IT'S CHEAPER TO KEEP A GOOD EMPLOYEE

       David Bell, MD of Ra-Kahng Associates, says companies should be more selective when making job cuts By Nina Suebsukcharoen
       Being a high performer is not always a sure ticket to career success because when the going gets tough, as it has been lately,the best people are often shown the door along with others who don't meet their high standards, says David Bell, managing director of Ra-Kahng Associates, the Thailand licensee for the Crestcom International management training company.
       This interesting point surfaced in a survey of local companies undertaken by a large finance firm, which could not be identified for business confidentiality reasons. Most of the participating companies said that when redundancies were undertaken they cut right across the board without taking individual performance into consideration.
       Mr Bell questions this approach, saying it would be better to keep the high performers and motivate them.
       "It is difficult to do that, and there are legal restrictions of course, but I would have thought there should be more effort to identify the high performers," he said, adding that in most most companies a small number of people account for a disproportionate amount of productivity.
       He drew attention to Pareto's Principle the 80-20 rule - a formula developed by the Italian economist Vilfredo Pareto which states that in most companies 80% of the work is done by 20% of the people. The split could vary a little, say 70-30 or 60-40, but it is the high performers who make a huge difference in overall profitability. A large number of companies are hamstrung by having numerous workers who just come in to do the job they are paid for without trying to shine or improve in any way.
       Mr Bell says it is important to find and develop talented employees, because this is the way to get out of the recession and build up business again.
       The tendency to make across-the-board job cuts is common in other countries as well, but Mr Bell has noticed that in some countries there is more effort to retain high achievers. However, it seems the legal structure in Thailand and many other places tends to promote equal, across-the-board redundancies.
       Pointing out that companies have to pay a set amount of money in severance pay depending on the number of years those laid off have put in, regardless of their performance, Mr Bell said he would rather pay more and keep the good people to ensure a better future for the company.
       He said employers had to watch out for cases of "why did you fire me and not them?"and being able to defend their decisions, but making the effort to be more selective is still important.
       Another key point that emerged in the survey is that companies should come out of this recession leaner and more effective than before and would not want to go back to a situation where they had to carry unproductive staff. This means that even when they start rehiring they probably won't employ as many people as before.
       However, Mr Bell said he has heard that a lot of employees do not want to be rehired,with this applying particularly to factory workers who have gone back upcountry after getting their redundancy payment and are happy there.
       This does affect local industries because some of them are seeing production increase faster than was earlier anticipated.
       "Apparently that is happening quite a lot - you lay them off, pay them off and they don't want to come back again and you are stuck with having less people than before."
       Recruiting people could also be problematic at the upper end of the market because some of those who were laid off feel they were treated poorly and do not want to return.
       "I think they also recognise that they are more valuable," said Mr Bell.
       He added that keeping high-potential employees does not hinge just on financial incentives such as salary, time off, gifts and bonuses, because these only have a shortterm effect.
       "For example, give me a salary increase and I'll say that's great. Ask about my salary increase next week and I'll say it's what I'm worth. That is what they pay me, that is my value.
       "It doesn't give me an incentive any more.Short term, for the first week or two, it does,but now I am settled down and that's it."
       He said it is in fact long-term motivators that will make workers want to do a better job, and among these are recognition, particularly public recognition, a sense of belonging and a feeling of being "in on things",making a difference, doing an important job,being respected and being involved in problem solving."People are different and they have different levels of performance. You know, a machine is a machine. It uses a certain amount of power, needs to be serviced once a month or whatever, raw materials are pumped into it and of course it pumps out the stuff it produces at a certain rate. It can't go any faster than that - that is what the limit of the machine is.
       "But a person doesn't have such limits, so you can motivate them by making them feel that they are doing a great job. Sure they have to be paid properly, but making them feel that they are part of the organisation and that they are doing something that is worthwhile is going to make them much more motivated."
       Mr Bell said the biggest hidden cost of a company is in fact staff turnover, because this expense does not appear in the bottom line. This point emerged in a system worked out by the Saratoga Institute which was adopted by the Society for Human Resource Management.
       Mr Bell and one of his associates put a lot of work into this issue, and determined that the average cost of replacing somebody works out to be about 30-40% of their annual salary.
       This takes into account the time and money spent on advertising and hiring a replacement,and even after the new employee comes in it could take three to six months before the employee becomes productive because it would take that long to learn the job and get to know the company and its people.
       "Of course, you could say that you saved money because you weren't paying anybody a salary during the period before hiring, but is this really a saving or a cost? I think it's a cost.
       "If that job is a worthwhile job it has to have value to it on top of the salary, otherwise you wouldn't hire someone to do it."
       Mr Bell also mentioned the outcome of a study done recently in seven European countries which found that more than 70%of executives who quit their companies did so to get away from their bosses.