The impact of outplacement programs on reemployment criteria: a longitudinal study of displaced...

The purpose of this study was to examine longitudinally the impact of outplacement support (e.g., counseling end psychological assessment) on several reemployment criteria. A sample of 1,880 managers and executives using the services of a large outplacement organization was examined. Controlling

for past salary, severance, and demographics, results demonstrated that displaced managers and executives participating in programs that demonstrated higher levels of outplacement support took more time to find reemployment, had greater likelihood of reemployment, and had higher salaries in new jobs than individuals participating in programs with lower levels of outplacement support. Implications for organizations reducing their workforces are discussed.

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Downsizing and staff reductions are common strategies for reducing business costs and improving organizational functioning (Balutis, 1996). Although these strategies are often necessary for business purposes, the psychological costs, such as acute stress, anxiety, and clinical depression, to the individuals being displaced can be serious (Leana & Feldman, 1992; Liem & Rayman, 1982; Winefield & Tiggemann, 1990). Moreover, many displaced workers who become reemployed experience underemployment (Borgen, Amundson, & Harder, 1988; Kaufman, 1982). However, in an effort to provide assistance, most large organizations (approximately 75%) provide their displaced workers with support from outplacement firms (Doherty, Tyson, & Viney, 1993). Outplacement firms provide displaced employees with a variety of resources and services, such as job search counseling, career assessments, networking lists, resume-writing workshops, interview training, and self-marketing training (Kirk, 1994). Many organizations also provide outplacement assistance to mitigate litigation for wrongful discharge. In addition, providing outplacement assistance can aid a company's standing in the community, help boost morale of employees surviving the workforce reduction (Brockner, Wiesenfeld, & Martin, 1995), and help reduce costs of unemployment insurance (Matthes, 1992; Wojcik, 1992).

The type of outplacement assistance that displaced employees receive, however, varies dramatically. For example, less comprehensive programs may have displaced employees attend a 1-day group workshop. More comprehensive programs may provide displaced employees with individualized counseling, career assessments, and specialized resources at outplacement agencies. Although millions of employees have received outplacement assistance (Mergenhagen, 1994), very few quantitative studies have examined the effectiveness of different programs (Cowden, 1992; Hanisch, 1999; Light, Wechsler, & Kaufman, 1997). Scholars have also stressed the need for empirical research on the correlates of outplacement interventions (Leana & Feldman, 1992). Therefore, the main purpose of this study was to quantitatively examine the effectiveness of outplacement programs over time that vary by the support and services provided to displaced managers and executives. The main criteria used in this study are employment status at the conclusion of outplacement assistance, speed of reemployment, and new salary.

Four outplacement programs, staffed by professional counselors, were examined in this study (Aquilanti & Leroux, 1999). Two of the programs were classified as higher level support programs (i.e., executive unlimited and management unlimited). These programs provided high levels of support and services in terms of (a) counseling time, (b) psychological assessment, (c) staff involvement, (d) office resources, (e) mailing resources, and (f) program length. Example resources included individualized counseling, videotaping, marketing seminars, voice mail, office supplies, and phone calling. The other two programs were classifted as lower level support programs (i.e., 6-month limited and 3-month limited programs). These programs provided less support than the higher level support programs in each of the areas mentioned earlier. (Table 1 delineates key differences between the programs.) Although there were several differences between the higher level support and lower level support programs, all programs provided displaced workers with the following services: assistance with resume writing, access to databases, spouse involvement, interview training, and basic job search counseling.

THEORETICAL BACKGROUND

The first set of hypotheses address reemployment status at the conclusion of outplacement assistance. I hypothesized that participation in higher level support programs would result in greater reemployment by the conclusion of outplacement assistance than participation in lower level support programs. In support of this hypothesis, past research has demonstrated the positive effects of psychological assistance on reemployment. For instance, experimental research has shown that programs that provide job-seeking help and social support result in higher earnings and foster easier job acquisition than do control conditions not providing these services (Caplin, Vinokur, Price, & van Ryn, 1989; Vinokur, van Ryn, Gramlich, & Price, 1991), and correlational research has demonstrated a variety of positive outcomes of job search support in the reemployment process (van Ryn & Vinokur, 1992).

Hypothesis 1a: Participation in higher level support outplacement programs would result in greater reemployment by the conclusion of outplacement assistance than participation in lower level support programs.

