Cutting Poor Performers Never an Easy Task

It's a task that befalls managers everywhere, at least occasionally: firing employees because they aren't doing their jobs well.

Although employees who aren't up to snuff are often quietly dismissed, American Management Systems Inc. of Fairfax, Va., took a different tack Feb. 23 when it released about 350 employees that company officials publicly said were poor performers or did not fit with the company's direction .

About half the people losing their jobs did not have the skills required for their positions, interim President and Chief Executive Officer William Purdy said in an interview with Washington Technology. On a percentage basis, the highest number of positions affected at the systems integrator was vice presidents, he said.

AMS, which employs about 9,000 people worldwide, announced the cuts Feb. 15.

AMS is not alone in dealing with poor performers, according to human resources managers and consultants, who said that changing business needs and tougher economic times are forcing companies to take a hard look at their employment needs.

"Many organizations, when faced with changing economic requirements, will use that [opportunity] to reconfigure the skill sets of employees, or for that matter, to upgrade the quality of employees," said Bob Smith, senior partner and vice chairman of the labor and employment practice at Washington law firm Morgan, Lewis & Bockius LLP.

"It's happening in both emerging businesses now because of the downturn of the economy, and in traditional brick-and-mortar companies, that are focusing on core businesses and moving to control costs," he said.

If a company needs to release a large number of employees at one time, "they'll usually choose the ones that are the weakest performers," said Gregg Prillaman, a practice leader with the human resources strategies group of Deloitte & Touche of New York.

AMS' action came after an employee survey found 72 percent said their chief complaint with management was willingness to tolerate poor performance, Purdy said.

The company, named one of Fortune magazine's "100 Best Places to Work," was "winding up with poor performers who needed to be carried by their teammates," Purdy said.

"We're proud of being one of the 100 best places to work ... but every business just has to recognize [when] something doesn't fit," he said.

Many companies survey employees, and it's not unusual to hear from them that management should deal more firmly with workers who aren't up to par, consultants said. However, some said it is uncommon to release a large number of employees for poor performance at one time.

"I've never run across company eliminating [so much] staff for performance," said Beverlee Rydel, a consultant in Macomb, Mich.

AMS also announced that another 350 people will be let go as the company restructures this year. The cuts, amounting to about 10 percent of the company's U.S. work force, were announced along with fourth-quarter earnings of $16.6 million, down from $18.4 million in fourth quarter 1999.

During the past year, AMS stock has ranged from a low of $14 to a high of $44.38. It closed at $23 Feb. 26.

The tight labor market for technology professionals might have contributed to AMS' problem with underperforming employees, human resources consultants said.

"With the tight labor market, a lot of managers have bent over backwards to keep employees, even those who are really marginal employees, because having somebody is better than having nobody," Prillaman said.

Consultants also gave AMS officials high marks for candor.

"They are taking the bull by the horns. I respect them for doing that and being public about it," said Gary Cluff, a human resources consultant in Vienna, Va.

Because AMS officials were frank about the layoffs, their recruiting efforts probably won't be harmed, Cluff said. Purdy said despite the layoffs, AMS will hire as many as 2,000 new employees this year.

"The people they are trying to attract will be pleased to know they don't carry dead wood," said Cluff, whose clients include several large tech firms in the Washington metropolitan area.

Unless a company faces dire economic constraints ? which AMS does not ? employers don't fire workers without first trying to improve their performance, according to human resources experts and managers at other systems integrators and technology consulting firms.

At AMS, a virtual university provides workshops, seminars and certificate programs. Its distance learning component includes more than 500 computer-based technology and business courses.

"Managers will make a genuine effort to try to improve employees' performance," with training, coaching and warnings, Prillaman said. But after a year or 18 months, most companies will release employees if no improvement has been made, he said.

Every company should have a performance management system to track evaluations and the employee's progress, Smith said. Most organizations set standards and objectives when employees are hired and assess their progress periodically.

"Part of the supervisor's responsibility is to develop the individual to fullest potential, to provide clear expectations and constructive feedback that addresses strengths and weaknesses and precisely what [the employee] needs to do to correct [problems]," Smith said.

Some managers need help delivering negative news, Rydel said.

"In a lot of situations, we have to work with the supervisors to explain how they should be doing the reviews," she said. "A lot of them don't like confrontation. [But] you can't continue to give someone a satisfactory review if they are borderline."

If layoffs similar to AMS' had happened at Booz-Allen & Hamilton Inc., "my self-criticism would be that we had not been managing performance assessment very well and how we could find at any one time 300 people who were not performing up to expectations," said John Honor, director of human resources.

Booz-Allen, a technology consulting firm in McLean, Va., uses 360-degree reviews in which the employee and everyone who interacts with him or her contributes to the evaluation. The resulting career development plan might include on-the-job training, coaching, mentoring, self-study or formal course work.

"If a person goes through several cycles, and it is obvious that he isn't making it, we will counsel people that maybe they should be taking other opportunities," Honor said.

At systems integrator Computer Sciences Corp., managers assess employee progress toward defined objectives annually and also present a development plan. The 68,000 employees of the El Segundo, Calif., firm can improve their skills via computer-based training courses and by exchanging information with workers throughout the company, said Jack Farrell, vice president of human resources in the company's federal sector.

"We give them every opportunity to overcome the performance problem," Farrell said. "If, and only if, they fail would we consider termination."

Employees at Deloitte Consulting of New York are reviewed twice annually. They also get feedback at the end of each assignment, said Lindsey Watson, director of human resources in Texas.

"If there are any [performance] issues, [employees] get feedback right away. They really appreciate it," Watson said.

Employers also said they provide various opportunities to move within the company so skilled workers don't get complacent or unhappy.

"If someone gets into a job they end up not being very happy with ... they are pretty free to transfer," Farrell said. "We don't want them leaving because they are unable to pursue their interests within the company."

It's never easy to let employees go, consultants and managers agreed.

"We have personal relationships with these people," Watson said. "It's difficult when the person has been a very good employee, and it just doesn't look like the person is going to develop. Maybe that person is stagnating. Those are hard messages to send. [But] we still have to tie their performance into the business."