual arrangements dominant when the hospital was under the coalition Work Choices legislation which was removed. Doing layoffs or downsizing by St. Bede’s hospital is a toxic solution. Though the hospital can get along with it in the short run as an organizational lifesaver, repeated use of these layoffs without a thoughtful strategy, destroys the organization's effectiveness. Sister Mary Josephine knows that treating her employers well really matters especially to those who leave and them who remain. One downsizing outcome should be preservation of the Hospitals intellectual capital. According to a study by Cameron et al (1991) downsizing should consider the organizations goals, beliefs, philosophy and culture. He concluded that downsizing was an affirmative and necessary approach to become more competitive, and an appropriate response to disproportionate growth in the work force. All the hospital departments are six; Nursing, Allied Health, Central Admin, Dietetics/Nutrition, Housekeeping/Maintenance and Medical staff. The hospital will have to lay 10% of all the departmental staff. The current payroll is $30million so reducing the number of employees by 10% will have saved the hospital more than 3million in salaries. This will mean reducing the size of each department by 1.8%. Hospital management should establish other options such as reducing benefits or cutting wages before downsizing employees. This is because it affects the Hospitals ability to handle increases in service demand. Receiving a surge in customer treatment and consultations is part of recovering from slow economic times. The hospital management should have a clear, well-defined vision before the implementing the layoffs. For management to accomplish layoffs, emphasis should be placed on the new organization and staff numbers needed. 3 Table of Contents 4 1.0 Introduction 6 2.0 Discussion 7 2.1 Fair Work ACT (2009) 7 First, collective bargaining under the Fair Work Act is a new voice mechanism for St. Bede’s hospital employees, the hospital and representation parties expressing their needs regarding work. Despite this absence, collective bargaining provides a basis to regulate the terms under which the hospital hires and treats future employees.  The new bargaining arrangement came into force on 1st July 2010, with strong emphasis on enterprise based bargaining. This supersedes the previous individual arrangements dominant when the hospital was under the coalition Work Choices legislation which was removed. The hospital cannot hide on the premise that the non-unionized since the Fair Work Act has outlawed pattern bargaining and removed any distinction between "non-union" and "union" treaties. 7 Secondly, good-faith bargaining require St. Bede’s employees and the hospital to make sincere effort in negotiations. Under Fair Works Act Both parties should participate and attend at reasonable time. Timely disclosure of relevant information like commercially sensitive and confidential information is recommended. Besides, response and genuine considerations apply to proposals and reasons for responses from bargaining representatives. The hospital will need to refrain from unfair conduct or capricious conduct that undermines collective bargaining and freedom of association. Thirdly, equality bargaining as suggested by Colling and Dickens (2009) provide for equality bargaining. This constitutes a collective negotiation of provisions captures interest or benefits to women thus facilitating gender equality. Heery (2006) also concerns equality bargaining so that the bargaining agenda to serve the interests of women employees. St. Bede’s Hospital is obliged to adhere to equality bargaining by considering layoffs to male and female employees on an equal platform (Cooper, R 2009). The bargaining should be driven by social forces, union bargaining priorities, gender of negotiators, bargaining structures, and managerial support. However, Sheldon (2008) noted that women involvement in bargaining prolongs the equality agenda and places greater priority on equality issues than do their male colleagues. Women involvement in the bargaining processes ensures equality measures appear in the final collective agreements (Sheldon 2008, p. 34). Equality bargaining will help aging St. Bede’s workforce, increased participation of female workforce, and the desire to retain workers. Equality bargaining suffers in a deregulated system since unions rate family policies lowest with regard to their bargaining priorities. Under good-faith bargaining, the hospital will also have to bargain on parental leave provisions such as parental leave entitlements and the consciousness of community and union movements. Lastly, Low-paid bargaining stream provides for enterprise bargaining among multi-employer previously associated with low-paid and award dependent employees. This will allow eligibility of particular employees and low-paid authorization (Sheldon 2008). This stream does not affect the hospital employees since they are not multi-employed. 