Is it Worth it to Retain Your Skilled Employees in a Recession?

Chris Young
April 1, 2009 — 1,748 views  
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A question I am hearing frequently is, "Should a company "burn cash" to retain skilled team members and managers?"

This is a great question.  The answer to this question is complicated, yet simple - high performers who are adding more value than they cost should be retained.  Lower performers should be laid off as quickly as possible to preserve resources.  This is not just a strategy to be used during economic challenges. 

The reality is most organizations have some type of "cross-subsidization" of high performers paying the price for low performers who are allowed to stay. 

These are uncertain economic times.  Some economists are suggesting a recovery will not occur until sometime in 2010.  That is a long, long time away.

What matters more than anything is that the organization "lives" to do business / add value another day.  Truly nothing else matters more than ensuring the organization lives for another day.  From here, one may ask a series of questions to bring additional clarification.

The next most critical question that must be asked is, "Which team members are truly adding value more than they actually cost?"  Those team members who are truly adding more value than they cost are the ones that should be retained as long as possible.  The lower-performers should be laid immediately.  Harsh, but true.

Most organizations have little understanding of which team members are actually adding more value than they cost.

The rationale...  Ideally, if the higher performers are adding more value than they cost, there is a higher likelihood that by cutting lower-performers, the "profitability tide" will rise - thereby saving high performer jobs and maximizing the longer-term viability of the organization.  Again, the organization must preserve cash and resources to live for the future.

What about employee loyalty?   Shouldn't those employees who have been loyal be retained?  The reality is that employee loyalty is often quite one-sided.  Often employee loyalty is one-sided on the part of the employer.  The employer provides training and implements a change strategy to make the organization more competitive and the "loyal" employee then fights the change.  This loyalty must be rewarded with a layoff when economic challenges present themselves.  And, yes...  Sometimes employees are more loyal than their employer.  What can an employee do who has truly been more loyal than their employer?  Find proper job fit / employment with an organization that reciprocates that loyalty.

The next most important question to ask is, "What impact will layoffs or pay cuts have on employee and team morale in general?"  I recently shared my thoughts in my post "Employee Layoffs or Pay Cuts?"  Some employees are going to be completely fine with an across-the-board pay cut.  But in the end, all of the employees who receive pay cuts in lieu of a layoff must be adding more value than they cost.  Yet, not every employee team member is going to "appreciate" a pay cut (sales people as an example).  There are some who may deeply oppose taking a pay cut to pay for others who cannot perform at a high level.  These employee team members may become demoralized about a pay cut and would prefer that their team members who are adding minimal or lower value be laid off first.  The key is to know objectively what your team members would prefer.  One way is to ask them through a survey.  The other is to use psychometric profile assessments to know ahead of time.

It is critically important that the organization understand their true talent "inventory" with minimum human bias.  The harsh reality is human beings are inherently biased.  Therefore, it is critical that a Job Benchmark be created and employee team members (as well as job candidates) be assessed using a scientfically valid psychometric profile instrument to understand the true potential of each employee team member.

If an organization is truly going to position itself to best face any economic future, it had best do so with the best talent possible.

The harsh reality is that organizations are laying off some of their best talent based upon outdated criteria such as "employee loyalty", length of service, human bias, and favoritism.  The reality is many organizations are almost completely clueless about what their employee performance actually is.  Some people and organizations reward employee loyalty.  That is not what I call it.  I call it short-sighted talent management strategy that sounds attractive, warm, and wonderful.  The reality is those organizations clinging to outmoded talent management strategy will dramatically increase their risk.  The economy of the future will reward mis-guided talent management decisions based on "employee loyalty" with dramatically increased economic risk.

Today and tomorrow - more than ever - will demand the best talent in the best seats on the "bus".

Therefore...  the real talent management question to be asked during poor and good economic times is...  "Is each employee team member adding more value than they are costing and what specifically, is that value?"

The answer is a simple, "yes" or "no".

Now go Maximize Possibility!

Chris Young

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The Rainmaker Group is a human talent maximization company specializing in helping organization maximize their bottom lines by improving employee retention, hiring the best talent possible, and strategic talent management and coaching services. From the Fortune 50 corporation to the small medical office, The Rainmaker Group guarantees lasting organizational change via a unique blend of energy, insight, and science to maximize talent, transform organizational culture, and provide strategic intervention.