Case 8

Summary of case 8A

·         Nokia, the Finnish mobile phone maker, decided to transfer on of its locations from Germany to Romania in 2008

·         The transfer meant around 4000 Germans were left without jobs

·         The decision to close the factory due to economic inefficiency was made without hearing representatives of workers or the German government

·         Talks about the Romanian factory being established on EU funding, and therefore in large parts funded by Germany, has angered the community even more

Summary of Case 8B

·         Nokia made yet more cuts in 2011, due to economic reasons

·         The company closed down operations in Romania and operations in Salo and other locations were at risk to be transferred to Asia

·         Over 3500 jobs were let go of as a result

Summary of Case 8C

·         Some of the former Nokia Symbian developers were outsourced to Accenture to continue their work

·         The jobs at Accenture did not match their expectations and 40% have now taken package deals and left the company

·         Accenture was unable to provide work for all outsourced staff members

·         The outsourcing has been criticized by the labor union since the start

Challenges:

·         Communicating news of layoffs due to shift in geographical location

·         The long-term effects to a community heavily dependent on one company or factory (Salo for example)

·         The company’s obligation to produce profit vs. obligation towards a community or country

·         Building new factories and then swiftly moving on as cheaper workforce becomes available

·         A companies obligation to an employee after an employee is laid off or outsourced?

Key Concepts, Theory and Models

There are many challenges with terminating a relationship with a staff member. Sometimes the worker chooses to leave a company, other times the company is forced to reduce staff numbers. The so called voluntary separations are those, when the employee leaves the company. This can be due to quitting or retirement. Sometimes severance packages are provided for workers that volunteer to leave (L. Gomez-Mejia, D. Balkin, R. Cardy, 2012, p.232). Typical severance packages are one or two weeks’ pay for each year the employee has worked for the company, according to J. Tavanger in his article “What to do about severance pay?”. (J.Tavanger, 2015). Senior staff, managers and CEO’s receive larger severance packages. For example, the former CEO and President of Ericsson, Hans Vestberg, received 2.34 million USD in severance after he left his position in the company. (Telecomlead, 2017)

The other type of termination, is involuntary, i.e. the worker does not want to leave the company, but is forced to. This type of situation can occur due to discharge (when a staff member is a poor fit for the company), layoffs (when the company is seeking to cut costs), downsizing, or rightsizing. (L. Gomez-Mejia, D. Balkin, R. Cardy, 2012, p.233-235). Most of the time, lay-offs are explained by the company not being profitable. For example, Twitter laid of 9 % of their staff, due to an App idea failing to take off. All staff that had worked on the app were consequently laid off. (S.Fiegerman, 2016) As seen in the Cases 8A and 8B, Nokia has been forced to lay off thousands of people in different locations due to their poor growth. In addition, many people have criticized Nokia for laying off people in one location, only to set up factories in another cheaper location. Then, after a few years, they have laid off those new workers to once again move to a cheaper location.

Involuntary terminations are always a challenge, and so, many companies rely on HR specialists to make sure everything is done by the book. Before layoffs are considered all other options should be explored. These are for example, hiring freeze, changes in job design, pay and benefit policies etc. (L. Gomez-Mejia, D. Balkin, R. Cardy, 2012, p.237-238). Finnish legislation is very strict on how to handle involuntary separation. Claiming that layoffs are necessary due to economic reasons, needs to be clearly visible. An employee is obliged to find all other means, then laying off a person. This can include shifting jobs, additional training etc. If a person is laid off, the company is mandated to offer said person any similar jobs that he or she is qualified for, during the next 4 months (if the person has worked for a company more than 12 years, the time is 6 months). This is stated in the Finnish law as “takaisinottovelvoite”. (Yrittäjät, 2017) 

The procedure of laying off one or more people is very regulated, and relevant spokespersons need to be notified in advance and invited in to the discussions. The first step is to notify the employees of redundancy, the following is to develop the layoff criteria. In many cases, seniority is used to simplify the criterion. Then follows the actual discussions with worker’s representatives and communicating with the laid off personnel. It is important to have more than two people present at these discussions in order to protect the employers back and to ensure everyone understands what has been agreed upon. Coordinating with the media is also an important aspect of laying off people. Sometimes staff will be upset or try to harm the company when they have been laid off, it is therefore advisable to have security on site and escort the redundant people out of the building. In many cases, sensitive data is stored at the desk or computer of an employee, therefore one shouldn’t be allowed back to the desk. After the layoffs are completed, it is important to swiftly move back into normal working pace, to reassure the ones left behind and to make sure they have psychological support if necessary. (L. Gomez-Mejia, D. Balkin, R. Cardy, 2012, p.239-240).

Literature:
 

J. Tavanger, 2012, “What to do about severance pay?”, The Armada Group,  http://www.thearmadagroup.com/hiring-managers/what-to-do-about-severance-pay (5.3.17)

L.R Gomez-Mejia, D.B Balkin, R.L Cardy, 2012, “Managing Human Resources”, 7^th Edition, chapter 6. Pearson Education Inc. New Jersey

Telecomlead, 2017, “Ericsson’s Hans Vestberg earns 2.34$ mn as severance pay”, Telecomlead, http://www.telecomlead.com/telecom-equipment/ericssons-hans-vestberg-earns-2-34-mn-severance-pay-75075 (5.3.17)

S. Fiegerman, 2016, “Twitter Cuts of 9 % of its staff and kills off Vine app”, CNN Tech,  http://money.cnn.com/2016/10/27/technology/twitter-layoffs-earnings/ (5.3.17)

Yrittäjät, 2017, “Työlainsäädönnän muutokset 2017”, Yrittäjät,  https://www.yrittajat.fi/yrittajan-abc/tyonantajan-abc/ajankohtaista/tyolainsaadannon-muutokset-2017-546475 (5.3.17)