Firing Poor-Performing Employees May Improve Work
Firing Poor-Performing Employees May Improve Work Quality, February 2005
A recent study shows that “rank and yank” systems could improve the performance potential of a typical organization.
A study publishing in the latest issue of Personnel Psychology finds that forced distribution ratings systems (FDRS), where a predetermined percentage of low-performing employees is fired every year, can be an effective way to improve a company’s workforce. By asking if it is “reasonable to expect that an organization would be able to improve the performance potential of its workforce by firing the workers judged to be performing most poorly, and replacing them with promising applicants,” the authors create one of the first studies to address this performance management system. Supporters of FDRS believe it motivates the best employees, removes dead wood, and helps to develop strong leaders. Detractors see a myriad of problems including a system that is open to bias and discourages teamwork. The authors found that “in all our scenarios, workforce performance potential at the end of the simulation was higher than it was at the beginning.” The overall impact of FDRS on the company’s performance was not measured.
Using a computer simulation, they modeled organizations’ ability to improve the quality of their workforces over a thirty year period after implementing FDRS. For the study to be accurate, they included the most significant variables: percentage of employees fired, reliability of ratings that determined who is fired, validity of methods to hire new employees, the selection ratio of new hires, and voluntary turnover. Under conditions where the greatest numbers of poorly rated employees were fired and the rating system used to fire them was reliable, the average potential rose forty-eight percent— the highest. In general, the annual average improvement was approximately sixteen percent for the first two years falling to two percent in year six and one percent in year ten. After year twenty there was no improvement. “From a statistical or psychometric perspective, FDRS definitely hold promise for improving the average potential of organizational workforces,” state the authors.
This study is published in the current issue of Personnel Psychology. Personnel Psychology publishes applied psychological research on personnel problems facing public and private sector organizations. Articles deal with all human resource topics, training and development, performance and career management, diversity, leadership, rewards and recognition, and work attitudes and motivation.
The author, Dr. Scullen is available for questions and interviews. Please call him at 515-271-3080 or email steve.scullen@drake.edu. Any time except Monday, Wednesday, and Friday mornings.
February 16, 2005
Robert A. Cameron & Associates Takes a New Approach to Quantifying and Solving the Issue of Employee Productivity and Company Profitability
One of least understood and unquantified expenses in business is the impact of low performing employees productivity on profitability. With new research available Robert A Cameron and associates has a method of calculating the value of the impact and offers suggestions on how to correct it.
(PRWEB) February 16, 2005 -- In business there are two very necessary and very different forces which must be balanced so that business will perform perfectly - people and processes. But far too often they are not in balance. CEO’s are ranking people issues as one of their major concerns in 2005 as they struggle with productivity, profits, and labor shortages. Robert A. Cameron & Associates takes a new approach to quantifying and solving this growing business issue.
This is a critical issue as people have a very real financial impact. Even if you have every process of your business working perfectly, people problems can still be the difference between profit and loss.
That’s exactly what a summary of eighty-five years of research has shown very clearly. Frank Schmidt and John Hunter – two of the foremost experts in personnel productivity and psychology – reviewed dozens of studies on the impact people have upon the success of organizations. One of their most interesting findings is related to productivity.
What their research showed them was that for every job they reviewed, about 16% of the people in any job fall into the “superior” category, 16% in the “poor performer” category, and that the vast majority of people were “average performers”. However, the most significant finding is the difference in employee productivity. It ranges from a 38% boost from a “poor” to “superior” performer in an unskilled position to a 98% boost from “poor” to “superior” in management positions.
Robert Cameron examined how the differences in the productivity in each category affect a company financially. Using a company size of about 75 people, his conservative estimate of the cost of having average versus superior performers is around $800,000 per year. What is the easiest strategy to improve the bottom line?
First, do whatever it takes to move “poor-performers” out of that category and into the “average” category. Your second objective would logically be to start moving your “average performers” into the “superior” category. And then your focus should be ensuring that you do all that you can to maintain the situation where all of your workers are in the “superior” category.
This approach provides you with a firm framework for effectively managing one of your largest investments – your human capital – in a manner that ensures that return on your investment are maximized through focus on clear measurable objectives.
To avoid unnecessary people costs, you must be sure that every time you make a people decision – whether you are hiring someone new, moving someone from one job to another, promoting someone, or investing in training or development – you are doing so with a view to achieving superior performance in the target position.
But how do you do this and why do some people perform at a superior level and some don’t? That factor is “Job Match.”. It has to do with matching people with work that fits who they are; their unique combination of abilities, temperament, motivation, and other intangible human qualities.
To achieve a good job match you should use employee assessments to improve your selection process. The cost of using assessments is offset many times over by the gain in employee productivity. Hiring more people like your best people gives you more superior performers, and greater productivity and profits.
For more information on this critical business issue or employee assessments, available worldwide, contact Robert A. Cameron & Associates, Weston FL, a Strategic Business Partner of Profiles International. Mr. Cameron works with employers to help them increase the effectiveness of their employee selection, hiring and development, and improve their company’s productivity and profitability. They can be reached at 954-385-8701 or visit their website at www.racameron.com
This is a ‘pay’ article and can be purchased at the website below.
The differences in revenue generated by high- versus low-performing employees. This is commonly set at 40 percent of the average employee salary. ...
www.workforce.com/archive/article/23/40/88.php
