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St Bedes Hospital is a medium-sized
400-bed hospital in a regional Australian city. It was established
in 1908 by the Sisters of Mercy an order of Catholic sisters.
St Bedes Hospital is a medium-sized 400-bed hospital in a regional Australian city. It was established in 1908 by the Sisters of Mercy an order of Catholic sisters. The facility has grown gradually over theyears and is now the third largest hospital in the city. It is entirely non-union and has never experiencedan employee layoff since its inception.Sister Mary Josephine has been the Chief Executive Officer on the hospital for 11 years. Eight yearsago she hired Ms Sharon Osgood as Director of Personnel. Osgood has an M.A. in Human ResourceManagement and has been instrumental in formalising the institutions human resources policies andprocedures.Hospital occupancy rates had run between 76 and 82 percent from 1970 to 1982. However since thenoccupancy had gradually fallen to 57 percent. Such declines have not been unusual for this industryduring this time period as a result of changing reimbursement policies emphasis on outpatient servicesand increasing competition. However the declining occupancy rate has affected this hospitals revenuesto such an extent that it ran a deficit for the first time last year. The only response to these changes thusfar has been a tightening of requirements for equipment or supply purchases.At the most recent quarterly meeting of the Board of Governors Sister Mary Josephine presented therather bleak financial picture. The projected deficit for the coming year was $3865000 unless someadditional revenue sources were identified or some additional savings were found. The Boardsrecommendation based on the immediate crisis and need to generate short-term savings was thatemployee layoffs were the only realistic alternative. They recommended that Sister Mary Josephineconsider laying off up to 10 percent of the hospitals employees with an emphasis on those in thenonessential areas.Sister Mary Josephine responded that the hospitals employees had never been laid off in the history ofthe institution. Moreover she viewed the employees as part of the family and would have greatdifficulty in implementing such a layoff. Nevertheless since she had no realistic short-term alternativefor closing the revenue gap she reluctantly agreed to implement a layoff policy which would be asfair as possible to all employees with a guarantee of reemployment for those laid off and to findadditional revenue sources so that layoffs would be unnecessary in the future.Sister Mary Josephine called Sharon Osgood into her office the next morning shared her concerns andasked her to prepare both a short-term plan to save $3 million over the next year through employeelayoffs as well as a long-term plan to avoid layoffs in the future. Her concerns were that the layoffsthemselves might be costly in terms of lost investment in some of the laid-off employees lostefficiency potential lawsuits and lower morale. She was concerned that the criteria for the layoffs notonly be equitable but also appear to be equitable to the employees. She also wanted to make sure thatthose being laid off received adequate notice so they could make alternative plans or so that thehospital could assist them with finding alternative employment. Since the hospital had no previousexperience with employee layoffs and no union contract constraints her feeling was that both seniorityand job performance should be considered in determining who would be laid off.Sharon knew the hospitals performance appraisal system was inadequate and needed to be revamped.While this task was high on her to do list she also knew she had to move ahead with herrecommendations on layoffs immediately. The present performance appraisal system uses a traditionalchecklist rating scale with a summary rating. Since there is no forced distribution the average ratings ofemployees in different departments vary widely.Table 1 shows the summary ratings of employees in each department. Most supervisors in alldepartments rate many of their subordinates either satisfactory or outstanding. Sharon has done aquick review of those employees whose overall ratings were unsatisfactory or questionable. Mostare employees with less than three years of seniority whereas the satisfactory employees had workedfor St Bedes for an average of around seven years. Table 2 provides a summary of the distribution ofemployees and payroll expenses by department for the most recent year.Table 1. Percentage Distribution of Performance AppraisalSummary Ratings by Department at St Bedes HospitalDepartment Unsatisfactory:Needs to improvesubstantiallyQuestionable:Needs someimprovementSatisfactory:Meets normalexpectationsOutstanding:Substantiallyexceeds normsNursing 6.4 6.4 54.2 33.0Allied Health 5.7 6.2 47.8 40.3Central Admin 2.7 3.1 67.5 26.7Dietetics/Nutrition 2.1 6.2 68.3 23.4Housekeeping/Maintenance7.8 12.4 54.6 25.2Medical Staff 1.1 6.2 63.8 28.9Table 2. Employment and Payroll Expenditures DistributionDepartment Number ofEmployeesPayroll ($) Annual Turnover
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