Before the 1980s, there hardly seemed to be a need for the service that today is called employee outplacement. Employment opportunities abounded and large salaries were common for executives, managers, and supervisors. Furthermore, it wasn't unusual for such individuals to devote their entire working lives to one company. Then came a downward turn in the economy. Private and public sector industries suffered vast losses; organizations reacted by reevaluating their entire workforce. Organizations that were once considered safe havens for employees turned to mass layoffs, variously called "corporate restructuring," "downsizing," or "cost-cutting." The cycle of layoffs and retrievals was a familiar one to the blue-collar workforce. But from the defense industry to Wall Street, the decline of American industry created a new category of the unemployed—the executive class. "Once out the door, displaced managers are confronting a much harsher world than they faced just a few years ago," Fortune's David Kirkpatrick reported in 1991. "There are many more of them competing for jobs—400,000 managers and professionals, by one count—and fewer companies are hiring."

Employee outplacement refers to career counseling services offered to employees at the time they are laid off. An outside or in-house outplacement team provides counseling, interviewing tips, networking leads, and even (in the case of high-level clients) cubicles or offices with phones, fax machines, word processors, and secretarial support. The sponsoring company pays for these services, usually at a rate of 12 to 15 percent of the dismissed employee's salary.


For the employees, outplacement represents a bridge between the shock of sudden dismissal and the daunting prospect of finding future employment. For the sponsoring company, the service is both an altruistic gesture toward good workers who through no fault of their own have been caught in an unfortunate circumstance and a way to obtain a measure of security against potential lawsuits brought by laid-off employees.

James E. Challenger, widely regarded as a pioneer in employee outplacement, saw the potential in such a service in the 1960s. As he wrote in his book Outplacement: "I perceived that while there were numerous assistance programs for the disadvantaged who were discharged, nothing was being done for the individual who was not disadvantaged. That person underwent the same emotional trauma and stress as his or her less privileged counterpart upon losing a job and, in my opinion, deserved no less in the way of assistance."

Challenger's first outplacement service—then called Executive Retrieval—consisted of a grassroots, door-to-door campaign calling on corporations to promote the idea of helping out executives seeking employment. Acceptance came slowly, as Challenger recalled in his book: "When I first approached companies with the concept, I was often ushered out of the executive suite. 'Why in the world,' they asked, 'should we help someone we are discharging?' I continually explained how it was to the mutual benefit of the company and the individual … [to turn] a negative situation for the company into one which put the firm into a favorable light in terms of public opinion. It assuaged internal corporate guilt … [and] it prevented unwise or hasty action by the individual that would damage a future career and provided the job search knowledge and tools for the person to find new employment."

Executive Retrieval evolved into the firm of Challenger, Gray and Christmas Inc. The company grew from a three-member team to what is today the oldest and one of the leading outplacement firms, with 1992 revenues of around $16 million. As Michael Barrier quoted Challenger in Nation's Business, the Chicago-based company can dispatch a counselor "anywhere in the country on 24 hours' notice" when someone is about to be fired. But what happens when a counselor and client meet is the subject of controversy.


Most outplacement firms work in essentially the same way. They "are very big on putting everyone through psychological testing to help them figure out what they should do with their lives," noted Dyan Machan, reporting for Forbes. Machan's article concerned a typical client who had lost his marketing job and signed up with an outplacement firm that, after 50 hours of counseling and testing, gave the client "a keen grasp of the obvious: He was told he should stay in marketing or perhaps should be a consultant."

This sort of cookie-cutter counseling approach is the biggest charge clients have against outplacement firms. Another complaint: people who are promised perks such as private cubicles and phones often must wait for such services due to the sheer volume of displaced clients. "The facility may have only 80 spaces, and if, say, 100 axed managers show up—not an unusual situation after a big layoff—20 are left without a cubicle for the day," as Machan wrote, though she added that "higher level executives generally do better and get something more like a private office."

