In his first five years as the CEO, he decimated 100,000 jobs in his company. When he retired, after a few more years, he had fired more than 500,000 people! This man, called “America’s Toughest Boss” and “Manager of the Century” (awards from Fortune), said that “people before strategy” has been his mantra all his life. One doesn’t need to look farther than the above details to understand why. The man is the legendary Jack Welch; and the company in question is General Electric.
Even before one starts criticising him, is the biggest learning Welch gave to the management world – that recession or no recession, firing poor performers has to be standard management policy. Sadly, as the noted Sirota Consulting proved, “Companies do a poor job of facing up to poor performers; it’s always the most negative finding.” BCG consultant Grant Freeland writes in a BusinessWeek report, “Few things demotivate an organisation (and its top performing employees) faster than tolerating and retaining low performers.” And believe it or not, a Forbes report shows how “employee retrenchment (of poor performers) actually increases loyalty!” If your organisation has been one that belongs to the category that has been forced to live with poor performers till date, I should suggest that recession is a supremely good time to kick them all out en masse.
At the same time, I should also say that this is the time to fundamentally change the way we plan and strategically think about our human resources. For starters, rather than using HR to mollycoddle employees (oh, haven’t we heard and had enough of outdoor motivational training exercises, perks, and all that jazz), use them to push down the throat of complacent low performers that whatever be their designation in the organisation – and even CEOs be damned, for all it matters – those are profits and profits that matter the most! (Booz Allen Hamilton reports, “Under-performance is the primary reason CEOs get fired.” They show that shareholder returns improve significantly ‘when poorly performing CEOs are axed’). Truly, as bottomline pressures force headcount reductions, it is also very easy to lose top performers, damage morale and the company’s reputation amongst employees, or curtail staff development programmes. By emphasising talent and productivity in cost-cutting efforts, employers can create a positive perception among current and potential employees and position themselves strongly for growth, when conditions improve. At the same time, a nimble HR, during relatively low growth times, should ensure a flexible and multiskilled workforce composition, where concepts like temporary staffing – depending on relevance – play a significant role in the manpower planning process. The pace at which technology is progressing, we will soon see present skills becoming redundant and a requirement will crop up for employees with multiple skills.
In conclusion, managing talent in the downturn for HR does not at all mean having to put up with lower than world-class employees just because you cannot afford the best. Rather, it means ensuring that the organisation and its employees perform at never before seen productivity benchmarks. As our theory goes, brilliantly productive CEOs/VPs/Directors/Managers/Employees/Humans for short, will become narcissistic and complacent given the first opportunity to slack. The job of HR is to ensure that that never happens. The job of HR is to, therefore, promote intellect over clerical work, to support youthful exuberance over aged experience, to believe in people with passion than people with egos... And in reality, this job of HR doesn’t change whether in downturn or out of it... For people will always remain before strategy. You didn’t know that, did you?