When organisations face the question of what to do about poor financial performance, they often consider redundancy as the easiest option. Whilst redundancy is often seen as an efficient way of cutting costs through headcount reduction, the redundancy process has a number of pitfalls that make performance management a more successful long term strategy for addressing both financial and output issues.
Following redundancies, employees can feel demotivated due to the loss of trust and security in their position and often frustrated at the expectation that they should pick up extra work to keep the same level of performance from a smaller team. Reduced morale and loss of trust in their security at the company often leads to a spike in voluntary resignations, which can result in the company losing key talent. Having gone through redundancies, organisations can often find they remain faced with poor performance.
An alternative to redundancies that can provide a long-term solution to the underlying issue is active performance management. Building a strong culture of excellence within your organisation can set the tone for your employees’ behaviours and encourage a highly motivated, productive team. Unlike the post-redundancy lack of morale and slowed output, a team with employees that are supported, developed and given responsibility are productive and happy to take on changes in strategy or direction that enable your organisation to remain competitive.
Achieving a high performance culture is not an easy task, however a culture that will last has to come from the top down and cascade throughout the company. As Bill Hogg states, “Without the proper guidance, support and a clear vision of what is expected of them, employees are not going to create the results you want”. Senior leaders must accept accountability for consistently communicating the values of the company and providing the necessary support for employees to succeed. Once you can achieve a performance culture that has cascaded down to customer facing roles, you will reap the rewards of more loyal, satisfied employees and, in turn, customers, which will translate into increased profitability.
It is not possible to filter out the low performers without first identifying if they truly are a low performer, or if there are deeper issues causing them to underperform, which will then be experienced by any future replacements. For example, failure to capture issues, lack of active management and insufficient support for workers.
Whilst redundancy may seem like the go-to solution for poor performance, the most effective way to dramatically reduce costs is by filtering out the poor performers and creating a more productive workforce, in order to create the capacity to do more with what you’ve got, or more with less.
