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NEW RESEARCH REVEALS SEPARATION POLICIES CAN DIRECTLY AFFECT ORGANIZATION’S MORALE AND BRAND

NEW YORK, August 27, 2009 – Organizations find that separation benefits provided to terminated employees impact the morale of remaining employees, according to a new study, Global Trends in Separation Practices. The research findings were released today by DBM, a leading global outplacement, coaching, and career management firm, and the Human Capital Institute (HCI), a global professional association and educator advancing the science of strategic talent management.

The study of more than 1200 business leaders from 45 countries shows a company’s decisions about separating employees, including severance pay, outplacement support, and other continuing benefits, can create ripple effects across the entire enterprise long after the departing employees have left the organization, even affecting the company’s brand and public image.  Key findings include: 

• Companies consider separation practices as part of an overall strategy to preserve and strengthen the relationship between the organization and its disparate constituents.  
• Most organizations provide severance to at least some of their employees with almost half offering severance to all of their employees, including part-time employees.  
• Most organizations with 100 or more employees provide outplacement to some terminating employees. 

“In today's marketplace, organizations recognize that support for departing employees is a requirement of business rather than an option," said Robert Gasparini, CEO and Chairman of DBM. “Separation policies are now viewed as integral to business strategy, helping to safeguard the company brand and reinforce relationships with employees, consumers and stockholders.”

Separation Practices
While all organizations must conform to their local laws and regulations, the study shows there is an underlying global understanding that separation practices, as necessary elements of an overall business and talent strategy, can help preserve and strengthen the relationship between the organization and its disparate constituents.

• Virtually all organizations reported problems resulting from a reduction in force, particularly noting decreased levels of morale (71%) and reduced loyalty (62%) among remaining employees.
• According to 95% of human resources professionals, the morale of remaining employees is the most important indicator of a successful downsizing event.
• When determining separation policies, companies place the greatest emphasis on consideration of departing employees (84%) and protecting the morale and commitment of remaining employees (82%) over financial considerations such as budget (68%) and return on investment (40%). 
• Most organizations (81%) believe providing higher levels of separation benefits most significantly impact the morale and productivity of the remaining workforce.  

Severance Practices
Most organizations (85%) provide severance to at least some of their employees with almost half (45%) providing severance to all of their employees, including part-time employees. Organizations that provide severance report:

• Most (66%) pay severance in lump sums instead of as continued salary payments. 
• Half (54%) increase severance benefits for terminations resulting from organizational change events, such as mergers, acquisitions, closures, outsourcing and the sale of the company. 
• Years of service (85%), followed by level within the organization (50%), are the most frequently used factors for determining severance.  
• Approximately half of organizations provide senior executives (48%) and executives (49%) with three weeks or more of severance for each year of service; managers and below generally receive two weeks or more per year of service. 
• The majority of companies set maximum severance payments to 12 or more months of salary and minimum payments to at least 2-4 weeks of salary.   
• In some countries, severance formulae are impacted by local employment laws, most notably in parts of Europe and Latin America, where social legislation plays a large role in determining the severance formulae.   

“Our research shows that differences exist in how companies from various regions of the globe provide severance support for separating employees,” said Allan Schweyer, Executive Director and SVP of Research at HCI. “However there is a high degree of similarity with respect to why they provide such support.”

Outplacement Practices
Outplacement services are provided to some terminating employees by 75% of organizations with 100 or more employees. Organizations that provide outplacement report:

The primary motivation cited for providing support is corporate values (76%) while less than 10% identify labor relations or legal considerations as a rationale. 

• Level within the organization is the factor most often used to determine outplacement support (63%), followed by years of service (39%). 
• More than half (58%) increase levels of outplacement support under certain circumstances, such as mergers, acquisitions, and facility closings. Increased support is often determined on a case-by-case basis. 
• Globally, at least 90% of human resources professionals agree the most valued features of outplacement programs include support, coaching and guidance from consultants; self-marketing materials; skill building and coaching; job leads and networking connections; and access to online resources.  
• Some variations in findings concerning the importance of job leads as part of an outplacement program were reported, influenced by legislation in some European countries and cultural differences in Latin America. Networking and job lead connections are most commonly valued in North America, where 47% of human resources professionals believe such support to be an essential element of outplacement programs. 

“When employees leave an organization, they don't just become ex-employees,” notes Gasparini. “Departing employees become customers, referral sources, competitors, and perhaps even future employees returning to the organization. By well managing employee separation, companies can fortify loyalty and mitigate retention risk among the remaining workforce.”

About the Study
DBM conducted a research study in partnership with the Human Capital Institute to determine global trends in separation practices. The participants represent a wide cross-section of industries. Global variations were investigated on all survey items and the respondent countries were grouped into four global regions: Asia Pacific, Europe, Latin America and North America.  Of those participating, 91% were human resources professionals.
 
DBM is a leading global outplacement, coaching, and career management firm providing services to private and public companies, not-for-profits and governments.

The Human Capital Institute is a global network of more than 115,000 members in 40 countries committed to shaping the world's new talent economy. Visit www.hci.org to learn more.

To request a copy of the Global Trends in Separation Practices report, please write to inquiries@dbm.com.