12 Ways to Cut HR Costs: Part 9 - Create Churn

12 Ways to Cut HR Costs: Part 9 - Create Churn

29th October 2020

By Daniel Pollard - 29 October 2020

UK employers consulted with staff on nearly half a million redundancies during the pandemic - roughly 1.5% of the working population. The true number will have been much higher as small-scale redundancies are not captured by government statistics. The furlough scheme will have given many employers an opportunity to pause but as the scheme comes to an end, employers face some tough choices.   

Over recent months we have seen a huge amount of creativity from our clients in finding ways to minimise redundancies. Over the next couple of weeks we will share 12 possible strategies adopted by our clients and some thoughts of our own to help reduce cost without compulsory lay-offs.

9. Create Churn

The legendary Jack Welch, CEO of General Electric, is famed for the practice of “letting go” the bottom performing 10% of its workforce each year. We make no comment on the business case for or the morality of this policy but found the write up in the Harvard Business Review on Jack hugely interesting for those who have time to read it. The reality though is that faced with the current economic pressure, we are seeing clients take a long hard look at the talent in their business to ensure that they have the best team on which to rebuild and/or to take advantage of the many opportunities that the current disruption creates.

Redundancy programs (reductions in force) risk unsettling strong performers, sending the wrong signal to the wider market and potentially requires collective consultation. Instead, a renewed focus on performance and culture allow employers to “manage out” staff and to encourage others to seek opportunities elsewhere.

This can take several forms: 

  • Active performance management for poor performers
  • Re-defining or re-emphasising standards
  • Introducing end of year and/or interim appraisals
  • Changing appraisal and bonus metrics to create a bigger disparity between low, acceptable and high performers; and/or
  • Restructuring roles and remuneration to greater differentiate between high and low performers. 

Legally, employers need to state the reason for dismissal and follow the process applicable to each reason. Substantively there is often a very fine line between performance/capability and redundancy as “the reason” for dismissal but the processes applicable to each are radically different. For this reason, it is important to be clear what the driver is. A reside to reduce headcount is likely to point towards redundancy. A desire to improve the performance of the workforce and to remove poor performers is likely to point towards to performance/capability.

For all 12 ways to reduce HR costs without redundancies click here.