Module 3:

Human Resource
Decision-Making in Organization
F.Sangil | G. Pineda | A. Yutuc | N. Megallon | A. Corpuz | M. Punay
Course Instructors
LEARNING OUTCOMES
1. Discuss the role of ethics in human resource decision
making;
2. Describe the concept of rightsizing and identify
organizational strategies for rightsizing;
3. Describe how to manage termination and retention;
4. Describe the elements of voluntary turnover; and
5. Discuss the key human resource issues during mergers
and acquisitions
01
ETHICS AND HUMAN
RESOURCE
MANAGEMENT
 OPENING QUESTION:

How will you differentiate

being ethical from being
legal?
Ethics and HRM
● In Module 1, we discussed how
the legal framework provided a
set of parameters for HRM
decisions. But ethics is another
important aspect of
decision-making that is separate
from the law, although the two
are closely intertwined. Ethics is
a separate concept from the law
but is closely intertwined.
Ethics
● It refers to an individual’s beliefs
about what is right and wrong
and what is good and bad.
● Ethics are formed by the societal
context in which people and
organizations function.
● It may or may not coincide with
the law.
Ethics
● Business ethics is complicated in
the global environment of
business
● Different countries and different
cultures have different values
and norms
 QUESTION:

Is it ethical for a
company to layoff
employees in order to
save its financial
performance?
02
RIGHTSIZING
RIGHTSIZING
● It is the process of monitoring and
adjusting the composition of the
organization’s workforce to its optimal
size.
● Managing the workforce size involves:
○ Layoffs or early-retirement
programs
○ Retention programs
○ Using temporary workers as a
bridge between the current state
of affairs and growth or reduction
One of the more basic decisions an organization
must make concerning human resources is the
size of the workforce. Whether a company is
forecasting revenue growth or decline, the
number of its employees must be adjusted to fit
the changing needs of the business.

REMEMBER!
 DEALING WITH
INCREASED DEMAND
OF EMPLOYEES
OVERTIME
● Overtime refers to hours worked above the normal 40-hour
workweek, for which there is usually a pay premium.
● This alternative is especially beneficial when the increased
need for human resources is short term.
● An advantage to this approach is that it gives employees the
opportunity to earn extra income.
● On the other hand, labor costs per hour are likely to increase.
● It could also lead to fatigue and anxiety.
IS OVERTIME REQUIRED?
In general, an employer can request
that an employee work overtime,
but they cannot "force" an
employee to do so against their will,
except under certain circumstances
defined as "emergency work" under
Article 89 of the Labor Code.
HIRING TEMPORARY WORKERS
● The idea behind temporary employment is that an organization can
hire someone for only a specific period of time, and a major
advantage to the organization is that such workers can usually be
paid a lower rate.
● Considerable flexibility comes from the fact that employees
themselves realize their jobs are not permanent, so the
organization can terminate their relationship as work demands
mandate.
● On the other hand, temporary employees tend not to understand
the organization’s culture as well as permanent employees.
● In addition, they are not as likely to be as productive as permanent
full-time employees of the organization.
EMPLOYEE LEASING
● Employee leasing involves an
organization paying a fee to a leasing
company that provides a pool of
employees who are available on a
temporary basis.
● This pool of employees usually
constitutes a group or crew intended
to handle all or most of the
organization’s work needs in a
particular area.
● An organization can pay a fee to a
leasing company that provides a pool
of employees to the client firm.
EMPLOYEE LEASING
● The basic advantage to the organization is
that it essentially outsources to the leasing
firm the HR elements of recruiting, hiring,
training, compensating, and evaluating
those employees.
● On the other hand, because the individuals
are not employees of the firm, they are
likely to have less commitment and
attachment to it.
● In addition, the cost of the leasing
arrangement might be a bit higher than if
the employees have been hired directly by
the firm itself.
PART-TIME WORKERS
● Part-time workers refers to individuals
who are regularly expected to work
less than 40 hours a week. They
typically do not receive benefits and
afford the organization a great deal of
flexibility in staffing.
● These employees are usually not
covered by benefits, thus lowering
labor costs, and the organization can
achieve considerable flexibility.
 DEALING WITH
DECLINING NEEDS
FOR EMPLOYEES
● Cutting back on the contingent workforce and
retaining only permanent members
○ Works best in cyclical industries
● Early retirement and natural attrition
○ Provide incentives for other employees to retire
early
● Plans must be voluntary
○ Failure to do so could elicit legal actions
STRATEGIES FOR LAYOFFS
● What is layoff?
STRATEGIES FOR LAYOFFS
● When notified of a layoff, some
employees decide to sue the
organization for wrongful
termination. In these cases, the
former employee alleges that the
organization violated a contract
or a law in deciding who to
terminate.
● Even if an employee does not
pursue legal remedies, many
employees who have lost their
jobs develop negative feelings
toward their former employer
STRATEGIES FOR LAYOFFS
● In the Philippine labor system, there are
two kinds of layoff: permanent and
temporary.
● TEMPORARY: Maximum of six months.
The law set six (6) months as the period
where the operation of a business or
undertaking may be suspended, thereby
also suspending the employment of the
employees concerned.
● PERMANENT LAYOFF: It is the
termination of employment initiated by
the employer through no fault of the
employees. It is also known as
retrenchment.
Both temporary lay-off and
permanent lay-off are
grounded on economic reasons.
The main difference is that in a
temporary lay-off, there is only
a temporary work suspension
and thus the employees remain
employed with the employer.
However, in a permanent
lay-off or retrenched, the
employees are separated
resulting in their exit from
employment.
A critical determinant of an employee’s
reaction to being laid off is his or her
perceptions of the justice involved in the
layoff process.
TYPES OF JUSTICE
● DISTRIBUTIVE JUSTICE: Refers to perceptions that the
outcomes a person faces are fair when compared to the
outcomes faced by others.
● PROCEDURAL JUSTICE: Refers to perceptions that the
process used to determine the outcomes was fair.
● INTERACTIONAL JUSTICE: Refers to the quality of the
interpersonal treatment people receive when a decision is
implemented.
CRITICAL DIMENSIONS OF
PROCEDURAL JUSTICE
EFFECTIVENESS OF DOWNSIZING
● Most studies suggest that downsizing is an ineffective
strategy
● Strategy preferred by stockholders
○ Downsizing results in negative effects on stock prices
and other financial indexes
● Survivor syndrome
○ Existing employees’ morale and commitment drop
dramatically
● Alternatives to layoffs may result in job loss
 MANAGING INVOLUNTARY TURNOVER
● Involuntary turnover: Terminating
employees whose services are no
longer desired
○ Represents a failure in the HR
system
● Managers should always start with
an effort to rectify the problem
before termination
● Employee assistance programs
(EAPs)
○ Help employees and reduce
the costs associated with lost
workdays and poor
productivity
 PROGRESSIVE DISCIPLINE
● Designed to try to improve
performance through the use of
punishment and discipline
● Progressive disciplinary plans:
Severity of punishment increases
over time or across the problem
○ Steps involved include verbal
warnings, written warnings,
suspension, and termination
EMPLOYMENT AT WILL
● It means employer can terminate any employee, at any time, for any
reason, or for no reason at all
○ Key to successful termination is documentation
● Some firms use positive discipline
○ Emphasizes positive changes instead of punishment

