10 Steps to Implement Hospital Layoffs With Minimal Disruption

Hospitals are on track to implement more mass layoffs in 2010 than the record year of 2009, according to the Bureau of Labor Statistics. As many hospitals are forced to downsize because of financial losses, hospital administrators must effectively eliminate positions and workers without disrupting hospital operations or engendering hostility. Here Aneil Mishra, PhD, professor and director of executive education at Michigan State University's School of Human Resources and Labor Relations and Denice Higman, founder and president of Soyring Consulting, offer ten steps to implement hospital layoffs while reducing hostility and protecting operations.

1. Focus on eliminating inefficiencies, not people. While your layoffs will obviously affect the people in the positions you eliminate, your strategic focus should be on redundant or less productive positions. Mr. Mishra says many organizations make the mistake of cutting positions across the board in the name of fairness. While eliminating 5 or 10 percent of positions in each department might seem fair to hospital employees, downsizing should ultimately benefit the hospital financially — and the hospital won't benefit if it's cutting valuable positions and keeping wasteful positions for the sake of "fairness."

At the same time, Ms. Higman advises hospitals to look at every department for cost inefficiencies. "Not every department has to be affected, but it's a mistake to just do nursing or ancillary or support departments," she says. "That's where you create bad feelings because people feel that just their department was targeted."

2. Involve trusted employees in the decision process. Once your hospital has decided to implement job cuts to save money and improve efficiency, your focus should be on determining which departments are overstaffed. This process should involve trusted, valued members of each area of the hospital — and that may not mean supervisors. "If you don't get nurses, physicians, technicians and lab support people involved up front, you will pay for it later in a lot of ways," Mr. Mishra says. "Your most trusted people may not be at the top of the hierarchy, so you need to figure out whose perspectives and opinions are trusted." A quality nursing manager can speak for the nurses in his or her department when making layoff decisions, and the backlash will be less because your employees already trust the people involved.

3. Base decisions on measurable performance metrics and productivity. A hospital with a good management system in place should be able to make decisions about layoffs fairly easily, Mr. Mishra says. Assuming your hospital has conducted regular performance reviews for its employees, you have tangible evidence on which to base your layoff decisions. "You're going to look at non-revenue-generating areas and low-skilled areas that are easier to staff up when times are better," he says.

While your department heads should look at each employee's individual productivity to determine how he or she will be affected, looking at volume alone should be a last resort. "You don't look at gross volume or revenue. Instead, you look at quality and productivity as your indicators," he says. Make sure decisions are made based on historical reports and data on the employee's performance so that layoff survivors understand why the particular individuals were affected. "You don't want survivors to look at the results and say it hasn't been done in a fair manner," he says.

4. Read union contracts carefully.
Your hospital will have to deal with layoffs differently if your employees are part of a union. "If it's a union, your layoffs may be by seniority of the union contract," Ms. Higman says, citing the "last hired, first fired" approach to layoffs present in many union contracts. She advises hospitals to pay careful attention to the union contract to make sure layoffs are done properly. You may have to move union members into different positions rather than cut them completely to stay compliant with the contract.

In addition, many union contracts require the hospital to provide the union with several weeks notice of impending layoffs. Look over your union contracts thoroughly to prevent legal problems down the line.

5. Decide how to reallocate responsibilities post-layoffs. Don't wait until after downsizing to reallocate responsibilities, Ms. Higman says. "That should be all planned out before those layoffs occur," she says. "Before layoffs, work with management [of each department] to determine who will take job responsibilities of the [downsized] person and make sure those people are aware of their new responsibilities."

While your hospital is going through the layoff process, you shouldn't be hiring many new positions, Ms. Higman says. "That doesn't mean there won't sometimes be a few select positions you have to hire, but it should be very minimal," she says. If your hospital is hiring people while downsizing more tenured employees, you may experience backlash from staff members who feel the layoffs were unnecessary. Wait until after the layoffs are completed and the hospital has settled back into its normal routine to establish and hire new positions.

6. Train your supervisors to inform the affected employees. Don't let your supervisors go into a layoff notice blind, Mr. Mishra says. "They should be trained on how to deliver that bad news effectively," he says. "[Notice about a layoff] is one of the most traumatic things you can hear, and if that communication is not handled properly, you can have a lot of negative repercussions."

He says training might involve bringing in outside experts and "best practice leaders" who have been through a hospital downsizing — especially if your hospital has never gone through a similar volume of layoffs before. "You don't want people making big mistakes because they haven't learned from other people's examples," he says.

7. Make a consistent public announcement about your layoff plans. In the past, Mr. Mishra says companies tended to inform those affected by layoffs first and then announce the decision to the company and the public. In the age of the internet, however, he says informing different people at different times can be a dire mistake. "The message is going to get out faster than ever before, and any inconsistencies and withholdings from certain groups will become apparent," he says. "You want to tell your suppliers, employees, customers and [communities] at the same time."

Mr. Mishra recommends the announcement about layoffs come from the CEO of the hospital — preferably in a face-to-face interaction. If you can't fit everyone in the same room as the CEO to make the announcement, "the CEO can make the announcement in front of a group of employees and distribute it through a web video to everybody in the hospital," he says. He adds your hospital's top executives should always be visible during the layoff process. They should explain the financial reasons for layoffs and emphasize that downsizing was necessary to maintain the organization's stability.  

Despite the necessity of making a public announcement, Ms. Higman says it can be a mistake to announce the number of positions you plan to cut in case your plans change. Announcing a number will make your hospital look foolish if your plans change and increase employee speculation about which departments and staff members will be affected by the cuts.

8. Don't delay the layoff process. Once your CEO has made a public announcement about the hospital's intent to cut positions, your department heads and supervisors should immediately begin meeting with those affected by the decision, Mr. Mishra says. "It might be a few minutes [after the announcement] to a few hours, but people do need to know as soon as possible that they are affected," he says. "You would email those people and tell them they're going to have an immediate meeting with their supervisor." He says the longer you keep employees guessing about who will be affected, the worse the rumor mill will become and the more traumatized your "survivors" will be.

He says hospitals should not hire a consultant or task a human resources representative with delivering the bad news. If an employee is told about layoffs from a stranger, they might feel devalued and disrespected for the hospital, opening the doors for a bad reaction and loss of trust among remaining employees. "The person delivering the message should always be someone the staff member knows," Mr. Mishra says.

9. Provide post-downsizing support for your affected employees. Once the announcement has been made and the affected staff members have been notified, your hospital should still work with those employees to provide support. Here, your HR staff members and department heads can work together to provide career counseling, job search assistance and other resources. Let the person know you're bringing HR into the process to provide a unique expertise. "You don't want to give them the feeling that you're just throwing them into some pool and some stranger in HR is going to pick them up," Mr. Mishra says. "The supervisor should also be involved because HR can't be expected to know everything about the person's particular talents and capabilities."

10. Continue quality indicators to get back on track. If your hospital is laying off a significant number of employees and restructuring some positions, it may take a few weeks to get back to your normal day-to-day operations. "You have to be sensitive to the people that are being laid off, but you also have to pay close attention to the people who are staying," Ms. Higman says. "Keep evaluating patient satisfaction, medical staff satisfaction, staff satisfaction and quality factors such as patient falls and medical errors to make sure your quality and satisfaction rates are not decreasing." That way, if your layoffs have negatively affected productivity, interactions with patients or revenue, you will be able to examine where the deficiencies lie or take steps to boost morale among your staff.

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