Because the comparison between higher and lower level support programs is confounded by program length in this study, I also make comparisons between the 3-month and 6-month outplacement programs. These programs differed only by program length; the types of services and resources available to both groups during the duration of the process remained constant. Thus, a comparison of these two groups provides a more precise examination of program time on reemployment outcomes. I hypothesized that participation in the 6-month program would result in greater reemployment by the conclusion of services than participation in the 3-month program. This hypothesis is based on the assumption that the additional time provided to displaced employees would result in greater job search, which should result in a higher likelihood of finding adequate reemployment (Doherty et al., 1993).

Hypothesis 1b: Participation in the 6-month limited outplacement program would result in greater reemployment by the conclusion of services than participation in the 3-month limited outplacement program.

The next hypothesis examines the subset of individuals who become reemployed within the time of their outplacement assistance. I hypothesized that participation in the higher level support programs would result in individuals taking more time to find employment than would individuals in the lower level support programs. Given that these programs provide high levels of job search resources and unlimited time, these participants are expected to take advantage of the additional time and resources to find higher quality reemployment (Critchley, 1996). Moreover, people in the lower level support programs are expected to impose a specific deadline to become reemployed (i.e., by the end date of services), which should promote faster reemployment (Hollenbeck & Klein, 1987).

Hypothesis 2: Participation in the higher level support outplacement programs would result in individuals taking more time to find employment than individuals in the lower level support outplacement programs.

The final set of hypotheses address how outplacement programs affect salaries. Although the higher level support programs are expected to result in greater time to reemployment, I expected that the additional time and resources in these programs would result in better financial outcomes for people who become employed during the outplacement process (Matthes, 1992). Specifically, I hypothesized that participation in higher level support programs would result in higher new salaries than participation in lower level support programs (controlling for past salary). Moreover, given the assumption that additional time should provide people with greater chances of finding better job options, I hypothesized that participation in the 6-month limited program would result in higher new salaries than participation in the 3-month limited program.

Hypothesis 3a: Participation in higher level support outplacement programs would result in higher new salaries than participation in lower level support outplacement programs.

Hypothesis 3b: Participation in the 6-month limited outplacement program would result in higher new salaries than participation in the 3-month limited program.

Past salary is also expected to be a powerful predictor of new salaries. People are often presumed to use their past salary as a strong criterion for evaluating the acceptability of new positions. From a control theory perspective (Latack, Kinicki, & Prussia, 1995), people continue the job search process until they sufficiently reduce the negative discrepancy between the salary of their last job and the new job alternative. The closer a new job option matches a person's past salary (or is higher), the more likely the person will accept the offer. Thus, past salary is expected to predict new salary levels.

Hypothesis 4: Past salary would be positively related to new salary levels.

The final hypotheses predict the amount of severance pay provided to displaced individuals by employers. A common belief is that employers use the normative rule that displaced employees should be provided with 1-week of severance pay for every year of employment (Cowden, 1992). In other words, employers are expected to take years of employment and past salary into consideration when deciding on severance pay. This study empirically examined if there was a linear relationship between this norm and the amount of severance pay provided.

Hypotheses 5a: Years of employment would be positively related to severance pay.

Hypotheses 5b: Past salary would be positively related to employee severance pay.

METHOD

Participants were 1,880 displaced managers and executives using the services of a large outplacement firm. Twenty-eight percent of the sample were female (72% male). The mean age of the sample was 45.7 years. The sample was highly educated: Six percent of the sample had no college, 10% had some college--but no degree, 3% had an associate's degree, 41% had a bachelor's degree, 32% had master's degrees or master of business administration degrees, and 8% had doctoral degrees.

All data were collected by professionals in the outplacement firm. The firm was located in a large metropolitan city in the United States. Organizations undergoing staff reductions, downsizings, or reengineering initiatives funded all outplacement activities of their displaced employees as part of their severance packages. The outplacement firm collected longitudinal data from counselors in two waves. The first wave occurred at the beginning of outplacement assistance for displaced employees, and the second wave occurred at the conclusion of services. Services concluded for displaced employees in one of two ways: (a) The displaced employees found new employment, or (b) the services expired. Three dependent measures were collected during the second wave of data collection: employment status at the conclusion of outplacement assistance, time to reemployment, and new salary. Outplacement program served as the independent variable in this study. Finally, to control for alternative explanations (Gowan & Nassar-McMillan, 2001; Malen & Stroh, 1998), several covariates were assessed in this study: age, gender (0 = female, 1 = male), education level, past salary, severance pay, and years of employment at the organization.

