Performance Management Solutions

Given that the majority of companies are currently run by those in their forties and fifties and that most middle managers are younger than that, it is no surprise that few in business today remember the last really major global recession, which took place nearly 28 years ago in 1980-82. There have been other economic ‘corrections’ of course, but in the 1980-82 recession 55% of developed countries experienced an extended period of flat or negative growth. Even the 1987 financial crisis and stock market ‘correction’ is outside the memories of most managers and so it comes as no surprise that they are very ill-equipped to deal with the current recession (which borders on a depression) and are panicking.

The extraordinary thing is that the current response to the economic turmoil is very similar to the failed responses to earlier recessions. Many companies are simply cutting the work force, cutting production, and cutting overheads in general – although in some sectors it is particularly noticeable that these cuts are falling disproportionately on the front line workers rather than across the business as a whole: there is little evidence that there is a thinning of management ranks as yet.

It is probably true to say that in the good times many businesses try hard to retain those workers whose performance is deemed to be below the required standard (which begs the question whether the ‘required standard’ has been realistically ascertained or whether performance figures and criteria have simply been plucked from the air) and that when times get hard these ‘poor performers’ are made redundant. In theory, this makes the company ‘leaner and meaner’ as it gets rid of those making the least contribution to the business – but in reality, responsibility for the performance of these people rests with the managers and it is these people that should be looked at very carefully.

The other failed approach to redundancy is the ‘last in, first out’ strategy. When I look at the companies that are using this approach it becomes evident that most are heavily unionised. Now, this is a serious problem for all concerned: if one retains the older workers and releases the younger ones, the company is effectively getting rid of the new blood that can and would revitalise the company as the recession eases. Thus, when growth returns, these companies will be ill-equipped to survive, as they are the ones with the least flexible work forces and the ones least able to adapt to the new environment.

Whichever approach is used, companies are currently making a further major error: they are cutting training and development. This means that the essential re-skilling to survive the downwave and be ready for the upwave is simply not happening. This is a failure of management who, although not responsible for the mess the economy is in (discounting, of course, bankers!), are responsible for positioning their company for survival and to be ready for the upwave when it happens. Managers should be re-strategising, and then re-skilling and re-training the entire work force.

This is simply NOT happening – training, or rather the cancellation of training, is almost always a leading indicator of a performance downturn in a company and it is not reinstated until well after the recovery – and the amount of training being down now is disastrously little and becoming less. So, companies are now trying to survive the recession using old and outdated skills and are failing to develop new ones with which to obtain a competitive advantage when things get better.

This is a failure of management – a failure brought on and driven by panic – a failure to understand that what is happening now is not unique and has happened many times before and they should learn from history that their current response is inappropriate. The decisions they are making now will come back to haunt them when their companies are unable to compete in the post-recession world.

The companies that will lead the recovery and benefit from the upwave will be those that have reassessed the business they are in now and need to be in in the future and have re-skilled accordingly. The companies that will fail now or even after the recovery has started will be those that simply cut their overheads without re-thinking their business. These companies will lose their competitive advantage as a result of knee-jerk reactions now and a failure of management to think ahead – perhaps they deserve to fail: I’m just sorry for the workers who will have to find other revenue sources through no fault of their own.