A manager’s decision to terminate an employee is often delayed while budget impact issues, wishful thinking about the employees choosing to leave, and last minute separation package considerations are reworked.

Although there are no routine terminations, there can be an easier process. Severance and outplacement costs can be estimated and budgeted, as is done with the costs for recruiting new talent; however, these costs are often overlooked.

There are several benefits to having a budget for planned and unplanned terminations.

• Organizations who plan financially for these events are more confident of executing them in a way that reflects their culture and respects the impacted employee(s). Employees summarily dismissed become negative publicity that can hurt recruiting efforts.
• Transitioning talent is an ongoing and essential dimension of strategic talent management. Putting transition costs into the budget sends the message that it is a legitimate and expected business reality, rather than only a disappointing and unpleasant management task.
• Available funding expedites these difficult decisions. Managers needing to trade out talent that is no longer serving the best interest of the company can move more quickly when funding levels are in place and available. Too often, these decisions get delayed while funding rationale is developed and reviewed.
• Transition budgets facilitate the capture and trending of terminations across the organization. How much is being spent on transitioning staff? Are these costs rising or falling, and what are the implications of either trend? This kind of data can be helpful in becoming more proactive in targeting areas within the organization needing more attention.

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Leaving the investment costs of termination vulnerable to the pressures and concerns of managers who have to own this difficult task creates unnecessary tension for the organization. Budgeting for this process is a sound business practice.

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