Jim Higgins - Breaking Up Is Hard To Do

If you plan to watch much of the news these days it may be wise to have a small bowel of antacids handy. Not a lot of silver linings are evident in the clouds on the immediate horizon. Unemployment is still unacceptably high, the disaster that for many is called “purchasing a home” is far from over. Long term saving is low and many of our social safety nets are in jeopardy. Meanwhile politicians from both parties argue over what to do about the problems facing the country.

Amidst this bad news, at least one thin silver lining has begun to emerge. While new job growth is tepid, at least it appears that the tsunami of layoffs is over. The number of new unemployment claims is no longer simply one bad surprise after another. And it appears we may be starting to claw our way back from a deep, dark precipice.

It should be noted that even amidst a recovery, however, there is one place where layoffs are likely to continue; companies involved in mergers or acquisitions. It is not uncommon that, in the aftermath of the economic carnage brought about by a deep recession that many companies are left weak and vulnerable to those with strong balance sheets and a desire to take this opportunity to build market share. It’s the way of Capitalism. The strong—and wise—generally survive.

The problem is that with every merger or acquisition there is a strong likelihood that the new company will have two HR departments, two finance departments, two maintained departments, etc. Most company’s when faced with this situation do the only logical thing; eliminate redundancy. The result is the word that brings fear to the hearts of workers everywhere and of every level—downsizing.

When a company downsizes it is nearly always an emotional time. Those whose jobs are being eliminated see the process as arbitrary, those who are retained often feel guilt, and although many would be surprised to hear it, there are a large number of managers and executives to whom the decision to downsize falls who feel a profound sadness.

This emotion-packed situation—in which nobody really feels like a winner—is a minefield and the employer should be very careful if they are to want to minimize the likelihood of costly litigation. Those who lose their jobs want to know why and often feel certain that they were let go because of some factor that is not at all related to the job or their quality of work. The employer must be ready to defend their decisions and show that they were tied directly to the requirements of the job.

But how can an employer do this? The answer is that they need to be able to “control for” legitimate factors that affect employee qualifications and show that, once these factors are taken into account an employee’s gender or ethnicity were in no way involved in the decision.

The statistical tool most appropriate for demonstrating this is called “binary logistic regression”. Logistic regression is very much like multiple regression as it is applied to an OFCCP-compliant compensation analysis. It takes into account factors like time on the job, time with the company, average job performance, years of education and previous experience to determine who the most qualified and high performing employees are and then, having taken these into account, the statistical test checks to see whether there are statistically significant differences between men/whites and women/minorities in terms of who is retained and who is downsized.

Logistic regression is extremely powerful. If you understand multiple regression, you are about 75 percent there toward understanding logistic regression. At the conclusion of the analysis, the employer is able to empirically demonstrate what factors were used to select who was retained and who was not. If the analysis is used proactively, before the downsizing, the employer can see what happens if they apply different criteria to selection who to let go. In this way, they can tailor their decision to be maximally fair while retaining the most high quality and productive workforce.

We recommend that employers learn more about binary logistic regression and how it can help them. If you require assistance with reductions in force, affirmative action compliance, compensation analysis, or test validation, visit our website at www.AffirmativeActionServices.com.