Question

Making Human Resource Decisions

Scenario:

You are the Director of Human Resources for your company. The CEO has just informed you that the financial state of the company is dire, and as a result, he is approaching the managers of each department and asking them to reduce personnel costs. The company makes its profits primarily on services such as business consulting, cloud-based storage for large companies, and other small miscellaneous business products. The industry has become highly competitive and sales are down. There is not enough revenue at this point to pay all of the salespeople.

You are charged with devising a plan to determine how personnel costs will be reduced. After much deliberation, you decide on three options. Because this is a management dilemma, none of these options are optimal. Further, cost/ benefit analysis has a role in the decision making process, but as you are dealing with people, this type of analysis is complicated and subjective.

Options:

  1.  Lay off employees and use them only as needed on a project or change employment structure (i.e. move some employees to independent contractors)

  2.  Reduce salaries across the board

  3.  Reduce hours and/or benefits for lower-level staff

Instructions:

Choose one of the above options and defend this decision. Use concepts from the chapter to defend your decision.

Answer 1

My decision would be to reduce salaries across the board. It is not ethical to layoff the employees or change the employment structure because the employees has joined the organization based on the belief that the company would protect them in all the situations. Reducing hours and benefits of the lower level staff are also unethical and their performance is not the reason for the given situation. All these happened due to the external forces including competition in the market and the economy. The decision should have equal effect on all the employees and should not discriminate anyone based on role or other factors. All the employees are equally important for the organization’s success and we can overcome the situation only with employee support. If we layoff the employees or reduce the benefits of lower level staff it will affect the employee commitment towards the organization and the organization’s reputation also will be affected. Hence the best method would be to convince all the employees regarding the situation and reduce the salaries across the board so that everyone would be affected and none of them feel discriminated based on the situation.