The University Medical Center is medium-sized, 300-bed capacity hospital at Dasmarinas Cavites. The facilities have grown gradually over the years and are now the 2nd largest in the town of Dasmarinas. It is entirely nonunion and has never experienced an employee layoff since its inception. Sister Veronica Cornista, the Chief Executive Officer of the hospital for 8 years presented a rather bleak financial of the BOD. This according to her is the result of the declining occupancy rate which has affected the hospital’s revenues to such an extent that it ran a deficit for the first time last 1998. Such declines have not been unusual for this industry because of increasing competition. So far, the only response to these changes has been tightening of requirements for equipment or supply purchases. The projected deficit for the coming year is around 1,300,000 unless some additional revenues were identified or some additional savings found. The BOD’s recommendation is employee layoffs, the only realistic alternative.
Breakeven Analysis
Break Even Analysis is a term used in business, cost accounting and economics. It refers to a point where the total cost incurred becomes equal to the total revenue earned. Break Even Analysis determines the number of units to be sold to earn the revenue required to cover the total costs. Total cost is a sum total of fixed and variable costs.
Process analysis
The term process analysis can be defined as breakdown of production process into different phases that converts inputs into output. A series of routine activities are incorporated using organizational resources with a view to achieve operational excellence.
- Employees Layoffs at the University Medical Center
The University Medical Center is medium-sized, 300-bed capacity hospital at Dasmarinas Cavites. The facilities have grown gradually over the years and are now the 2nd largest in the town of Dasmarinas. It is entirely nonunion and has never experienced an employee layoff since its inception.
Sister Veronica Cornista, the Chief Executive Officer of the hospital for 8 years presented a rather bleak financial of the BOD. This according to her is the result of the declining occupancy rate which has affected the hospital’s revenues to such an extent that it ran a deficit for the first time last 1998. Such declines have not been unusual for this industry because of increasing competition. So far, the only response to these changes has been tightening of requirements for equipment or supply purchases. The projected deficit for the coming year is around 1,300,000 unless some additional revenues were identified or some additional savings found. The BOD’s recommendation is employee layoffs, the only realistic alternative. They recommended laying off up to 25% of the hospital’s employees.
Sister Veronica reluctantly agreed because the hospitals employees had never been laid off in the history of the institution and viewed the employees as part of the family. Since the hospital had no previous experience with employee layoffs and no union contract constraints, her feeling was both seniority and job performance should be considered in determining who would be laid off.
Alma Pilapil, the hospitals personnel director know that their performance appraisal system was inadequate and needed to be changed. While this task was high on her “to do” list, she also knew she had to move ahead with her recommendations on layoffs immediately.
Questions:
- How would you propose to avoid /mimize the problems identified by Sister Veronica and Alma?
- What long term solutions do you see for the hospital once its gets its cash flow problems under control and eliminates its deficit? What can it do to increase revenues so that future layoffs will not be necessary?
- What difficulties exist in laying off employees who were viewed as part of the family? How can such difficulties be overcome?
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