Quản trị kinh doanh - Chapter 4: Managing turnover

Chapter 4: Managing Turnover13/29/2020Chapter 4: Managing TurnoverIs Turnover Good or Bad?Importance of SortingTechnical ChangeOrganizational ChangeHierarchical StructureSpecific Human CapitalRetention StrategiesReducing Costs of Losing Key EmployeesEmbracing TurnoverBidding for EmployeesRaiding Other Firms: Benefits and PitfallsOffer MatchingCompensation with a Nonpecuniary ComponentUndervalued WorkersLayoffs and BuyoutsWho to Target for LayoffsSpecific Human CapitalCosts of LayoffsBuyoutsImplementation of BuyoutsThreat of LayoffsSpeed and Extent of DownsizingRetirement BridgesJob Placement ServicesSummary23/29/2020Chapter 4 – Managing TurnoverAfter completing this chapter, you will be able to address the following:What can I do to reduce turnover costs in my firm?How does a firm define its offer-matching policy?Should we raid other firms for talent? And what can we do about poaching of our talent? What considerations are necessary for the firm when undergoing personnel reductions33/29/2020Facts about TurnoverTurnover rates are higher:In low wage jobs.In smaller firms.Among female employees. Why?When labor markets are tight.When the industry is highly concentrated in an urban area.43/29/2020TABLE 10.4 Monthly Quit Rates per 100 Workers by Firm Size, Selected Industries (1977–1981 averages)53/29/2020FIGURE 10.5 The Quit Rate and Labor Market Tightness63/29/2020TABLE 10.5 Average Job Tenure, Selected Countries, 199573/29/2020OECD: Long-Term Unemployed(> 1 yr, % of total)83/29/2020Job Openings and Turnover*:Source: US BLS, Issues in Labor Statistics, Summary 10-03, March 2010 93/29/2020Positives and Negatives of TurnoverMobility in the labor market can improve job matches, which should increase firm productivity and overall economic outputAlso, combining senior and junior workers may increase productivityMobility may reduce the incentive to invest in firm-specific human capital because training is costly and the returns are not realized103/29/2020Bidding for Employees3/29/202011When should you raid for talent?123/29/2020Offer Matching: How do you respond to a raid?Q: Should you adopt a “No offer matching policy?”A: It depends on whether or not you think the worker will actually leave the firmIf workers are likely to leave the firm for better offers, then you want the opportunity to “offer match” if the offer is still equal to or below the workers value to youIf workers are not likely to leave the firm, a “no offer matching policy” discourages searches aimed only at inflating wages.133/29/2020Q: When is a firm likely to benefit from a  “no offer matching policy”?A: There are two necessary conditions When a significant proportion of compensation is non-pecuniary.When the firm is currently paying him/her less than what he/she is worth.143/29/2020Layoffs and Buyouts3/29/202015Layoffs and Specific CapitalLazear “When firm-specific human capital is important, the firm maximizes its profits by laying off from both ends of the distribution first. That is workers who have just started with the firm and those who are about to retire make the best targets”Why???163/29/2020Ch 4 (cont’d): Layoffs and BuyoutsOn completing this chapter, you will be able to address the following:If a firm is forced to lay off workers, whom should it target?Are buyouts useful as tools in lieu of layoffs?How large should a buyout be?How to prevent voluntary layoffs from attracting the wrong people?How can we minimize the pain of a layoff for the company? (Q: Why is it important?) 173/29/2020Buyout or Layoff?Factors that make buyouts necessary:Legal constraintsFirm reputationQ: Why does reputation matter?Q: What types of workers should we seek to offer a buy-out to?183/29/2020Buyout Formulas“Profitable buyouts are possible whenever the present value of the worker’s alternative (A) exceeds the present value of the worker’s productivity at the firm”The better the alternatives, the easier it is to buy out the employee The lower the output at the current firm, the more likely the firm will find it cost-effective to pursue a buy out193/29/2020The Selection Problem – againThe firm wants to buy out anyone for whom the present value of wages exceeds the present value of outputUnfortunately, the individuals who the firm would like to get rid of are not always the ones for which a buyout is possible203/29/2020Selective Layoffs and BuyoutsWe have considered that workers differ only by age – but in reality some workers are more ambitious or able than others and these traits should factor into our buyout and layoff decisions.Factors we may want to consider include:Workers with more firm-specific human capital are tougher to buy outHow do I spot these workers? They tend to have idiosyncratic duties or have formed singular relationships with your customers.More able workers may not always be the ones to keepProductive workers cost more. Getting rid of some of them may save you more money. They are likely to be those with the highest-value alternatives. Be careful, buyouts create potential for adverse selection213/29/2020Buyout Formulas“Profitable buyouts are possible whenever the present value of the worker’s alternative (A) exceeds the present value of the worker’s productivity at the firm”The better the alternatives, the easier it is to buy out the employee The lower the output at the current firm, the more likely the firm will find it cost-effective to pursue a buy out223/29/2020Generating Data for the Decision Remember, some estimate is better than no estimate for informing a decisionEstimate Present Value of WagesEstimate Present Value of AlternativesEstimate Value to Firm / PV OutputIdentify those for whom Wages exceeds ValueBUYOUT = PV WAGES – PV ALTERNATIVESTailor as appropriate233/29/2020Implementation PlansWindow PlansWindow plans limit the time during which the buyout is offered. Since the firm is willing to pay more to get rid of low productivity workers, workers would have an incentive to reduce productivity if they anticipated the plan.Retirement BridgesWhile we’ve seen that it doesn’t make sense for a firm to pay as much to buy-out a 65 year old as a 56 year old, not doing so may incite legal trouble. Retirement bridges accomplish that but not quite so overtly. They offer seniority credits for pension calculation as if the worker had stayed to normal retirement age. A 56 year old retiree receives a greater benefit from taking a retirement bridge than a 65 year old. Job Placement ServicesJob placement services effectively raise the value of workers’ alternatives. This means the firm can offer lower buyouts. However the cost of setting up and running the service must be lower than the buyout savings for this plan to be cost effective. An alternative may be reimbursing employees for using outside job placement services.243/29/2020Summary: Layoffs and BuyoutsThe right and left endpoints of the age-earnings profile, respectively, identify workers with lower specific human capital and downward-sloping productivity trajectoriesBuyouts can generate voluntary participationBuyouts must exceed the DPV of future wagesSpecial measures can mitigate adverse selectionGreat care is needed in the implementation of layoffs253/29/2020RECAP – Chapter 4Collaboration on key tasks, cross-training and effective job design can protect the firm against loss of critical skills due to turnoverOffer matching policies consider the value of the worker to the firm and the broader effect on overall salaries Raiding is an effective strategy for acquiring unique talents not readily available in a marketFirms want to buy-out when PVWAGES exceeds PVOUTPUTFirms will have the least difficulty designing buyouts for workers with higher PVALTERNATIVES263/29/2020