Why do we have layoffs? One counter-intuitive answer is “because retention programs work.” Layoffs happen because the efforts to keep the workforce trimmed didn’t work. Attrition wasn’t high enough. The right people did not leave of their own accord.
Hiring and Keeping the Best People is a standard goal in most organizations. Identifying key talent and promoting them is such a core part of conventional wisdom that we take it for granted. Most leaders aspire to be surrounded by trusted colleagues who are well seasoned and deeply experienced.
When this idea spreads through an organization, it is called “Retention”. In a harsher light, it is the essence of cronyism and featherbedding.
Is it really a sound business practice?
Good, strategic workforce planning is virtually nonexistent. Instead of accurately knowing and describing the specifics of our workforces, we rely on tired generalizations. We want to manage attrition down and become the “employer of choice”. In other words, our HR Departments lead us down the primrose path and make our organizations home to people who retire in place.
It should be no surprise that we have downturns. Preparing for them, hiring wisely and continually pruning the organization is the right way to approach the problem. Too few hands always leads to greater productivity.
Time and again, our organizations act surprised when the downturn comes. RIFs mean that we “hired too many people”. Said another way, “We didn’t let enough people go when times were good.” Retention and retention programs, therefore, are the primary cause of RIFs.
“Why do we have layoffs?” Because the retention programs work too well. The idea that great people should be retained in their jobs for a long time is the exact opposite of growth and innovation. Retention breeds seniority and bureaucracy. Innovation requires youth and inexperience.
5 Comments
Huh?
You are saying you want to create incentives for bad employees to leave. But those incentives are much more likely to affect your good employees who are being actively recruited.
Retention (low attrition) is really about giving the employer the power to make the decision about when an employee stays or leaves.
Oh, I think you can be clearer than offering incentives for bad employees to leave. A focus on retention shifts leaders away from a focus on results.
If retention were about giving employers the power to decide, there wouldn’t be such massive overstaffing in the good times. Layoffs are evidence of bad hiring decisions, and retention programs that work too well. Precision in the definition of hiring requirements, thriftiness in the approval of new reqs and clarity about what constitutes meaningful performance are all partial culprits.
Don’t hire in the first place; don’t work so hard to retain; and, get really clear about who you want to keep.
Generally speaking, retention has more to do with an employers inability to imagine an abundance of the people they want to attract being attracted, and acting accordingly. Well, actually they do act accordingly — they implement retention programs.
Isn’t it interesting that Jack Welch’s forced ranking at GE had a positive net result on both retention and attraction? Despite the annual cull there was no shortage of talent attracted to the place, or people willing to fight hard to keep their jobs.
Our employment structures are still fashioned on an legacy-values that go along with archaic notions of career, tenure, gold watches and pensions. That I think is the root of the problem with workforce planning too.
Surely the savvy Sumser mind knows that RIFs result primarily from downward shifts in the demand for the organizations products/services, and not from the sudden realization that there are too many problems and mistakes vs. keepers, achievers, and stars onboard. Jack Welch’s annual cull of the repeat bottom dwellers was talent quality management in action, not a RIF, since there was no net ‘reduction in force’.
RIFs caused by business cycles could have the happy bi-product of raising the talent bar, but only if retention decisions deliver more value than hiring decisions. What follows ain’t rocket science, but it is people science. And recruiting is a people science business.
Decision value depends on the types of information used in the decision process and how that information get combined to make the ‘hire vs reject’ and ‘cut vs. keep’ decisions. On the hiring side, we know from dozens of published, refereed research studies that candidate answers to unstructured interview questions about their likes and dislikes, interests, goals, and plans (and not just what type of flower they would like to be) offer little decision accuracy. We also know that scores on most personality keyed tests, whether type or trait focused, offer even less value than the unstructured interview. On the retention side, there ought to be better performance information on which to base the ‘cut or keep’ decisions. There ought to be, but there often isn’t. Even for sales roles, when objective records of collected revenue exist, the hard numbers can be as clear as mud when it comes to highlighting the true stars and achievers. As one CFO turned CEO put it to me recently, “Why should I cut one of my two regional VPs doing all the right things up in Chicago (because the Chicago market has retrenched) when I have a VP in Austin whose region looks solid, but he has been coasting in a plum region for two years?” We often reward being lucky (right place at the right time), but doing so can’t, by definition, pay off.
Good retention decisions are as hard to make as good hiring decisions. Neither is easy. Retention programs don’t cause RIFs, and good retention programs work to retain the stars, keepers, and achievers while developing, counselling, and ultimately culling the problems and mistakes. Its all about maximizing the health and sustainability of the organization and its most valuable resource— it’s talent.
Here’s the problem, Tom. You say that RIFs are “caused by business cycles”. I’m arguing that only idiots are unaware of the fact that demand expands and contracts over the course of a business cycle. How could it be a surprise that things are going to contract on a predictable basis?
The problem is that Retention programs are understood as a universally good idea. Wanting to keep people in the fold is a core human instinct. We over-reach in almost all efforts focused on retention.
As for the rest of your argument, the question of who is or isn’t a ’star’ is the other part of the problem. The heavy focus on retention of start performaers at at the root of the latest batch of economic bad news. Our organizations need reliable performers who have a little too much to do, not a hand-picked cadre of high-pos.
The really useful thing I’m taking away from your comment is “We often reward being lucky (right place at the right time), but doing so can’t, by definition, pay off.” That’s exactly the point.