Return on investment of high-quality outplacement programs

Corporate executives and shareholders seem to take it as an article of faith that reductions in force and the savings they generate are a necessary evil when earnings numbers are declining. Others start a priori with the fact that downsizing is wrong because of the damage inflicted on individuals, communities, and society. In their ardor to take action before year-end or to demonstrate that the human costs outweigh the profitability of downsizing actions, both shareholder agents and worker advocates push aside the imperative to develop fiscally pragmatic solutions to mitigate the effects. They fail to look at job loss as a mental health and education/training policy issue that must be addressed by individuals, organizations, and government, each with self-interest and “skin in the game.” Like other health care issues, the questions of what works and who pays for the services are in dispute. The personal reemployment account (PRA) plan1 seeks to harness the individual’s motivation to take appropriate career actions when unemployed, but is too expensive and the monies are likely to be misspent. Effective retraining and community college programs are even more costly and only correct for unskilled and perhaps some semi-skilled workers. Companies that conduct downsizing actions, however, do have compelling financial reasons to develop a more complex understanding of the damage and costs to the organization and to assist discharged workers and managers in bridging to a new job. Organizations that utilize high-quality outplacement in downsizing programs receive a return on investment (ROI) that far exceeds the costs of a poorly managed or simplified plan. Unfortunately, many companies have weakened their outplacement programs in order to reduce costs. In addition, many human resources consulting firms offer outplacement programs of inferior quality with very limited services that will not produce the results described here. We use the words “high-quality outplacement” throughout this article to describe the comprehensive outplacement programs that will have a substantial impact on individual job searches and company financial health after a downsizing event. Such high-quality programs would include proactive mental health and counseling support for discharged workers, plus tailored coaching in job finding skills and technical/ administrative services. These programs dramatically lower the duration of unemployment and maximize the utilization of an individual’s experience and skills in the next job. By investing in high-quality outplacement services for affected employees, companies will significantly cut the total costs of a downsizing action by reducing overlooked losses in absenteeism, unemployment insurance, health care insurance premiums, turnover, and litigation. As companies become more adept at measuring the total costs of their layoff actions, corporate self-interest will increase utilization of highquality outplacement programs.