The Movement to Clear “Dead Wood” From Payroll – Is This a Good Idea?

by Dean Prigelmeier, President, Proactive Technologies, Inc.

It sounds smart, practical and indicative of effective management. Who wants “dead wood” unless you are camping and need kindling? But it is easy these days to pick a target, whether facts support your position or not, and demonize it to rally support for its eradication – often unwittingly supported by the people it will most detrimentally affect.

Like most oversold management theories that appear and then disappear once the collateral damage is discovered, this one too seems to have that trajectory – probably not before it ravages the capacity of companies that are running well but on which “cost cutting at any cost” measures are imposed.

The practice may be incredibly risky to the long-term health of the operation. In the August 22nd, 2016 Wall Street Journal article entitled ‘Nowhere to Hide for “Dead Wood” Workers’  by Lauren Weber, the author detailed the story of Kimberly-Clark’s aggressive approach to clearing out the dead wood. Gone are the days of “coddling” employees who are “under-performing.” Gone are the days when an employer’s loyalty to the worker was reciprocated with loyalty to the corporation. Survival of the fittest is the driving culture for these corporations that have embraced “Performance Management.”

From 2000 – 2010, Kimberly Clark’s share price fluctuated in the $40 – $60 range. Their share price even seemed to rise during the worst of the Crash of 2008. But a long-term stable share price was not good enough. Wall Street and Kimberly-Clark executives – likely holding an equity position – wanted more at any cost. Their strategy worked. The share price rose exponentially after 2010 to $126.78 as of August 22nd, 2016.

But can one say Performance Management was the reason? Wall Street analysts, according to the article, attributed the rise in share price to “declining commodity prices, aggressive cost-cutting, growth in emerging markets and a generous dividend payout.” Without knowing these factors, the impression can be that Performance Management worked incredibly well. Perhaps driving out higher-paid salary employees, with their generous pension expectations and benefits packages, did contribute to the aggressive cost-cutting factor…for the current quarter. Perhaps the timing of Performance Management implementation was planned for a period that provided cover for ulterior motives.

“Companies spend $14 billion a year on products to help manage employees, including human-resources software from Workday Inc., SAP SE’s SuccessFactors and Cornerstone onDemand Inc. with $2 billion of that dedicated to performance management…” “Those systems let managers track worker’s progress via dashboards that display goals, accomplishments, attendance, peer feedback and other data.” Seems like endless micro-management of subjective criteria that can keep even participants who advocate for the system at a constantly high state of stress and vulnerable to irreversible wrong conclusions.

Corporations that used to proudly inform new-hires of the company’s low turn-over rate, now tell employees “turnover is good.” “Kimberly-Clark, CEO Tom Falk – himself a 33-year veteran – pushed the Dallas-based company onto its new course. ‘We all talk about how having the best team is the most difference-maker in your results…But we didn’t have the supporting processes to make that sustainable.’” It could be that he still does not. “Managers are instructed to begin every meeting with a story about how someone demonstrated one of the six behaviors the company promotes, such as ‘build trust’ or ‘think customer.’”

Nowhere in the article was their reference to “ensuring that each employee is trained full job mastery” before measuring performance. Perhaps what they are measuring is the failure of their workforce development program over the years, not employee performance. “One former employee said he was initially glad that the company was identifying those who weren’t pulling their weight. Then, after earning top reviews over a decades-long career, he said he was given a low rating and placed on a performance-improvement plan after missing a project deadline. After that, ‘no one would talk to me’ about other positions, he said.”

This seems like a poorly veiled effort to drive out the higher-paid employees to make room for lower-paid millennials – who welcome the opportunity to advance without realizing that someday they, too, will be singled out. The legality of this approach will be tested, I am sure. Yahoo and other corporations have found that terminated employees feel like they have no choice but to test employment issues of “job-relevance,” “age discrimination,” “wrongful termination” and others in court, even the Supreme Court. The job descriptions to which the employee was originally hired will be scrutinized, as well as efforts to make it possible for the employee to reach goals and previous performance reviews.

What is the value of ruining a corporation’s reputation for the long-term by chasing short-term individual gain, in this case share price and earnings per share? What is the cost of a class-action lawsuit for systematic discrimination in employment or wrongful termination that lingers long after those that caused it are gone? Wouldn’t it have been simpler and cheaper to have taken a critical look at the company’s worker development program to see if it was capable of driving each worker to “full job mastery and capacity” so that documented evidence exists that each employee is capable of high-quality performance? Then managers could be managers and seek to measure and sustain that level. Instead of focusing on cutting labor costs, wouldn’t it have been better to get as much out of the labor dollar as possible and protecting the valuable asset in which the company has invested?

I feel confident is saying that Performance Management will be ultimately shelved. Those valuable employees who have marketable skills can, and will, look for the off-ramp at the nearest opportunity. As the corporate make-up shifts from those who could meet expectations but do not trust corporate motives to mediocre performers who learned to play the system, let’s see if the corporation can maintain its capacity, purpose and, eventually, share price. Unless one assumes the labor market will never return to normal, or are part of a group wants to make sure it doesn’t, the concept may seem justifiable to those above for the moment but looking down the road one can see the potential for disaster.

It may be that you do not have a choice at your organization to accept or reject this approach. Heck, the private equity investors that are pressuring you to do so might have stock in the Performance Management company they have selected. But if you do have a choice, consider a credible alternative.

When Proactive Technologies’ employees setup a worker development program, we first analyze each job classification for the critical tasks each employee is expected to perform and the best practice for each task. We next determine, for each incumbent worker in the job classification, which tasks that they and their manager believe they have mastered to identify the “gap” and to create a structured on-the-job training program to close the gap. It is at this point of assessing the gap that we discover how well (or not) the company has been developing their workers over the years. Sometimes the average “Worker Capacity” rate starts at as low as 20%, meaning the average existing worker in that job classification has mastered only 20% of the critical tasks of the job. The company has been paying 100% wage for 20% capacity! What use would a Performance Management approach be when the workers have not had a chance to master their job so performance can be measured? Why are the ones that allowed this internal skill gap to appear and thrive in the organization now allowed to shift blame to the worker who, I am sure in these days, would gladly do all that the company needs done? If the company knew what that was and could deliberately develop the worker in the way it is to be done, wouldn’t that be more of a business strategy?

“Cart before the horse” or ‘trojan horse” management fads are not the solution. They are often written by smart people with little or no practical experience in the intended user’s world. Fundamental employee development and management practices always survive. If the company is fortunate enough to escape litigation and negative media attention, Performance Management will probably be tossed aside just like the 1980’s wave of “Investment in Excellence,” Management by Objectives” and the like. But not before leaving a swath of unfortunate and possibly irreparable damage in its wake.