Analyzing the Employee Layoffs at St. Mary's Hospital

St. Mary's Hospital was established in 1908 by the Sisters of Sacred Heart and has become an important part of the northwestern city in which it resides. However, the recent financial picture for St. Mary's Hospital has forced the Chief Executive Officer, Sister Mary Josephine, to make some very difficult decisions. Yet, like many organizations in this current economy, the decisions must be made, and some individuals may be impacted in a great way. It is up to Sister Mary Josephine and the human resources director, Sharon Osgood, to make the right decisions for St. Mary's Hospital and its employees.

The source of the problem for St. Mary's Hospital is the large projected deficit for the coming year. With $3,865,000 at stake, the hospital cannot afford to continue on its financial course. However, for Sister Mary Josephine and Osgood, they must determine the right course of action, and that lies in the cause of the $3.8 million deficit. According to the hospital, occupancy rates have fallen to only about 57 percent. It is stated that the decline is due to changes in reimbursement policies, a new emphasis on outpatient services, and increasing competition. As a result, the changes and steady decline have affected the hospital's revenue, and St. Mary's Hospital can no longer sustain the same expenses if it is not generating the appropriate revenue.

While layoffs seem imminent for the first time in the hospital's history, there are other alternatives for St. Mary's Hospital. According to Human Resource Management (2008) by Robert Mathis and John Jackson, the chapter entitled "Strategic Human Resource Management" discusses workforce downsizing. One of the first things management could do is to implement attrition (54). Attrition, which occurs when individuals quit, die or retire and are not replaced, is a form of downsizing that is much less intrusive and damaging to the morale of the individuals working there. Furthermore, St. Mary's Hospital appears to have a considerable amount of senior workers; as a result, management could offer early retirement buyouts for many of them, which would reduce legal liabilities and keep organizational morale and satisfaction high (55).

However, the most difficult and damaging task still lies ahead. , St. Mary's Hospital does not want to have to let go of any of its workforce, but it still needs to develop a major plan for implementing employee downsizing and layoffs over the next year that will generate $3 million in savings. In order to save money, St. Mary's Hospital should immediately freeze hiring and allow for attrition in the Nursing, Allied Health, and Housekeeping and Maintenance departments (Mathis and Jackson 54). These departments not only have the highest unsatisfactory and questionable performance appraisals, but they also have the highest turnover rates. And while it is important to mention that because the hospital's performance appraisals are inadequate, layoffs should not be based solely on performance. However, there does appear to be a correlation between the annual turnover rates and low performance appraisals; the combined percentages of unsatisfactory and questionable performances roughly equal the annual turnover rates for each department. Furthermore, Sister Mary Josephine and Osgood should also allow for natural turnover and attrition in the other three major departments during the first quarter of the year. This in total could save around $1,000,000 over the course of the year without any drastic action.

However, at the beginning of the second quarter, two major strategies should be initiated: early retirement buyouts and hourly reductions. In order to keep morale as high as possible, senior workers in the Nursing, Allied Health, and Housekeeping and Maintenance departments should be encouraged to leave with early retirement buyouts (Mathis and Jackson 54). This alone could produce a net saving between $500,000 and $750,000. Also, instead of initially laying off individual employees, Osgood should help implement a 30-hour work week for all employees in these three departments. By only reducing hours, the organization's morale will not decrease as drastically. In this way, employees will still retain their benefits and three-fourths of their pay, while the hospital will save on hourly wages and other expenses, like overhead. Moreover, the weekly hour reduction can save around $1,050,000 during the last three quarters of the year. Thus, between the early retirement