REMEMBER:
At-will employment, where the employer may dismiss an employee at any
time, without cause and by mere notice or salary in lieu of notice, is not
allowed under Philippine labor law.
EMPLOYEE RETENTION
● It refers to the ways of reducing the voluntary turnover
of desired employees
● HR analytics plays an important role
○ Regular employee satisfaction survey and exit
interviews provide valuable information
MODEL OF THE TURNOVER PROCESS
This phenomenon is known as “TURNOVER CONTAGION”
JOB DISSATISFACTION
● The basic reason people
leave their jobs is because
they are unhappy with them.
● This is the major cause of
voluntary turnover
● Even if an employee is
extremely dissatisfied, he or
she is not likely to quit
without real prospects of
finding another job.
EFFECTS OF JOB DISSATISFACTION
● It leads to increased voluntary turnover.
● It is also predictive of other types of withdrawal behavior.
● Dissatisfied employees are also more likely to join unions.
● A more subtle form of withdrawal that does not involve being away from
the job is a reduction of commitment to the organization.
○ Organizational commitment: The degree to which an employee
identifies with an organization and is willing to exert effort on behalf of
the organization.
● Dissatisfied employees are less likely to engage in behaviors on the job
known broadly as organizational citizenship behaviors
○ Organizational citizenship behavior: include those behaviors that are
beneficial to the organization but are not formally required as part of
an employee’s job.
 Happier workers are
healthier workers.
Dissatisfied employees are
more likely to be absent
for health reasons.
Measuring and Monitoring Job
Satisfaction
● Attitude surveys
○ Job descriptive index (JDI) - Assesses satisfaction
with specific job aspects
● Usage of instruments that include questions about desired
versus experienced levels of satisfaction
○ Example - Faces scale
Retention Strategies
● Job enrichment: Making work meaningful and giving more autonomy
and opportunity to use skills
● Realistic job previews: Pre-employment previews that provide
accurate and realistic information to the job applicant
● Stock options: Rights given to employees to purchase a certain
number of shares of stock at a given price
Managing HR During Mergers and
Acquisitions
● Employees are concerned with job security
● Mergers and acquisition threaten a worker’s self-identity and core
beliefs
● HR managers can serve as the center of communication
● Important to build employee identification with the new corporate
identity
 THANKS!
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