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Is slash and burn the right strategy for your business?

Guest post by: Michael Smyth

Article Overview: When the economic downturn first started to impact John’s business he was quick to act. First signs that turnover was dropping caused John to focus on his biggest overhead – the wage bill. A swift round of redundancies gave immediate relief and he was able to sustain profit levels on an even keel. Six months later, however, turnover had dropped even further and he was facing a personal grievance claim from one of his employee’s with a possible payout of $1000s.

Is slash and burn the right strategy for your business?

When the economic downturn first started to impact John’s business he was quick to act. First signs that turnover was dropping caused John to focus on his biggest overhead – the wage bill. A swift round of redundancies gave immediate relief and he was able to sustain profit levels on an even keel. Six months later, however, turnover had dropped even further and he was facing a personal grievance claim from one of his employee’s with a possible payout of $1000s.

Where it had gone wrong

For several months following the redundancies, the business had been on an even keel and everyone was working harder to keep turnover at a respectable level. But after 3 months, John noticed that the performance of one of his key sales people was dropping off. Sales were there, it was just that he was losing out to the competition. John’s immediate reaction was to embark upon a performance management process with Martin.

At the initial meetings with Martin, John would hear complaints that Martin was overworked and didn’t have the support he needed to do his job. John considered these comments to be just an excuse and with more people in the job market as a result of the economic downturn, thoughts that there may be better qualified sales people out there looking for work crossed his mind.

Doggedly, John persevered with the performance management process. Sales didn’t improve (in fact they got worse) and verbal warnings were followed by written warnings until Martin was on the brink of dismissal.

That’s when the personal grievance was raised

The personal grievance alleged that Martin was suffering an unjustified disadvantage in the workplace. The specifics of the allegation were that the performance management process was unfair in that it:

1. Failed to recognise that Martin needed more support in his role and therefore the targets which had been set were unreasonable;

2. The time given to Martin to improve was also reasonable since he had a greater workload;

3. Since the redundancies, Martin’s workload has significantly increased leading to workplace stress

Stress affects performance

It is now proven that stress affects performance both positively and negatively. In order to perform at optimum levels we require a degree of stress. Deadlines can be good because they force us to work efficiently and productively. However, too much stress has a negative effect on performance. Long hours at work, and working weekends without adequate rest impair performance and productivity. If this is allowed to continue for too long, physical symptoms manifest such as inability to sleep at night, poor concentration and moodiness.

Unfortunately, in times of recession these symptoms are all too common. An employer, will recognise the symptoms as poor performance rather than stress and therefore embark upon a performance management process. Of course, this increases the stress for the employee: the end of the employment relationship is inevitable unless the employer has a change of strategy. The only question is whether the employee raises a personal grievance or not.

The problem started with the redundancies

As part of the redundancy process, John made a number of his sales support staff redundant. This caused more work for the sales people, like Martin. Initially the sales people were able to cope, but after several months the cracks started to appear. Martin was the first to crack as he found it increasingly difficult to compete with the opposition. Consequently, turnover dropped and John started to panic.

However, the problem wasn’t the recession: it was John’s initial slash and burn strategy. The redundancies had gone too far and placed too much pressure on those employees who remained in employment. John needed to re-think his strategy.

When to make redundancies

There is no question that redundancies are a good method of streamlining in order to survive an economic downturn. However, be careful how far you take your streamlining process. Consider the effect on the remaining employees because if you over-burden them too much, you could decrease productivity and decrease turnover even further. Worse still, you could end up being hit with a personal grievance. Redundancies are a good opportunity to trim the fat, but make sure that you don’t trim the meat.

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Article Tags: economic downturn, employees, redundancies



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