A common mistake I observe is when a company attempts to resolve its financial shortcomings with a magnanimous policy they think is "fair minded." This approach typically starts with a "we're all in the same boat" speech; declaring that rather than reducing the workforce, "we'll all agree to forgo the 5 percent budgeted increase and everyone takes a 5 percent pay cut." Expeditious across-the-board management decisions are, more often than not, simply lazy management decisions. Spun as a fair measure affecting everyone equally, in reality it shuns the company's best by rewarding the underperformers.
The companies that make lemonade out of the lemons are the ones that cut deeper and use the surplus to reward top performers. Say, for example, to remain viable, a company needs to reduce payroll by 20 percent. I think the smart play is to cut the payroll by 25 percent and use the accrued funds to dole out double-digit raises to your superstars.
Think about how the two approaches play out. In the typical scenario, the solid performers watch as co-workers are dismissed. They are then informed that there will be no bonuses and a wage and hiring freeze for the next year. The superstars start thinking if they could get another job, they would.
Compare that with the scenario I propose: A solid mid-level performer has watched as co-workers are cut loose. He is told by management that with staff reductions, the company will need to rely on him more than ever. And because the company recognizes that will mean more time and effort on his part, he will receive a 12 percent increase. But they are told that only the best and brightest are getting this special consideration and they need to keep the good news to themselves.
The thing is, really good people are always in demand. They can find a job even in the most challenging times. When you punish them in the name of "fairness," you accomplish nothing. Actually you stand to create problems rather than fix them.
When top performers are treated like average ones, they are more susceptible to being hired away. Average performers and underperformers stay put. When management creates an environment that treats them the same, they are encouraging the best people to leave and the worst to stay. And that promotes mediocrity.
Bob Moore is president of Bob Moore & Partners, a consulting firm that specializes in the automotive aftermarket. Moore, SEMA board member, can be reached at [email protected].