CASE STUDY Thanks for 24 years of services. Now here is the door! Summary Thanks for 24 years of services. Now here is the door! Russ McDonald, an MBA, began his career at GM as a cost analyst at the company’s Fisher Body division in Detroit. GM was then, the world’s no. one car manufacturer. By his twentieth anniversary with the company he had risen to the position of assistant vice president of finance in the corporate treasury department. Increased foreign competition has declined GM’s profitability throughout the 1980’.
It was closing inefficient plants, reorganizing divisions, introducing new production technologies, and making huge cuts in staff. Mc Donald being 49 and with 24 years of experience with GM, he was given an opportunity to take early retirement with offer of nine’s months pay plus lifetime health benefits. Otherwise, it would be only a matter of time-maybe a year or two at best and he would be pushed off. After taking the company’s offer Russ has been out of job for nearly 30 months. Assumptions Profitability has declined through out 1980’s. We assume that GM already well acquainted with the situation.
By end of 1990 till 1995 before planning layoffs; the company had taken required remedial steps for e. g. Introduction of new technologies, cost cutting strategies in production, reaching new markets and other marketing strategies. Evaluation Was the decision of McDonald right? Problems: •Russ opted for the company’s offering rather than staying in the company for next 2-3 years before being pushed out. •His experience wasn’t relevant to today’s work place, there were no opportunities in large companies, small companies wanted people who are flexible, and they considered corporate types like Russ as mentally rigid. Either he would have to take at least 50percent cut in pay, moreover employers were very uncomfortable offering such relatively low salary; they figured Russ would be demotivated and likely to “jump ship” at the first offering His decision was not right? Desired solution: •He should have not left right away rather looked for a job while working. •Being the vice-president in finance he with his team could have work out with cost-reducing programmes. •He must have indulged in other area than finance, so he could have been shifted to other department. Or rather meanwhile planned his own venture, some other field in finance like consultant, speaker etc. •If, layoff was inevitable in future, in this situation, he should have taken legal counsel and demanded for legislative protection. What went wrong with the HR department? Problems and suggestions: •GM’s HR department should have identified ‘Headcount fat’ so as to take appropriate steps before massive layoffs. HRP was absent. *This could have been done by implementing early warning system. , make sure HR communicates early on in the process the reasons behind the layoff and the criteria used to other departments. For employees like Russ McDonald: *There responsibility must have been clubbed with other work. So as times of layoff they can be shifted; for internal supply of other GM’s ventures. *They must have been given training and development sessions; indulge in TQM’s project, so they can be updated and not to face such a situation. •Layoffs should be avoided because it gives implications beyond financial impact, but if necessary HR must have given more benefits, for e. g. : *Other than company’s offer of nine month salary and lifetime health benefits, the company must have provided grantee to affected employees like McDonald, who re not hired within specific period. *He could have provided with education fund to open himself to other ventures in finance. *HR department must understand individual problems for employees being senior and dedicated, in these situations. •Layoffs would give large scale damage to company’s image. *If the layoffs are planned, they must be have been as open as possible. *Communication should be done with existing workforce immediately after layoffs to avoid demotivation. *Exit interviews should be taken to overcome individual dissatisfaction.
What company must have done? •Company should have gone through market research and appraisal of consumer behaviour to keep them away from situation of retrenchment. •Counselling of all the employees should be there to evaluate the loopholes: GM could have started a network base system where for e. g. all its production department or HR department all over the world communicate to get new ideas. This digitalization would have complimented the layoffs in one unit into others. ————————————————————