Is annual staff culling a sensible strategy for your business?

Would systematic culls of staff benefityour business? Kate Walters weighs up the case

Any employer knows the extent to which underperforming staff harm productivity. They will also have wrestled with policies to discourage slacking and incompetence. Is the solution an annual staff ‘cull’?

More than three-quarters of senior executives believe so, according to a report from recruitment firm Hudson. Seventy-seven per cent said that dismissing a fixed number of employees each year would improve financial performance and productivity.

Almost half of the respondents agreed that dismissing up to 5% of their workforce each year was healthy, and one in six went so far as to say that a business could dismiss up to 20% each year without damaging productivity or morale. Steve Ballmer, chief executive of Microsoft, outed himself as a fan of such an approach last year, controversially declaring that he dismisses one in 15 employees annually.

John Rose, chief executive of Hudson UK, agrees that retaining for the sake of retaining is bad news for both business and individual. “Sometimes, the best career direction for an employee is out of the company,” he says. However, in practice, only 4% of companies systematically dismiss a percentage of their staff each year. The skills crisis is a factor in this, with a quarter of bosses saying that due to current skills shortages, they would rather retain below-average performers.

For many analysts, this indicates that businesses should focus more on employee training and do all they can to prevent an under-performance problem arising in the first place. Jo Causon, director of marketing and corporate affairs at the Chartered Management Institute, believes this would be of more benefit to businesses and employees than a culling policy. “In a period with obvious skills shortages, businesses need to manage talent in order to compete globally,” she says.

While agreeing that a certain level of staff turnover introduces new skills and ideas, Causon believes managers could easily get more from their existing staff. “Our research suggests that only 15% of managers are directly involved with staff training. But it’s the manager’s responsibility to help people to perform competently and the employee’s responsibility to respond positively.”

The benefits of restructuring are undeniable, helping businesses become more competitive and profi table. But Madeleine Thomas, a partner in the employment team at asb law, says annual restructuring as a result of a cull could easily backfi re.

“The law on redundancy is strict – it will only be a fair redundancy dismissal if the employer genuinely needs to reduce his/ her workforce,” she says. “Normally the employee’s job should have disappeared. Therefore any artifi cial attempt to shed employees will probably result in costly tribunal claims.”

She adds the policy could also lead to employees losing loyalty and trust in their employers, so “businesses will risk losing valued employees and will suffer the sometimes ignored costs of recruitment and training”.

Thomas suggests that employers look at natural wastage instead. “When an employee resigns or retires, instead of automatically advertising for a replacement, the strongest businesses will evaluate whether that role continues to serve the business needs. If not, the employee will not be replaced or the role may be modified.”

A dismissal quota is undoubtedly a risky strategy. And although most senior executives say they would welcome the policy, the fact that few businesses have one suggests it’s an idea that’s better in theory than in practice. But successful businesses do need a policy on underperformers. As Rose says: “Retaining for the sake of retaining will not help solve the UK’s skills crisis or its increasing productivity gap.”

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