THE EMPLOYEE 401(K) MODEL

Steven Cesare, Ph.D.

A compassionate business owner from Florida called me the other day to talk about one of his long-term employees, who is no longer meeting performance expectations consistently. In specific, the employee has been with the Company for nine years, attaining the position of Maintenance Foreman several years ago, all the while serving as an average employee. Characterized as a “nice guy,” the Foreman has never taken initiative, shown propensity for growth, or added noticeable value to the Company.

Lamentably, for the past several months, the Foreman has taken a negative turn. His work ethic is now sorely lacking, his attendance and tardiness have become problematic, and his leadership skills toward his work crew are increasingly sarcastic, pessimistic, and condescending to the point that his team no longer wants to be on his crew or associated with him and his nihilistic attitude.

You already know the question the business owner ultimately asked me: “What do I do with him, Steve?”

As a capitalist, I have long viewed every employee as a metaphorical fund in the Company’s 401(k). Everyone understands the dynamics, strategy, and importance of an actual 401(k) to their personal wealth. Serious 401(k) participants meticulously evaluate and then buy, sell, or modify funds in their portfolio every quarter when they receive their financial statement. Based on results, the participant will consider changes to the existing funds in the 401(k) to minimize loss, accelerate value, and perpetuate success.

That sounds a lot like what serious business owners do when they receive their Company’s monthly, quarterly, and annual results. Doesn’t it?

But serious business owners don’t think about stocks, bonds, or mutual funds. They think about accountability. They think about future performance. They think about long-term goals.

Ultimately, they think about employees; because employees are the drivers of value to reach those goals.

My response to the business owner’s direct inquiry was “Is the Foreman achieving all of the business goals assigned to him?” The resulting pause was pregnant indeed. Nine months pregnant. With twins.

The answer should have been “yes.”

Breaking that silence, I offered four alternatives to the business owner: termination, demotion, reassignment, and a fitness for duty exam. The business owner intimated that the Foreman was “getting older” as such was “slowing down.” Aging is a fact; it is happening to all of us. Thus, I suggested the fitness for duty exam as an index to determine if the Foreman could still physically perform all the Essential Functions of his position safely. Second, given that the Foreman was having trouble leading his crew, a demotion to Crew Member was also presented as an option. Third, the business owner could reassign the Foreman from his field position to a support role in the shop, which obviously adds more indirect labor expense to the Company’s P&L. The final option was termination, especially appealing since the Foreman had received multiple write-ups for not meeting performance expectations and several policy violations.

Within the 401(k) mindset, the owner readily acknowledged he would sell a deficient fund in his personal 401(k), though he was definitively reluctant to see the corresponding symbolism regarding his Company 401(k). Rather than evaluating the Foreman on his contributions to the Company’s results, the owner waxed nostalgic about the length of time the Foreman had worked for his Company, the personal impact termination would have on the Foreman’s family, and the emotional toll it would take on the owner himself.

Interestingly, within the context of the 401(k) model the Maintenance Manager, immediately said the Foreman should be dismissed, thereby freeing up space for a more productive new employee, improving the attitude of that work crew, and reminding other employees that merit is more valued than tenure.

The owner is still reviewing the funds in his Company’s metaphorical 401(k) and options for future success.

By the way, have you reviewed the funds in your Company’s metaphorical 401(k) this quarter?

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