Leadership and Cutting down Staff

published in: Leadership inventory

29 Jun

Paramount prior starting a business is with Whom (see article "What Comes First in Leadership WHO or what”).

Once started, the results become paramount. I've heard and read hundreds of statements stating that in business organizations people come first. But that are only empty words. Of all the companies in the service sector (where wage costs exceed 60% of all company costs) that ended in loss several years in a row, all cut down the staff. Thus their management admitted that profit is paramount. In the monetary economy, a company cannot exist if it does not make profit.

The business cycle has its upward and downward trends. During protracted declines many leaders are forced to cut staff, colleagues... This is the most unpleasant task in the life of every manager. But true leadership requires even this task to be executed fairly and in principle.
One possible approach is the "20-70-10" approach, used for many years by the former president of General Electric - Jack Welch. It is suitable for "the easy" part of the cuts. Its essence consists of categorizing people in three groups according to their results. 20% -the top employees, 70% - "the happy medium" and 10 % - poor performers. We cut the 10% first.
The hard part of the cuts comes when we need to reduce the "the happy medium ". In such a situation the following matrix does a good job:

leader, cutting down staff, leadership


Quadrant 1 - below average performance and poor sharing of corporate values allows us to start the cuts from here.

Quadrant 2 - high performance and poor values sharing. In the long run, these employees should be replaced by colleagues from quadrant 3, because productivity can be learnt, while value systems cannot be changed (in majority cases).

Quadrant 3 - lower than average performance and a strong sharing of company values. It is recommended to shift these colleagues to another position (if possible). However, if at the second position the employee does not achieve above average results, probably her/his potential cannot be revealed in our company, and for both sides it is better to think about company change (that is only true if a proper leadership was executed).

Quadrant 4 - Top staff should not be cut down. I personally have always wanted to work with the best... And who doesn’t?

It’s not so important what principle you will apply. What is important is to have principle and the employees to know the behavior that is valued in the organization. It is in company best interest the leader to continuously improve the quality of the team. It is in employee’s best interest to find the right company to deploy and develop her/his talents and potential.

Managers that allow friendly relations with colleagues to take precedence over higher results might be interested in Dr. Kenneth Blanchard’s thought
(“The One Minute Manager” series).

There is nothing so unequal as the equal treatment of Unequals.



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