We’ve all done it at one point or another in our professional careers as leaders. You have that one (maybe more) under performing employee that manages to keep their job despite the multitude of poor performance reviews year in and year out, much to the displeasure of the teammates around them.
An under performing employee is a cancer to everyone around them. Cancer in that they have a strong ability to negatively impact others, spreading their under performing ways and often times attitudes which are capable of bringing down the performance of people who were previously good employees.
What if I told you that a manager’s inability to terminate poor performers costs upwards of $675,000 per year in revenue?
The cost of under performing employees is staggering!
Staggering to the tune of 6.75 x annual salary. Imagine that you have an employee who is under performing exceptionally bad and that person is being paid $100k. Dr. John Sullivan of ERE says that it just takes one single big mistake and your employee who should have been terminated long ago just cost you $675,000 green backs.
Maybe you don’t have a really bad employee, maybe they just under perform a little bit wavering on mediocre performance. Well, that mediocre performance can cost on average $225,000 a year, assuming the employee is at that $100k base.
These are the tangible costs of indecision and lack of performance management. The intangible costs on the other hand are just as bad if not worse because of the rippling affect they have on a business. As I mentioned earlier, the cancerous employee can bring down entire departments causing low morale, perceived notions of management ineffectiveness, employment attrition, poor customer service, you name it.
If the cost of not firing an under performing employee, tangible and intangible, are so high why don’t managers do something about it more readily?
My experience being in a leadership role for the past decade as well as being a talent resource consultant for my clients during that time has lead me believe managers don’t fire under performing employees for the following reasons:
If the above tangible and intangible costs weren’t enough to encourage people to make swift decisions when dealing with their under performers, here’s another way to look at it.
The current state of our economy as it relates to employment is interesting to say the least. Unless you’ve been hiding under a rock the last 12 months you’re probably aware that our country has been reporting record lows in the area of unemployment for quite some time.
As always, there tends to be a fair amount of controversy over our national unemployment stats as people on both sides of the political fence love to refute or praise the numbers depending on their political affiliation. Last month our country got its latest update with respect to our national unemployment rankings which came in at a mere 4.9%. What that’s supposed to tell us is 95.1% of our country, or roughly 306 million of our family, friends and neighbors, are gainfully employed.
The reason it is important to look at the current state of our economy and our unemployment numbers is because this has a very real and sobering impact to companies who are looking to hire new talent.
When managers are in a situation where they keep poor performers the inevitable situation begins to play out where the company’s (or divisions, departments or teams) performance begins to decline. When service levels start to suffer and the bottom line starts to drop towards the floor boards the people on the high perch start looking for answers.
As this plays out further the company’s willingness to house poor performers is eventually discovered and those perched above making most of the organizational decisions send out directives to the management team asking for swift and quick action in cleaning up under performing employees. This action can have all sorts of names, including: rif’s, top-grading, layoffs, purging and competitive landscaping, etc.
Here’s why this is a dangerous situation to be in…
When we make decisions having to do with the vitality of our team in the heat of the moment rather than proactively we’re making things more difficult than they need to be. When we all of a sudden have to fire that under performer, the person who’s been mailing it in for months, even years, we’re now scrambling to find a replacement in hopes we can uplift ourselves from the disaster that we’ve brought upon ourselves.
But wait, didn’t we just talk about the fact that 95.1% of Americans are working right now? Now we’re faced with a whole new set of challenges.
When we need to hire and are faced with an economy (like present) that is tight from a resources perspective all of a sudden we find ourselves caught up in things that are outside of our control, like:
It’s crucial you are PROACTIVE in your performance management and talent identification. Waiting to the last minute to deal with either of the two often times won’t produce the results you’re looking for, putting you in between that good old spot we like to call a rock and a hard place.
About the Author
Travis Smith is the founder and managing director of Square-1 Engineering, a medical device consulting firm, providing end to end engineering and compliance services. He successfully served the life sciences marketplace in SoCal for over 15 years and has been recognized as a ‘40 Under 40’ honoree by the Greater Irvine Chamber of Commerce as a top leader in Orange County, CA.