RESULTS

To examine the hypothesis that participation in higher level support programs would result in greater reemployment by the conclusion of outplacement assistance than participation in lower level support programs, a 1 x 4 analysis of covariance was conducted. Employment status served as the dependent variable. Outplacement program was used as the independent variable with six control variables used in the analysis: age, gender, education, years of employment, past salary, and weeks of severance pay. Consistent with supplemental nonparametric analyses, findings indicate a significant main effect for outplacement program on employment status, F(3, 1870) = 48.97, p < .05. The following are the groups and respective percentages of workers who were reemployed by the end of service: executive unlimited (97.2%), management unlimited (95.2%), 6-month limited (85.3%), and 3-month limited (70.8%). The age covariate was also a significant predictor, F(5, 1879) = 4.83, p < .05, although its effect size was weak (r = .05, [beta] = .08, p < .05). Thus, older individuals with experience appeared to have a slight advantage in the job search process.

In support of Hypothesis 1a, people in the higher level support programs were significantly more likely to be reemployed by program completion than people in lower level support programs. Bonferroni-paired contrasts revealed that the executive-unlimited program had significantly less unemployment at the end of program completion than both the 6-month limited program (M difference = -.14, p < .05) and the 3-month limited program (M difference = -.29,p < .05). Similarly, the management-unlimited program had significantly less unemployment at the end of program completion than the 6-month limited program (M difference = -.11, p < .05) and the 3-month limited program (M difference = -.27, SE = .02, p < .05). In support of Hypothesis lb, participants in the 6-month limited program were also more likely to become reemployed by program completion than people in the 3-month limited program (M difference = -.16, p < .05).

The subsample that included data on reemployment time and new salary was used for the following analyses. To test Hypotheses 2, 3a, and 3b, a 1x4 multivariate analysis of covariance was conducted with time to reemployment and new salary used as the criteria; outplacement program was used as the independent variable. Age, gender, education level, years of employment, past salary, and weeks of severance were again used as covariates. Results indicate a multivariate effect on the two criteria, Hotelling's trace: F(6 df) = 21.57, p < .05. Separate univariate tests revealed a main effect of outplacement program on both time to reemployment (F = 32.48, p < .05) and new salary (F = 9.37, p < .05). The number of participants per outplacement condition was as follows: executive unlimited (n = 92), management unlimited (n = 113), 6-month limited (n = 147), and 3-month limited (n = 162).

Bonferroni-paired contrasts were used to examine the contrast between higher level and lower level support programs. Results indicated that the executive-unlimited program resulted in significantly more time to reemployment (M difference = 180.82,p < .05) and higher salary (M difference = 20,562.83,p < .05) than did the 6-month limited program. This same trend was seen when comparing the executive-unlimited program with the 3-month limited program in terms of time to reemployment (M difference = 213.01, p < .05) and new salary (M difference = 22,670.71,p < .05). Likewise, the management-unlimited program took significantly more time to complete (M difference = 121.32, p < .05) and resulted in higher incomes (M difference = 14,568.55, p < .05) than did the 6-month limited program. Finally, the management-unlimited program also resulted in more time to complete (M difference = 153.52, p < .05) and higher salary (M difference = 15,676.42, p < .05) than did the 3-month limited program. Against expectations, results revealed that the participants in the 6-month limited program did not take longer to find jobs, nor did they have higher adjusted salaries than participants in the 3-month limited program. Mean values for new salaries are plotted in Figure 1.

[FIGURE 1 OMITTED]

In support of Hypothesis 4, past salary was a strong predictor of new salary (r = .76, [beta] = .62, p < .05). Other significant covariates of new salary included education level (r = .27, [beta] = .07,p < .05) and years of employment (r = -.06, [beta] = -.11, p < .05). Finally, to examine the hypothesized impact of individual differences on past salary and weeks of severance pay, two multiple regression analyses were conducted. The first regression analysis found that past salary was associated with three independent variables (F = 94.96, p < .05; adj. [R.sup.2] = .19): age (r = .22, = .20,p < .05), gender (r = .25, [beta] = .17, p < .05), and education (r = .30, [beta] = .30, p < .05). The second regression analysis revealed that weeks of severance pay was associated with two independent variables (F = 96.24, p < .05; adj. [R.sup.2] = .38): past salary (r = .40, [beta] = .39, p < .05) and years employed (r = .45, [beta] = .44, p < .05), as predicted.

DISCUSSION

Overall, results from this study provide evidence that high-level outplacement support helps facilitate positive reemployment outcomes for managers and executives. This can be welcome news to outplaced managers and executives who are fortunate enough to receive high-support outplacement counseling. Instead of feeling powerless by their recent job loss, they can feel empowered by research showing that being in supportive outplacement programs will help promote reemployment in jobs providing satisfactory compensation. Because some organizations allow employees to decide if they want to participate in outplacement programs or receive severance pay instead, results from this study suggest that the displaced employees may want to seriously consider outplacement as a viable option, especially given the amount of stress that could be associated with pursing a job search without professional support (Eby & Buch, 1994; Mirabile, 1985; Wooten, 1996). Although these findings are encouraging for outplacement firms that provide higher level support programs, the comparison between higher level and lower level support programs was confounded by program length: Higher level support programs allowed participants unlimited time to use outplacement assistance. Future work comparing outplacement programs that vary by support, but controlling for length of program, is needed.

