Is Turnover Bad? Hire Slow/Fire Timely

A few weeks ago in my FastTrac class, we reviewed the edict "Hire slow and fire fast."

I have heard it before, and while I understand the message, I prefer to alter it slightly:

Hire slow and fire timely.

Why the Change?

I have seen managers who are too quick to terminate. If you have seen my blog on HR Metrics, you know the cost of turnover contains many factors. The costs add up quickly, and if they can be avoided, they should be avoided. If training can help improve deficiencies, training beats termination.

That being said, there is certainly a point in an employment relationship when it is time to terminate, and when that point has been reached, then it is (say it with me) "time to terminate."

Back to the Edict:

The edict is valuable on two fronts. The first is that by hiring slowly we can improve our decision making process and thereby reduce the likelihood of turnover. We can use various tools, such as pre-employment testing, structured interviews, and background checks to ensure we have a good fit for the position and for our company. Through realistic job previews, we can help the applicants make informed decisions regarding the employment relationship. If everyone goes into the relationship with "eyes wide open," we increase the chances of success.

The second is that when an employment relationship reaches the "time to terminate" stage, we are well served to take action. I have seen it many times; companies are scared to terminate. The trepidation may be based on the fear of a lawsuit, but it also may be an aversion to the act of terminating an employee.

Termination is the most difficult part of being in human resources or owning a business. Some people are not phased by it, but personally, I find it heartbreaking to tell a person he or she has lost a job. It is a devastating blow and an emotional exchange.

Regardless, the cost of not terminating can be more problematic than turnover.

The Cost of Not Terminating:

It would be nice to say that the cost of not terminating is 20% higher than the cost of turnover. Of course, the cost of not terminating is more difficult to calculate due to the intangibles. Still, low preforming employees and disgruntled employees have a negative impact on the company. It may be through lowering overall productivity, creating errors and waste, or through the impact on other employees.

A company at which I used to work had an employee who was known to do nothing. The company wanted to terminate her for more than a year before she was actually terminated. Her direct supervisor was against it, and he had significant power in the company. She barely worked 30 hours a week but would come into the office on the weekends, clock in, and do her homework for school in order to stay full-time and keep her benefits.

She was a nice person. It was tough to recommend her termination, but it was obvious that her cost exceeded her value. Other employees worked hard and resented that she was not held to the same standard. Office politics became front and center, and other employees went from gruntled to disgruntled (yeah, I know gruntled is not a word).

The Employee Equity Solution:

Luckily, the office was small enough, and the majority of management was trusted enough that we did not see the "employee equity solution" employed. The "employee equity solution" is based on the idea that an employee wants to feel equity with regard to his or her position. Equity, in this situation, is based on the feeling that pay is equal to the amount of work the employee does. Employees seek to find an equitable ratio of pay to work (pay/work). This is generally measured against other workers both internally and externally.

In the "employee equity solution," the employee adjusts his or her level of work to ensure that there is equity. So, if employee A gets paid X and does Y level of work, then employee B adjusts the level of work to achieve the ratio of X/Y.

When employee A is an under-performing employee who should be terminated, employee B will reduce his or her work level. Now the company has two employees who should be terminated for lack of performance.

Is Turnover Bad?

Not always. In the scenario above, terminating employee A is good. A bad employee can have a negative impact on the organization as a whole. When I recommend termination to an employer, a common response is the cost of unemployment. My response is that the cost of unemployment beats the cost of paying this individual to create new standards for minimal performance.

Turnover should be avoided, and it can be through good hiring practices, training, and on-going support. Still, there are times when termination is the answer. When that time comes, it is important to take timely action.