8 2.2 Downsizing at St. Bede’s hospital 9 2.3 Theoretical understanding of down sizing 10 2.4 Rationale of conducting layoffs 11 2.5 The problem is too little profit and not too many people 12 2.6 Consequences of downsizing 12 2.7 Mini-cases 13 3.0 Recommendations 14 3.1 Effective Downsizing 14 3.2 Reducing benefits as alternative to downsizing 14 3.3 Employees to be given enough Notice as Possible 15 3.4 Always respect employees dignity 15 3.5 Respect the Law 16 3.6 Talk of the act afterwards 16 4.0 Conclusion 17 Reference List 18 Downsizing: St. Bede’s Hospital Case study 1.0 Introduction The aim of this report is to establish ways of saving money and taking due consideration to employee capabilities and welfare. The management of St. Bede’s hospital has a daunting task of balancing organizational objectives to market dynamics which have forced major unfavorable changes to be considered and implemented. In the wake of labor agitation, efficiency of service and increasing competition, the hospital is faced with a grim future of balancing its books of account. The culture of the organization has been shaped by certain values and beliefs which has held them as a family. Processes and procedures of operations have been embedded in this family culture. To make profit, the hospital must have higher revenue with low operational costs. The objective of this organizational evaluation is to identify ways of reducing costs or increasing savings by $3million without compromising its culture, philosophy and structure. Another aim is to establish humane means to lay off employees without creating discontent and bitterness. The final objective is to obtain a long-term strategy of increasing revenue without considering options such as employee layoffs. This study will only be limited to employee concerns and perhaps to a limited extent look into the methods, tools, processes, quality management and marketing as new ways to increase customer satisfaction. The hallmark is achieving measures that will ensure motivated employees, clear and effective organizational structure and culture. 2.0 Discussion 2.1 Fair Work ACT (2009) First, collective bargaining under the Fair Work Act is a new voice mechanism for St. Bede’s hospital employees, the hospital and representation parties expressing their needs regarding work. Despite this absence, collective bargaining provides a basis to regulate the terms under which the hospital hires and treats future employees.  The new bargaining arrangement came into force on 1st July 2010, with strong emphasis on enterprise based bargaining. This supersedes the previous individual arrangements dominant when the hospital was under the coalition Work Choices legislation which was removed. The hospital cannot hide on the premise that the non-unionized since the Fair Work Act has outlawed pattern bargaining and removed any distinction between "non-union" and "union" treaties. Secondly, good-faith bargaining require St. Bede’s employees and the hospital to make sincere effort in negotiations. Under Fair Works Act Both parties should participate and attend at reasonable time. Timely disclosure of relevant information like commercially sensitive and confidential information is recommended. Besides, response and genuine considerations apply to proposals and reasons for responses from bargaining representatives. The hospital will need to refrain from unfair conduct or capricious conduct that undermines collective bargaining and freedom of association. Thirdly, equality bargaining as suggested by Colling and Dickens (2009) provide for equality bargaining. This constitutes a collective negotiation of provisions captures interest or benefits to women thus facilitating gender equality. Heery (2006) also concerns equality bargaining so that the bargaining agenda to serve the interests of women employees. St. Bede’s Hospital is obliged to adhere to equality bargaining by considering layoffs to male and female employees on an equal platform (Cooper, R 2009). The bargaining should be driven by social forces, union bargaining priorities, gender of negotiators, bargaining structures, and managerial support. However, Sheldon (2008) noted that women involvement in bargaining prolongs the equality agenda and places greater priority on equality issues than do their male colleagues. Women involvement in the bargaining processes ensures equality measures appear in the final collective agreements (Sheldon 2008, p. 34). Equality bargaining will help aging St. Bede’s workforce, increased participation of female workforce, and the desire to retain workers. Equality bargaining suffers in a deregulated system since unions rate family policies lowest with regard to their bargaining priorities. Under good-faith bargaining, the hospital will also have to bargain on parental leave provisions such as parental leave entitlements and the consciousness of community and union movements. Lastly, Low-paid bargaining stream provides for enterprise bargaining among multi-employer previously associated with low-paid and award dependent employees. This will allow eligibility of particular employees and low-paid authorization (Sheldon 2008). This stream does not affect the hospital employees since they are not multi-employed. 