Case Study

City Main Hospital was losing money and the hospital Executive Director knew that action had to be taken to
reduce expenditure. Since a major portion of the costs were labor-related, the choice was clear – reduce staff.

A natural target for staff reduction was the fifth floor. This unit generally served ’observation’ patients but had
been less than half-full for some time. Reassigning fifth floor patients to other units could be done easily, and
closing that floor would save a significant amount of money.

Approximately, forty employees worked on the fifth floor, all of them reporting to Sara Khan, the Nurse
Manager. Hospital management decided that since her floor was being closed entirely, Sara’s services would no
longer be required.

There were, however, some complicating factors. First, the hospital had a policy of reassignment rather than lay
off and thus had a commitment to place the fifth floor staff in other open positions for which they were qualified
within the hospital. While it was unclear how many of the forty displaced staff could be moved to other areas,
management knew that many could be accommodated.

Second, most of the employees on the fifth floor were long-term staff who had become somewhat “set in their
ways”, compared to the employees in other departments. Indeed, the fifth floor had developed a reputation for
being an uncooperative group that consistently resisted even the most minor changes, and most managers felt
that the quality of care provided by the fifth floor nurses was marginal at best. Similarly Sara was generally
regarded least effective of the hospital’s nursing managers. As a result of all these factors, managers in other
units were extremely reluctant to accept displaced fifth floor workers.

A series of management meetings took place to plan the closing of the fifth floor. The meetings were conducted
by the assistant head of nursing and attended by the hospital’s Nurse Managers, as well as the Director of
Personnel, Director of Public Relations, and a Communications/Labor Relations Consultant. Initially,
management had considered omitting Sara from these meetings but decided that it would “look better” if she
were included in the planning process. During every meeting Sara cried openly, much to the discomfort of the
others present.

Everyone who participated in the meetings was sworn to secrecy; no was to mention the closing of the fifth
floor until the plan was completely developed and announced. Nevertheless, rumors quickly began to circulate
that something was “in the works” and the fifth floor had specifically been targeted by the management.

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Eventually, a plan was developed. On the following Wednesday morning, the Deputy Head of Nursing and the
in charge of personnel would meet with the fifth floor staff to tell them the news and provide them with details
either about their shifting to other units (for whom other positions had been found) or (for those who would be
terminated) about the strikingly generous severance package the hospital was providing. Immediately afterward
this same information would be announced at a general meeting of all management; simultaneously, the
hospital’s Chief Medical Officer would conduct a meeting of the medical staff. Individual letters, signed by the
Director General, would be couriered to all employees on Monday (so most would reach by Wednesday), and
departmental meetings for employees would be conducted on Wednesday afternoon to discuss the situation in
detail with all the staff. Finally the news media would be contacted late Wednesday afternoon and provided
with statements which would appear on Thursday.

On Monday, two days before the layoff (termination) were to occur, the group met with the CMO and the Chief
Administrative Officer (CAO) to review their plan. Much to their dismay, the CMO and CAO both reacted
extremely negatively. Both wanted to know exactly how many would be terminated. The group was unable to
produce exact numbers, since the number of vacant positions fluctuated almost daily due to resignations and
new hires. “Nursing never gets its numbers right!” the CMO roared. In addition, the CAO strenuously objected
to having the letter to employees come from the Director General. “We’ve got to stop passing the buck and
shoving the blame upward,” he argued. Both demanded specific numbers and significant changes in the
announcement letter drafted by the group before they would allow the plan to move forward.

At the same time, however, the organization’s rumor mill was functioning at full throttle. The fifth floor was
going to be closed, probably this week, the mill stated. Indeed, the fifth-floor employees themselves had
apparently gotten wind of the plan. On the hospital’s computer system, one fifth-floor employee typed an
announcement that was communicated throughout the hospital—“We’re long-service, formerly loyal employees
who are about to be kicked out onto the street by the hospital. If you would like to help, we are starting to a fund
to help support those who will be hurt by this. Please send your contribution to (name, address of fifth-floor
employee).”

On Wednesday, fifth floor employees came to work dressed in black and wearing black armbands. They
covered the curtains in patient rooms with black sheets, much to the dismay and confusion of the patients in
those rooms. When no one came to tell them their floor was being closed, they became all the more upset.

On Thursday, tension mounted. While senior management continued to debate the numbers involved in the
termination and appropriateness of the communication plan, the fifth-floor employees waited for someone to
tell them to go home. Eventually, the situation became unbearable. One nurse began to cry, and soon all were
sobbing and hugging each other. The in charge of personnel was called, and when she went to the fifth-floor

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and saw what was happening, she told all of the employees to just go home. With the help of the Deputy Head
of nursing, she oversaw the hurried transfer of fifth-floor patients to other floors.

On Friday, the hospital announced that the fifth-floor had been closed.

Source: Andrews and Herschel, Organizational Communication, 1997, as reproduced by Cheturvedi and
Cheturvedi, Business Communication: Concepts, Cases and Applications, 2004.

Questions

1. Analyse the reasons for spreading of rumours of the termination of the observation ward staff.
2. Was it correct to include Sara in the initial discussion meeting? Why/Why not?
3. Ideally, how should this situation have been handled?

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