Outplacement Firms—What They Offer in the Event of a Layoff

This article is from the March 2010 issue.

By Christine Martin

Layoffs have always been a fact of working life, and the current recession means more, not fewer, employees are being let go. Some employers hire outplacement firms to help departing employees and human resources staff handle the fallout. But do you really know what these firms offer? Are their services worthwhile—either for employer or employee?

Traditionally, the outplacement firm gives the laid-off employee an office to go in the morning; the use of a desk, telephone, and computer; and some degree of job search counseling, often for up to one year. The job search counseling typically includes help drafting a resume and preparing for interviews, and may also include access to job postings.

In return, the employer gets a reputation as a company who terminates employees in a humane manner, and (maybe) a reduction in wrongful termination lawsuits and unemployment insurance claims.

Outplacement firms also can help human resources staff handle the stress of managing a layoff. The HR staff themselves may need coaching on how to explain terms and conditions to departing employees and how to deal with upset co-workers. According to the Washington Post, some outplacement firms show up on the day of the layoff to coordinate activities. They back up nervous HR people and hold the hands of those who are fired, spending time with them during the first 30 minutes. A cynic may wonder if this handholding is designed to distract the newly terminated while management cuts off their computer access, locks them out of their email and revokes their security clearance. But this initial “misery loves company” approach may be more humane than the “surgical method” advocated by some managers, who (for fear of lawsuits) terminate employees with no conversation or explanation and then have them immediately escorted off the property (Saslow, 2009).

At least one outplacement firm offers stock phrases that management can use to blunt the impact of bad news. For example, management might be coached to say “George, we realize that loss of employment is undoubtedly a difficult experience” or “George, you have made considerable and long-lasting contributions and they are acknowledged and appreciated.” Undoubtedly these phrases (canned though they may be) are helpful to employers who don’t see themselves as bad people and who may not want to have to let people go (Saslow, 2009).

According to the Wall Street Journal, an employer can expect to pay an average of $3589 per employee for these and other outplacement services (Dvorak and Lublin, 2009). But group discounts are available. And some outplacement firms charge only for the employees who actually use their services, which means that the practice of seeing an employee immediately after his or her termination may actually be a marketing tactic. When better to sign up a new client than when he first learns he has lost his job? According to Wall Street Journal, about 40 percent of employees never use the outplacement services they are offered, and some just ask for the cash instead. The same newspaper says that few employers track whether outplacement works. It also says that outplacement firms themselves find it hard to know how their clients fare because many drop out or don’t notify the outplacement firm when they find work. Two firms, however, did report that their clients found work in a median of 14 to 16 weeks (Dvorak and Lublin, 2009).

If employees don’t find outplacement services useful, it may be because services have become standardized as the business has grown. According to the Wall Street Journal, outplacement services began in the 1960s to give terminated executives a way to counter the stigma of losing a job. They got an office to go to, a telephone, and secretarial services. But by the 1990s, outplacement was offered to almost everyone, with an accompanying lack of individualized attention. Corporations were offered volume discounts, and soon everyone got the same “standardized menu of workshops and referral services.” Personal counseling, easily the most expensive part of the service, was limited, but even access to office space was cut. For example, while executives still got private offices, mid-level workers could no longer expect even a cubicle. Instead, some firms provided only telephones and space at a shared table. Cheaper still ($2500 per head for six months) is the approach taken by some outplacement firms who function only as online providers. They offer no brick and mortar facilities (no pseudo-office to go in the morning) but provide only weekly alerts as to jobs posted on electronic job boards, plus phone counseling and online group seminars.

But job hunters may need personal contact and in-person support groups to get back on their feet. In some cases, churches and other not-for-profits fill the void. For example, the First United Methodist Church near my home in suburban Chicago offers a job club that meets weekly and brings in speakers on issues facing the unemployed. It also provides “peer-to-peer interviewing practice” and advice on preparing a resume. In downtown Chicago, the Career Transition Center (a not-for-profit that is funded by a number of religious congregations) offers “peer group meetings,” “accountability groups” and workshops on how to write a resume and interview effectively. It also has a corps of volunteer career coaches who will meet with job-seeking clients. Libraries, too, often offer job clubs and networking groups for those who have lost their jobs (or those who fear that they will). Of course, these not-for-profit groups (and libraries) cannot exist without money and must rely on donations (or tax receipts) to keep going. But in many cases they provide emotional support that can’t be matched by a large outplacement firm. They may prove a valuable outlet for those facing the emotional and financial problems associated with job loss.

Meanwhile, employers who are considering hiring an outplacement firm may consider the following, adapted from a web site run by Quest Career Services. (This is not an endorsement of this firm.)

  1. What level of service do you want to provide to departing employees? Individual counseling? Group workshops only? Access to a brick and mortar site? Online only?
  2. Does the outplacement firm have experience working with the level of employee you are discharging? Does the outplacement firm have experience with companies in your field? Working with laid-off research scientists may be different that working with former employees who have less formal education.
  3. If your employees will have to use the Internet to find a new job, how much experience does the outplacement firm have with the electronic distribution of resumes and the like?
  4. How many months of outplacement service are you willing to pay for? In general, higher-level employees will take longer to find work similar to what they are used to. If they are to receive one-on-one counseling, it will be more expensive than simple access to job support materials.
  5. Are costs clearly defined? Are they negotiable? Affordable? Will you be charged a minimum fee? Or just for the ex-employees who actually use the service?

All of the above are things to consider if you are thinking of hiring an outplacement firm. Other resources that may be of interest to employers who may have to institute lay offs are the Society for Human Resource Management (www.shrm.org) and the American Management Associations (www.amanet.org).

Works Cited

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