2.2 Downsizing at St. Bede’s hospital Doing layoffs or downsizing by St. Bede’s hospital is a toxic solution. Though the hospital can get along with it in the short run as an organizational lifesaver, repeated use of these layoffs without a thoughtful strategy, destroys the organization's effectiveness. Sister Mary Josephine knows that treating her employers well really matters especially to those who leave and them who remain. One downsizing outcome should be preservation of the Hospitals intellectual capital. The kind of treatment given to the downsized employees directly affects the retention and morale of high-performing and valued employees not downsized (Schein 1992). The hospital should not use downsizing as a way of communicating to investors or financial centers on the gains of a no-nonsense, tough-minded and a new management style. The cost of downsizing is known to outweigh any gained benefits. The hospital and specifically Ms Sharon Osgood is advised against laying off employees based on a last-hired, first-fired platform throughout all the hospital departments. The downsizing method most clearly defensible in a court of law is to lay off utmost 10% of employees across all departments based on a seniority-only basis so that no employee claims dismissal on discriminatory grounds. 2.3 Theoretical understanding of down sizing According to a study by Cameron et al (1991) downsizing should consider the organizations goals, beliefs, philosophy and culture. He concluded that downsizing was an affirmative and necessary approach to become more competitive, and an appropriate response to disproportionate growth in the work force. Successful companies reduced the work force, engaged in organizational redesign and quality improvement through systematic efforts as an intentional and proactive strategy. Interestingly, some few organizations in their study showed improved organizational performance. Furthermore, Petruno (1996) reflected on the concerns that organizational shareholder activists are a way too greedy and imposing immense price on the many employees who underwent job losses. Increased performance he notes may be happening at the expense of hollowed out organizations. Similarly, Hamel and Prahalad (1994) did not question the downsizing legitimacy, but their argument that time taken on establishing core competencies and associating the competencies to the outside marketplace could be better than reengineering and restructuring. Restructuring shores up the present position, though it least prepares one to compete in the future. The hospital management (CEO and HR) are advised not to utter anything beyond what is absolutely necessary to the survivors or departing employees. This precaution is meant to protect the hospital from making any explicit or implied promises that may be difficult to keep. Strict scripting what is spoken regarding the layoffs helps the hospital to shield itself from verbal slips among departmental heads, themselves undergoing stress of releasing their valued employees (Waterman, Waterman, & Collard 1994). 2.4 Rationale of conducting layoffs From a legal perspective, this approach is a success, but not essentially from a more and larger significant concern of the hospital’s health. To start with, it is irrational to lay off employees across different departments on a flat percentage basis. It may be difficult for nursing department to cope with the same proportion of fewer employees as Allied Health department. This may force one department to be externalized while another is left intact. The decision on the employees lay off per department is not an arbitrary statistic but based on analysis of business needs (Mohrman, & Mohrman, 1983). It is also irrational to strictly lay off employees based on seniority. Redistribution of the work should dictate the choice of employees for a layoff but not the date an employee was hired. At times an employee of 10 months may have more valuable skills that one who has been at the hospital for more than 10 years. 