When times are tough, it's not unusual to decide to shed staff as a way of cutting costs. This can be a sensible move if it's done strategically, rather than as a knee-jerk reaction. But before you start, ask yourself the following questions:
- Will I have to rehire a similar person when things improve?
- Does the cost-saving of losing this person's salary outweigh the cost of severance payment and rehiring?
- Is this person right for the job? If things weren't so tight, would we be thinking of terminating his or her employment?
If your answers confirm the need to reduce staffing, you need to make choices with the medium and long-term needs of the enterprise in mind, not just the short-term pressures.
Here's a handy matrix to help you sort the sheep from the goats and ensure you retain the people you need.
You don't want to part with people who are performing well, even though they may not have the potential to move up the organisation or into a new role in a growth area. They need reassurance that they are valued, even if there's a pay freeze. Nor do you want to lose the stars, the people with bags of potential, who are already doing well. They'll need a new challenge soon or they'll move on.
And, self-evidently, you need to lose the poor performers who aren't of value to the organisation. But it's the question marks, bottom right, who are a puzzle. In theory, from their CVs, they have a lot of promise, but currently they're underperforming.
Are they in the wrong role? Is their manager the problem? If you fire them without giving them the chance to show what they're capable of - on a new project, for example - you could lose some real talent you're going to need in future.
Talk to them and find out whether their failure to shine is a matter of skill or will: do they need training to increase their skill, or is their poor performance down to a negative attitude that could well improve if they feel listened to?
Getting rid of people is never fun, but good leaders balance the cost of having the wrong person in the wrong job with the financial value of having the right resource.