Evaluating Layoff Techniques: A Policy-Capturing Study of Voluntary Versus Involuntary Layoffs

Abstract

<p> An organization can adopt one of two implementation techniques to execute layoffs. Through involuntary layoffs, management can unilaterally select which employees to layoff. Alternatively, through voluntary layoffs, employees can self-select through volunteering for a layoff. A model from the turnover realm was adapted and applied to assess antecedents of the layoff decision for both implementation techniques. Antecedents included work related variables (job performance, salary, job satisfaction, stress, organizational commitment, severance packages) and non-work related variables (age, education, tenure, gender, family size).</p> <p> A policy-capturing approach compared voluntary versus involuntary layoffs. Management and employee dyads assessed employee profiles and judged the layoff decision for each profile. Given the exploratory nature of this research, subject matter experts (SMEs) assessed 388 profiles to validate the model. Semi-structured interviews with SMEs provided improvements adopted for the field study. The field study involved managers and employees from three companies evaluating 976 employee profiles to determine the likelihood for voluntary or involuntary layoffs. Logit regression analysis provided the significance, strength and direction of influence for each antecedent on the layoff decision.</p> <p> The results provide evidence that job performance, job satisfaction and organizational commitment have a negatively correlated relationship with both layoff implementation techniques. Slightly more than half (56.35%) of employees had the same stay or leave decision during voluntary versus involuntary layoffs. The residual (43.65%) represent mismatches that are a result of different influence and interpretation of the remaining layoff antecedents. This thesis provides evidence that voluntary and involuntary layoff implementation techniques result in a different mix of employees leaving the organization. From a policy perspective, recommendations on how to minimize mismatch are provided. From a theory perspective, a closer bridge between layoff and turnover research is proposed. This thesis also suggests that layoffs should be assessed based on the voluntary-involuntary divide in future research.</p>