2.5 The problem is too little profit and not too many people The critical question in St. Bede’s case is the need for a layoff driven by the concept of having too little profit and not too many employees. It is known that a rationale based on too little profit cannot hold. It is the first warning sign that the hospital is not ready for a layoff. It is utterly unwise to use layoff as a sole cost cutting measure (Sutton, & D’Aunno, 1989). This throws away organizational learning and valuable talent when employees are dumped. The hospital lacks revenue but risks annihilating intellectual capital and consequently reducing the potential for future growth and efficiency of remaining resources. If the problem was too many employees, the hospital could have started a process strategy for change well-thought-out. Legitimate determination of whether the employees are too many requires a review of the organization's business plan and not the head count (Greengard 1993). This involves product and services offered, services and products likely to be profitable and the talent needed to run the hospital. These questions aid in planning the post-layoff future. Quick turnaround will be ensured against the backdrop of inevitably negative downsizing effects to that of positive growth in efficiency and value. 2.6 Consequences of downsizing When the hospital management resort to downsizing principally to cut labor costs and save on revenues, it gives rise to rumors which spreads quickly on the fate of employees who remain. The morale of retained staff members will be lowered owing to the dilemma on the stability of their jobs. Persistence of rumors lowers the morale further and develops into an acute productivity loss and employee turnover. This is a difficult time for the company having made losses in the past year. The hospital is ill-equipped to hold to the return of formidable revenue numbers (Tomasko, R M 1990). Customer Service will be affected since the hospital now has fewer employees take care of customer issues. The customer service levels suffer and so is the public reputation of the hospital. Inadequate service staff causes experience delays in service delivery to patients. There will be increased instances of customer dissatisfaction which negatively affects on revenue and sales. Business processes will be affected if the hospital downsizes employees when the way work is done is not altered. To maintain productivity, processes need to be changed to accommodate less staff on hand to do the work. For instance, introducing automation and efficient patient diagnosis procedures can help do some jobs former staff members used to perform. This maintains the existing employee’s production levels. 2.7 Mini-cases BB&T Financial Corporation merger with Southern National Corporation ensured elimination of redundant positions through the strategic application of a hiring freeze. For the case of Hewlett-Packard, a fortnight program was implemented where all employees had to take one day off every two weeks without pay until there was an increase in business revenue. On the other hand, Scott Paper in the mid-1990s did a layoff of 10,500 employees but the following years saw Scott take a dramatic decrease in profitability and inability to introduce any new products. A competitor Kimberly-Clark later bought out the company. 3.0 Recommendations 3.1 Effective Downsizing The hospital management is currently faced with malfunctions emanating from non-optimal efficiencies. This gives rise to the thinking that a layoff is needed. All the hospital departments are six; Nursing, Allied Health, Central Admin, Dietetics/Nutrition, Housekeeping/Maintenance and Medical staff. The hospital will have to lay 10% of all the departmental staff. The current payroll is $30million so reducing the number of employees by 10% will have saved the hospital more than 3million in salaries. This will mean reducing the size of each department by 1.8%. The basis of layoffs will be based on seniority across all departments through assessment of every job description. No employee should be laid off based on the number of years worked in the hospital but on the role and sensitivity of the role the employee is performing. 3.2 Reducing benefits as alternative to downsizing Hospital management should establish other options such as reducing benefits or cutting wages before downsizing employees. This is because it affects the Hospitals ability to handle increases in service demand. Receiving a surge in customer treatment and consultations is part of recovering from slow economic times. The hospital should be properly staffed to handle new patients because downsizing limits its ability to implement after financial recovery. 3.3 Employees to be given enough Notice as Possible Guilt and fear should not engulf St. Bede’s management rather they should give employees enough forewarning on the upcoming layoff or downsizing. There is a fear that employees knowing their fate ahead of time become unproductive demoralized and sabotage hospital operations. No documented evidence has shown that advanced notice of a layoff raises the chance of employee sabotage. On the contrary, lack of advance notice increases mistrust of management among remaining workers.  