However, I was able to compare reemployment outcomes of employees who received either 3- or 6-month outplacement assistance that included the same services, that is, only the length of time varied. Against expectations, participants in the 3-month program did not have significantly lower levels of compensation than participants in the 6-month program after controlling for age, gender, education, past salary, weeks severance, and years employed with the organization. This finding suggests that participants in the 3-month program realized that they needed to conclude their job search earlier, which resulted in greater motivation within the allocated time. In contrast, participants in the 6-month program might have acted in a manner consistent with Parkinson's Law (Aronson & Gerard, 1966), which states that tasks or projects expand to fill the time available.

This study also found that past salary was a strong predictor of future salary, which suggests that the managers and executives were motivated to find jobs that at least approximated their past salaries. In line with control theory, when the discrepancy between people's past salary and new salary was sufficiently reduced, people would accept the job. Other results suggested that education level contributed to the prediction of not only past salary but also new salaries. This implies that more education results in competitive advantages for displaced employees trying to secure higher paying jobs in the labor market. Finally, consistent with organizational norms, I found that employers took into consideration the number of years of employment and past salary when determining the number of weeks of severance pay to provide their displaced workers.

Results from this study also have implications for organizations deciding on which outplacement to provide their displaced employees. Contrary to negative views toward the effectiveness of outplacement, results from this study revealed that outplacement programs with high levels of support were associated with higher quality reemployment outcomes. Organizations providing these services could reassure their displaced managers and executives that this type of outplacement assistance can help them achieve beneficial outcomes. This can be especially encouraging for those displaced individuals suffering severe emotional distress from a recent displacement. However, it is typically more expensive for organizations to provide higher level outplacement support, which can be problematic for organizations having financial difficulties; therefore, the final choice of outplacement support will depend on organizational resources and the value organizations place on helping displaced employees find quality reemployment.

There are several limitations in this study. Because the managers and executives were not randomly assigned to different outplacement programs, it is difficult to make causal inferences, although longitudinal data provided tentative directional influence. Several control variables were also examined to mitigate rival hypotheses, but there is always the possibility that other variables are accounting for differences. Moreover, this study was unable to compare the outplacement programs with control conditions that did not provide outplacement assistance. If such comparisons were possible, one would expect to find even greater support for outplacement assistance. Another limitation of this study is that it was unable to assess potential psychological mediators, such as job search self-efficacy, job coping, and decisionmaking processes (Amundson, 1989, 1995; Fishbein & Ajzen, 1975; Leana & Feldman, 1992; London, 1995; Wanberg, 1997; Westaby, 2002; Westaby & Fishbein, 1996). Future work should make efforts to ascertain these data.

In summary, this study found that high levels of outplacement support can provide considerable benefit to displaced employees. Thus, displaced employees may be well served by participating in highly supportive outplacement programs when provided the opportunity. This opportunity, of course, depends on whether or not organizations sponsor high-support outplacement programs for their displaced employees. Results from this study provide evidence that employers may want to seriously consider such possibilities.

TABLE 1
Components of Outplacement Programs

                                  Distinguishing Features

Outplacement                Counselling    Psychological    Private
Program                     Time           Assessment       Office

Executive unlimited (a)     Very high      Very high        Yes
Management unlimited (a)    High           Very high        Yes
6-month limited             Medium         Medium           No
3-month limited             Medium         Medium           No

Outplacement                Mailing      Staff          Program
Program                     Resources    Involvement    Length

Executive unlimited (a)     Very high    Very high      Unlimited
Management unlimited (a)    High         High           Unlimited
6-month limited             Medium       High           6 months
3-month limited             Medium       High           3 months

(a) Executive and management unlimited programs are
considered higher level support pro-grams in this study.

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James D. Westaby, Program in Social-Organizational Psychology, Department of Organization and Leadership, Teachers College, Columbia University. The author thanks Pat Raskin for her helpful comments on this article. Correspondence concerning this article should be addressed to James D. Westaby, Program in Social-Organizational Psychology, Department of Organization and Leadership, Box 6 Teachers College, Columbia University, 525 W. 120th Street, New York, NY 10027 (e-mail: westaby@columbia.edu).