Industry or global shut downs, cost cutting, and spin offs are just a few reasons why employees are laid off. Fallon and McConnell (2007) argue that companies conduct layoffs primarily due to economic issues. Today, many organizations are being forced to reduce their workforce due to these factors. However, before layoffs occur in organizations, there are numerous steps that have to be taken to ensure effectiveness in the process. The selection criteria are the most important aspects of organizations’ initial decision to conduct workforce reduction. Decisions regarding to which employees leave or stay would need to be established before conducting layoffs. Personnel Policy Service Inc (n.d) states that employers should use discretion in determining which employees to layoff. In choosing employees for termination, they suggest that companies use criteria, such as length of service (seniority), performance rating and merit, job status, and job skills.
Seniority is a common selection criterion used by many companies in determining which employees remain.”Of all the criteria, seniority is the most objective” (Segal, 2001, p.199). Under seniority-based layoffs, the most recently hired employees are the first to be laid off. Both Fallon and McConnell (2007) and Personnel Policy Service Inc (n.d) state that using seniority is advantageous because it is a fair and safe means of determining who to layoff. Personnel Policy Service Inc (n.d) argues that it is also very easy to implement seniority as a selection criterion. However, using seniority as the sole selection criterion has it disadvantages. Companies that use seniority as their sole selection criterion run the risk of losing employees that have expertise, initiative, and leadership qualities but lack seniority, which many reduce the diverse of their workforce (Personnel Policy Service Inc, n.d).
To avoid the risk of losing employees with expertise, initiative, and leadership abilities, some companies rely on performance ratings and merit as a selection criterion. The use of performance rating is beneficial; companies use performance ratings to identify their productive employees and layoff their unproductive and problematic employees. However, if companies’ performance evaluation systems are biased, subjective and not taken seriously, layoff decisions can greatly affect a protected class of employees-women and minorities (Personnel Policy Service Inc, n.d). Therefore, if performance ratings are to be utilized to determine layoff decisions, it is important the evaluation system is fair, based on employees’ performance, and conducted in a consistent manner (Personnel Policy Services Inc, n.d). To avoid employees’ legal challenges, Segal (2001) suggests that when performance is measured, objective behavior factors should be considered instead of subjective ones and layoff decisions based on employees recent performance evaluations.
There are companies that require specific job skills and...