For another view of outplacement, consider the experience of publishing executive Betsy Carter. Carter found herself out of a job when her magazine folded; as a senior executive, she was offered six months' outplacement service with America's largest outplacement firm, Drake Beam Morin. Carter called her counselor "unrelentingly optimistic," and in a Working Woman piece reported that she herself "loved taking the tests and plowing through the workbook exercises to glean what my 'career anchor' is.… It was reassuring to have a place to go between appointments. In the mornings, I'd check in with the receptionist, who always called me by my first name, then go to my desk. It was easy to distinguish between the Drake Beam employees and my fellow unemployees. The former were exceedingly chipper, quick to smile and offer some pleasantry. The latter—mostly displaced male executives—rarely met my eyes, much less smiled."

Carter also noted that among the spate of aptitude tests and psychological counseling, she was informed that she had "most in common with photographers, musicians and chefs and the least in common with emergency medical technicians and Air Force enlisted personnel. These findings were not exactly surprising. My mother could have told me all this for free."


So does employee outplacement really work? The answer often lies within the client's own initiative and attitude. Carter stayed with Drake Beam Morin and eventually found herself with a promising job offer and a chance to work as an independent contractor. Other outplacement clients report that the impersonal testing and competition for cubicles and phones makes outplacement no more appealing than striking out on one's own in the job hunt. As Machan pointed out: "Unlike just about every other industry, there's little accountability here. That's because the buyer is not the user. An employer, understandably concerned about sinking morale, wants minimal contact with the newly axed. There's typically no follow-up by the company of the former employees."

On the other hand, as Challenger noted in his book, outplacement is not meant to be an employment service, but a support service. And as for the by-the-numbers counseling, that's a given as well. "Good outplacement counseling is a generic process built around the uniqueness of the client," Challenger wrote. "Professions do not really matter. My staff has no nuclear physicists or microbiologists on its staff and yet we successfully counseled several in one year."

For those who might find the "generic process" too limiting, Machan provided this suggestion: "Look for smaller or specialized firms. Harris, Heery, of Norwalk, Connecticut, for example, specializes in marketing managers. Stanley Herz & Co., of Stamford, Connecticut, specializes in finance and information services." And, she added: "This much is clear: Companies may feel they are getting their money's worth using outplacement firms as litigation insurance and as sops to the consciences of the higher-ups who do the firing. But it is not easy to find firees who feel they have gained much from outplacement services."

Ironically, the economic upturn of the mid-to-late 1990s proved damaging to the employee outplacement industry. By 1995 demand for employee outplacement services began to decline due to falling unemployment. Two of the largest outplacement firms in the United States went out of business in 1997, and many smaller operations were forced to merge with larger competitors. Although the employee outplacement industry generated approximately $1 billion in sales in 1998, many firms were adding management counseling and other services to their repertoire as a hedge against continued low unemployment. Companies also turned increasingly to outplacement consultants to meet their decreased (but extant) outplacement needs. It seems clear that the employee outplacement industry will follow a cycle that precisely mirrors that of the economy at large.

[ Susan Salter ,

updated by Grant Eldridge ]


Barrier, Michael. "Lighting a Fire under the Fired." Nation's Business, July 1992, 55-56.

Carter, Betsy. "My Life and (Surprisingly Good) Times at an

Outplacement Center." Working Woman, September 1992, 65.

Challenger, James E. Outplacement. Apex Publishing.

Crisp, Andrew. "Jobless Executives Thrown a Lifeline to Get Back to Work." European, 7 April 1995, 22.

Fernandez, Bob. "Two National Outplacement Counselor Firms Close Down." Knight-Ridder/Tribune Business News, 7 December 1997.

Hirschman, Carolyn. "Time for a Change." HRMagazine 43, no. 9 (August 1998): 80.

Kirkpatrick, David. "The New Executive Unemployed." Fortune, 8 April 1991, 36.

Lucas, Spencer. "Sink or Swim: Downsizing Can Torpedo the Unprepared, but Outplacement Counselor Edward Everett Says the Best Will Float to the Top." Memphis Business Journal, 7 August 1995, IA.

Machan, Dyan. "Meet the Undertakers." Forbes, I I November 1991, 384.

McNerney, Donald J. "Outplacement Trends: Prices Decline, then Stabilize." HR Focus 72 (December 1995): 1.

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