Cut Staff or Cut Your Service Rates?
The economy is turning for the better — but in many markets, ever so slowly. I talked with a VAR a few days ago who is cutting his services rates by 25 percent for all work that can be completed by August 31, 2009. The VAR’s goal: To make certain his people stay busy through the summer. So a key question: Instead of cutting your rates should you lay-off some staff to save money?
As you consider your situation, please focus more on your actions as a leader than your employees and bottom line. Long-term growth ignites when our actions as leaders are consistent, honest, based on facts and fair.
Consider a typical employee performance situation. The employee is performing below your standards. Times are tough and budgets are tight. You have met with the employee previously to encourage them to improve and yet their productivity is still lacking. The question for many managers becomes, “Do I fire this person, or continue to encourage them?”
The answer to both questions might be “no.” Firing the employee means you have to find a replacement, which takes time and ultimately costs 1-2 times their annual compensation. That could be $50,000-100,000. Continuing to encourage them as you have is repeating a process that is broken.
Consider Your Options
Therefore you have to consider alternatives:
- Are the responsibilities of this person’s job aligned with the individual’s natural strengths or behaviors?
- Take a moment to review their Success With People Talent Assessment reports or similar behavioral and values reports. Consider whether the person’s responsibilities and the way they are being managed is consistent with the statements they highlighted as best describing how to manage, motivate, communicate and work with them effectively.
- Next, meet with the employee to affirm some of the behaviors or values they have highlighted in their reports. Be specific as you explain how you are trying to manage them according to those natural strengths. Describe the level of performance you are seeking and how it is not being met. Then ask what needs to happen for their performance to improve. The purpose of this exercise is to get the employee to take ownership for their lack of performance and the plan to improve.
Maybe, just maybe, you have made a mistake. This person is in the wrong job! If this is the case, then you have a few key things to consider before you take action:
- Has the person previously received clear, measurable goals and a well-written job description defining their responsibilities?
- Do you have written documentation that the individual’s performance does not match the standards set for the job?
- Do you have written documentation from third parties, such as coworkers, vendors and/or customers confirming the employee’s performance is below standards?
Here are three suggestions that may provide a new perspective when it appears you’ve made the wrong hire:
- Look In The Mirror. Before you hold the employee responsible for lack of results, you must first confirm that you have provided the direction and support you promised. This is why I first asked whether the person had a well-written job description and clear, measurable goals. Did you follow up on those goals every week or two? Have you held the employee accountable to your performance standards on a weekly basis, or left them to struggle on their own for a month or more at a time? The challenging decision you have to make may not be primarily about the employee, but rather regarding how to improve your own management skills and system for leading your direct reports.
- Transfer The Investment. You have an investment in this individual. As you reviewed their natural strengths as exhibited by their behaviors and the values that drive those behaviors, consider whether you hired a great person but they are in the wrong role. Possibly they could be a star performer in a different position in your company.
- Always a Customer. This person may or may not continue to be an employee with your company, but they remain a potential customer or influencer of customers. Therefore they need to be treated respectfully, fairly and honestly even when you are letting them go.
In conclusion, take immediate steps to resolve the situation systematically when you have an employee who is not performing up to your standards. In good times or bad, every week you delay costs the company money, holds you back from achieving your results, and is unfair to the employee.
There are many options for the actions you can take. If you have a challenging situation and need some advice, contact me.
Contributing blogger David Russell is a best-selling author and CEO of MANAGEtoWIN, which develops employee performance management solutions. Follow The VAR Guy via RSS; Facebook; Identi.ca; Twitter; and via his Newsletter; Webcasts and Resource Center.