In our recent article entitled “There’s No Money for HR in Dubai” (https://axiomatic.co.za/news/theres-no-money-for-hr-in-dubai/) we suggested that it is important that HR practitioners should start considering various retention tools to improve their Employee Value Proposition (“EVP”) and retain top talent. Several clients have stated that while they would love to introduce retention strategies, they are in fact being required to retrench employees, consider downsizing the staff compliment in some way or must identify other ways to contain salary costs.
Generally, one must consider the prevailing labour legislation, but too often, companies adopt a “first in, last out” criteria which is short sighted, could jeopardise the company’s ability to remain competitive and dare we say – a cop-out by HR.
Axiomatic Consultants has significant experience in assisting companies with such exercises and our initial advice would be to “think strategically” while adopting a 3-phased scientific approach as follows:
The departure point should be a strategic evaluation of the positions (not people) in the company which are crucial to the success of the company’s strategy. Obviously, an in-depth knowledge of the strategy is required and if the strategy is not well defined, extensive discussions with the CEO may be required.
For example, if the primary strategic objective is to increase revenue by 30% annually over the next 3 years, HR must identify the sales roles crucial to achieving this. This is often where the analysis stops. However, this is only the beginning of the “deep-dive” analysis. Once the sale has been secured, a Key Account Manager will be responsible to ensure repeat orders. Further, Manufacturing and Production will be required to ramp up production and, given the anticipated increase in sales, the Account Receivables Clerk will play a significant role in ensuring debtors are kept under control. This level of granular investigation of the roles (not people) is crucial to the exercise.
As can be appreciated from the above example, numerous positions are identified, each with their own part to play in ensuring the success of the strategy; as such, it is important that the analysis follows the entire process chain to identify and include all essential roles. This is a challenging and onerous task but is far better than simply using the hierarchy or gut feeling to identify these critical positions.
Upon completion, this exercise would have identified positions which we term, “Strategy Enhancers” and “Strategy Contributors”.
Remember that, so far, only positions have been identified. Based on our experience, and provided the strategic “deep-dive” has been completed correctly, Strategy Enhancers normally constitute between 10% to 15% of the current staff compliment. The number of Strategy Contributors differ from industry to industry and depend to a large extent on the degree of vertical integration within the company – where the company controls more than one stage of the supply chain.
A word of caution – do not simply assume that all the C-Suite positions are Strategy Enhancers – the same rigorous evaluation must be undertaken for the C-suite.
Once the Strategy Enhancers and Strategy Contributors have been identified, a further “deep-dive” is required to critically evaluate the current incumbents. The salient objective of this assessment is to establish the capability and effectiveness of the current incumbents. This assessment must be done in a fair and objective manner where subjectivity does not influence the integrity of the exercise.
What is important, is that one needs to evaluate the employees in terms of the strategic objective(s) of the company, whilst applying lateral strategic thinking throughout the process. We recently experienced the value of lateral strategic thinking when working with a IT company – the strategy was to increase sales of a “widget” product. On evaluating the current salesmen, it became evident that they did not have the technical acumen to sell such a complex product. However, through a thorough examination of the process chain, it became apparent that some employees from R&D were far better equipped to explain the technical nature of the “widget” to the client’s customers; provided they underwent some sales training. The result: a staggering increase in sales and the achievement of the insanely ambitious revenue targets. As Edward de Bono stated, “Lateral thinking is concerned not with playing with the existing pieces but with seeking to change these very pieces. It is concerned with the perception part of thinking”.
When evaluating employees, HR practitioners often tend to overcomplicate the process by attempting to use a 9-box matrix or other similar obtuse and complicated measurement tools. In our experience, simplicity is the key and we have used an adaptation of the Boston Box model, as illustrated below, in several similar exercises with great success. The model is self-evident and easy to use – recently a HR Director stated – “When using this, the result jumps out and bites you”.
This is the stage where HR steps up to the plate and demonstrates their strategic value.
Rock Stars and Solid Performers unequivocally belong in the Strategy Enhancers or Strategy Contributors population. HR however needs to establish the reasons for the low performance of Question Marks and introduce training to elevate them to Rock Star status. HR is also responsible to evaluate whether a Problem Child warrants the status of a Strategy Enhancer or Strategy Contributor – if not, these employees must be classified as Non-Strategic (refer to Phase 3).
Then, in conjunction with Line Managers, HR needs to:
- ensure that KPI’s are set for the Strategy Enhancers and Strategy Contributors. These KPI’s need to be aligned with and promote the attainment of the strategy;
- institute quarterly monitoring of the KPI’s with both employees and Line Managers. It is essential that regular but at the very least a quarterly “conversation” is held with the employee rather than the traditional “once-a-year” evaluation. Further, HR and the Line Manager must ensure that the original KPI’s set, remain relevant and appropriate to the strategy – any revision to the strategy necessitates an immediate change to the KPI’s;
- introduce short term incentives to inculcate a performance culture, drive behaviour towards the strategy, reward attainment of objectives and retain these crucial groups of employees.
In our experience, this type of “deep dive” analysis identifies that approximately 50% to 65% of employees are either Strategy Enhancers and/or Strategy Contributors. What of the balance of employees who we refer to as Non-Strategic?
HR can now start to evaluate Non-Strategic employees, comfortable in the knowledge that retrenchments must come from this population and that if retrenched, this will not derail the strategy of the company. Strategic thinking is still required in this phase. If for example, the strategy is to significantly increase revenue, HR needs to examine whether the large department of Cost Accountants is not a hangover from the previous strategy where cost containment was the primary focus – if so, they are not Strategy Enhancers or Strategy Contributors and are concomitantly Non-Strategic.
Retrenchments are unfortunate but are sometimes necessary. If this process is followed, HR will demonstrate their strategic insight into the business, identify critical roles, become an integral part of Line Manager’s planning and strategy and become a “Talent Leader” by nurturing and promoting talent.
If you really want to kill morale, have layoffs every two months for the next two years” – Tom Peters
The “deep dive” will unambiguously identify those employees who should be retained and the Non-Strategic population from which retrenchments must be made. This scientific approach will facilitate a single round of retrenchments thus preserving morale while at the same time, achieving adroit cost reductions – cost savings that actually strengthen the business.