A BAD EMPLOYEE OR NO EMPLOYEE?

Steven Cesare, Ph.D.

A steady business owner from Georgia called me the other day to discuss her company’s compensation system; well actually, she really called to talk about employee accountability. A not so novel concept that an increasing number of managers, supervisors, and owners grapple with on a daily basis.

Like many companies, the Georgia business owner is successful, aware, and examining all possible avenues to improve employee productivity, net profit, and EBITDA. Despite a fundamentally strong human resources program consisting of job descriptions, performance reviews, and a variable pay based compensation plan, she has become irritated with her field managers’ degree of entitlement when it comes to their productivity, merit pay increases, and bonus payouts. As she conveyed to me, it seems like her managers are doing less productive work than ever before, spending more time completing administrative tasks, and constantly insinuating they are grossly underpaid based on their self-inflated value to the organization.

The crux of her conversation came to the fore when she said, “Steve, is it better for me to keep a bad employee, or have the position vacant and necessarily sacrifice productivity while I find a replacement?”

Her binary inquiry spawned my philosophical prelude before I answered her question directly.

Every company is different; bound by its own culture, local labor market, competitors, and customer demands, as well as its employee value proposition model. Readers of this weekly posting know all too well that I view each employee through a capitalist lens, equating employees as metaphorical individual funds in the employer’s conceptual 401(k) plan. By that I mean, once an employee becomes more of a cost to the company than an asset, the employee must be replaced.

Sorry if that offends any Social Workers, NGOs, or companies subsidized by Black Rock.

As such, my philosophical preamble ended with me earnestly recommending that she meet with her executive team and weigh the pros and cons of her binary question to me in an effort to embed that decision-making process, its practical rationale, and eventual consequences into their company culture going forward with maximum communication, buy-in, and realization.

Beyond the philosophical background, I succinctly told the Georgia business owner I believe, a vacant position (i.e., no employee incumbent) is preferred over having a bad employee in position.

But Steve, you’re the HR guy! Yeah, yeah, I know that.

I have had this debate with various owners who fervently believe some productivity is better than no productivity. These are the same folks who repeat the common refrain “the devil you know is better than the devil you don’t know,” all the while forgetting the unassuaged fact they are still settling on the devil.

My position is predicated on merit, culture, and integrity. First, if a company does not stand on individual employee merit, how can it reward its workforce fairly despite disproportionate individual value? Bad employees do bad work; which typically means good employees then have to do follow-up on that bad work. Second, if a company culture keeps bad employees on the payroll, those bad employees insidiously infect hard-working employees thereby leading to the inevitable conclusion that high-performing employees will eventually adopt the same substandard performance level shown by their ne’er do well co-workers. And finally, let’s face it: The issue of organizational integrity becomes de facto hypocrisy.

I know the skeptics will bellow that replacing key staff takes time, money, and resources; all of which are in perpetual short supply.

In response, we can state, by continuing to employ underperforming employees, the skeptics’ personal and organizational accountability are also in perpetual short supply.

Then ask them how long does a mutual fund in their 401(k) have to lose money before they sell it?

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