Management Case Study – Somebody has to be let go
Having Health Systems (HS) or Health Service Organizations (HSOs) as clients can be tough and challenging. Often, a manager is left with the responsibility of redesigning the organization of the consulting firm based on the demands of the HS and HSO clients. Ever-changing rules and regulations such as the newly ratified Affordable Care Act (ACA) has required HSs and HSOs to have to adapt, and in turn, affect the flow of operations and the stability of consulting firms. Another common result of common changes in the HS and HSO industry would be the reduction in reimbursements as a result of these organizations cutting their expenses (e.g. consulting expenses). This, in turn, has led to mangers of consulting firms with the responsibility of redesigning and reorganizing its system to ensure high productivity and efficiency rates, to suffer from great disturbances. These disturbances may further be complicated by an organization’s lack of knowledge on how to best reorganize and redesign its system, as even simple changes and disturbances can lead to drastic disruptions in the flow of operations in consulting firms.
The objective of this paper is to discuss the case of Ken and the downsizing operation and task he got assigned in. Specifically, the president of the consulting firm where he works as one of the managers has announced that some 25 people have to be let go by the company over the next three weeks. Given the innate fragility of the consulting firm that Ken is currently managing, mainly because of the formal and informal organizational designs, as mentioned by Longest and Darr (2008) in their book, Managing Health Services Organizations and Systems, Ken is facing the dilemma of where to start with the workforce downsizing operations, how to rationally make the downsizing decisions; and what kind of organization design would be most suited for the company given its current dilemmas. In Ken’s consulting firm’s case, he will start the downsizing operation from scratch. Meaning, job descriptions that are supposed to define each of the employees’ roles are yet to be processed; no performance evaluations have been done, at least in the past six months, on most, if not all, of the employees. All of these factors shall make it more challenging for Ken to manage the downsizing operation the consulting firm’s president has given him.
If you were Ken, where would you start? How would you proceed?
It would be difficult and downright risky, for the consulting firm and its employees to immediately proceed with the layoff procedures of some 25 yet to be named individuals without conducting a fair, thorough, and logical assessment first. Letting go of employees can be a tough task for managers because of the emotional and workplace relationship stakes involved, which can be included under the informal aspects of redesigning an organization. However, there is more to laying employees off than just the emotional and workplace relationship stakes.
According to Longest and Darr (2008), even a minute environmental or organizational change, such as when certain employees will be laid off from the company, can lead to changes in individual positions, groups, departments, or the entire organization; and when it comes to changes in senior management levels, these changes can lead to even more significant redesigns, which do not necessarily mean good redesigns.
Often the resulting state of the organization after such huge changes turn out to be more chaotic and unproductive compared to the organization’s previous state. Also, another factor that is relevant to Ken’s case is the truth that attempts by managers to suppress informal relationships and arrangements can create destructive and dysfunctional situations, as in the case of laying employees off. Ken should consider the possible impacts of laying employees off and the criteria and approach he would use in doing so before making any decisions. As mentioned, it would be beneficial to apply a thorough and fair approach in executing the procedure.
Ken could start by explaining to the employees the reasons why the company’s senior management thinks that a workforce downsizing is necessary; what is in it for the organization; and what would happen to the entire workforce if the company will still push to keep its oversized workforce despite the fact that the organization’s current performance and financial figures, and the condition of the market work against such decision; and that the entire organization may have to face the risk of bankruptcy. This way, as the manager, he would be able to condition the minds of his subordinates about an impending employee layoff procedure. This may also significantly lessen, if not completely eradicate, the employees’ thoughts that Ken is just doing it anyway even though the organization can really handle an oversized workforce, at least for a few months more, which clearly is not the case, according to the firm’s president.
If those employee thoughts and mindsets are not addressed, Ken may face bigger problems after having executed the layoff procedures. Problems that he may face in the future may include but are not limited to: undesirable outcomes such as work restriction, disloyalty, insubordination, and other manifestations of anti-organization attitudes among others.
Making rational choices is actually easy. It is the amount of workload that makes Ken’s situation problematic is the fact that he has to start from scratch. Before he can make any rational decisions, he first have to make sure that all employees already got their respective job descriptions; and have already been evaluated based on their job performance. This way, Ken can make a rational assessment based on objective benchmarks and not just blindly let go of anybody. Ken could approach this operation the rational way by doing the following steps. Firstly, he can begin by literally listing all of the current job positions in the company, especially the ones that have been created, often out of thin air during the boom period.
After listing all the jobs, Ken should segregate the jobs according to their function, job description, or any category that may systematize the segregation process. Ken may then proceed by sorting the job segments based on the categories: necessary and unnecessary job segments. As the manager, he can then make a clear distinction about which job and or job segments in the company are essential from those that are not. With this knowledge, he can approach the operation rationally. He may, for example, decide to lay the bottom 25 employees in terms of his personalized job necessity index off. This way, he can finish the task assigned to him by the company’s president and at the same time, ensure that the job positions that would be left after the layoff procedure will not cripple or significantly affect the productivity of the entire organization, if at all. Ken should also make sure that the workforce downsizing procedures he plotted are in accordance to the rules and policies set by the Federal Equal Employment Opportunity Commission (EEOC) to ensure that the procedure would not create any legal disputes and or lawsuits by disgruntled employees in the future .
What Kind of Organization Design Does this Organization Need?
In general, there are five organizational designs that Ken can choose from when it comes to the decision what design to use for the newly downscaled organization and those are: Simple Structure, Machine Bureaucracy, Professional Bureaucracy, Divisionalized Form, and Adhocracy Designs. According to Longest and Darr (2008) there is no single or magic formula that can help any senior, middle level, or front-line manager choose an organization design. What members of a management team should do is to select a set of criteria that it will consider whenever making decisions about organization redesigns.
Some of the important considerations in choosing the appropriate type of design for an organization are the: types of operations, whether the operations are divided into administrative and professional operations, among others. In this case, since the organization we are talking about is a consulting firm, which is often not involved in professional tasks unlike HSs and HSOs (whose employees’ tasks are often subdivided into professional and administrative), the most sensible organization design to use would be a Simple Organization Design. This design is often characterized by a linear chain of command wherein all members of the team report to a leader and so on as the chain of command points to the chairman, or even the owner of the firm. What makes the Simple Organization Design to use is the fact that employees of a consulting firm often have to rely on their administrative skills only.
Longest, B., & Darr, K. (2008). Managing Health Services Organizations and Systems. Health Professions Press, Chapter 11.
Selmi, M., & Ohio, S. (2013). Value of the EEOC: Reexamining the Agency's Role in Employment Discrimination Law. HeinOnline.