Employees see a blatant disrespect for their integrity if they discover issues brewing without their knowledge. Providing employees with this information enormously helps them to plan their lives, builds trust and constructive help. 3.4 Always respect employees dignity Many poorly executed layoffs methods employed treat employees like children since information is doled out and withheld. This is a violation of managers' control over their employees (Armstrong-Stassen 1993). Human resource treatment of laid-off employees will depict how it will treat the remaining employees. Successfully planning for the new hospital will improve its results and get going. The exceptional talent must be kept because they are employees who are most marketable to other hospitals. 3.5 Respect the Law It is essential to respect the employment laws even though the legal department cannot design a layoff. The hospital should be aware of entitlements connected to civil rights, disabilities, age discrimination, retraining, and worked adjustment. These are important laws requiring respect for what they prescribe, proscribe and intend. The planned lay-off should be based on business needs, and not on seniority or head count. This will not pose any problem upholding the law (Rousseau 1995). The hospital will face legal challenges when layoff are based on factors other than business needs. 3.6 Talk of the act afterwards Many organizational managers think that after a layoff, the better when less is said about it. The hospital will be lucky if everyone forgets and moves on. The reality is that employees surviving the downsize talks about what happened whether the management team likes or not. The discussion becomes subversive when the company tries to act as if nothing has happened and suppress these discussions. Regardless of whether the management does, the remaining employees act as consequence of the past. If managers and employees are free to speak their minds on what happened, recovery from a layoff will be hastened. Surviving employees renew ties and pull together thus a great opportunity for the team (Downs 1998). Refusal by the management to acknowledge the reality by being heartless makes employees to feel a sense of helplessness. Effective downsize requires empathy with the people who are experiencing jobs loss. 4.0 Conclusion The hospital management should have a clear, well-defined vision before the implementing the layoffs. For the management to accomplish layoffs, emphasis should be placed on the new organization and staff numbers needed. Having a well charted direction guided by a clear vision of the future enables the new organization to shed some similar challenges previously creating the need for the layoff. However, the managers should not underestimate the tendency of the old organization recreating similar problems afresh. Clearly definition, shared vision of the new company to all in the management team will rid efforts of future sabotage and stop a cycle of repeated layoffs with dismal development in organizational efficiency. It is important factors to keep in mind business planning and respecting employee dignity. From the mailroom to the board-room, no one enjoys downsizing. However, the need for staff reduction is unavoidable but the layoff should be done in a way that the organization excels and the problem is fixed. Reference List Armstrong-Stassen, M 1993, Survivors’ reactions to a workforce reduction: A comparison of blue-collar workers and their supervisors, Canadian Journal of Administrative Sciences 10 (4), pp. 334-343. Cameron, K S, Freeman, S J, & Mishra, A K 1991, Best practices in white-collar downsizing: Managing contradictions,  Academy of Management Executive 5(3), pp. 57-72. Colling R & Dickens A B 2009, Fair Work and the Re-regulation of Collective Bargaining, Australian Journal of Labour Law, 22 (3), pp. 284–305.  Cooper, R 2009, The 'New' Industrial Relations and International Economic Crisis: Australia in 2009. Journal of Industrial Relations. Vol. 52, No. 3. pp. 261–74. Downs, A 1998, The Seven Miracles of Management, Prentice Hall Greengard, S 1993, Don’t rush downsizing: Plan, plan, plan, Personnel Journal 72(11), 64-76. Hamel, G & Prahalad, C K 1994, Competing for the future, Harvard Business Review, pp. 122-128. Mohrman, S A & Mohrman, A M 1983, Employee involvement in declining organizations, Human Resources Management Journal, 22(4), pp. 445-465. Petruno, T (December 19 1996), Has ‘greed’ supplanted ‘shareholder value’? Los Angeles Times. Rousseau, D 1995, Psychological contracts in organizations: Understanding written and unwritten agreements, Thousand Oaks, CA: Sage. Schein, E 1992, Organizational culture and leadership. San Francisco: Jossey-Bass. Sheldon, P 2008, What collective bargaining future for Australia? Lessons from international experience. In J. Riley and P. Sheldon (eds), Remaking Australian Industrial Relations (pp. 235–48). Sutton, R I & D’Aunno, T 1989, Decreasing organizational size: Untangling the effects of money and people, Academy of Management Review 14(2), pp. 194-212. Tomasko, R M 1990, Downsizing: Reshaping the corporation for the future. New York: AMACOM. Waterman, R , Waterman, J & Collard, B 1994, Toward a more career-resilient workforce, Harvard Business Review, pp. 87-95. Read More