Episode #374: Do We Need To Adjust Our Expectations About Performance Because of COVID-19

In any organisation we are going to have our A, B and C players. Hopefully no D players but if you do, then commiserations. The Pareto Principle tells us that 20% of our team will produce 80% of the results. Quite straightforward. Why don’t we just fire the 80% and keeping adding to the 20%. Well mathematically it doesn't work and also practically it is problematic. If you have very deep pockets and you can hire the best, then go for it. The rest of us are just hellbent on making payroll. We do our best to hire well, but after the probation period has ended, certain things become apparent. As Warren Buffet famously observed, once the tide goes out you can see who was skinny dipping. In a properly functioning labour market, the poorer performers, could be terminated and replaced. This is where Japan makes the whole premise more interesting.

Covid-19 has crushed the hospitality and tourism industries, so there are a lot of people available on the market for that type of work. Some other industries have had to let people go, so the unemployment rate has crept up slightly. It is still not a market overflowing with talent ready to make a move or looking for a job. People tend to stay where they are and particularly so at the moment. Japan does not like volatility and people’s native conservatism comes to the fore to resist all change. The upshot is that hiring people has become more difficult and is likely to stay that way, as the demographic decline kicks in.

As leaders, we know that there is no point spending a lot of time trying to turn C players into A players. All the research says put your energy into the A players, because they have so much more potential and capability to perform. By definition there are fewer of these people in the team, so technically we should be able to use our available time to work more with them. What do we actually do though? Our emotions drive us to invest in the C players, trying to turn them into Bs. We hired them, didn’t we. Basically, we have discovered they won’t become As, in the vast majority of cases, but B levels seem achievable.

We get irritated by the Cs poor performance. We want to be that rising tide leader who can lift all boats. However, are we deluding ourselves? Are we unable to admit we screwed up the hiring process? Is Covid-19 the opportunity to circumvent the bias in the Japanese legal system in favour of workers? Is this a good time to cut people loose, who are C level and lower? It is astonishing for Westerners, raised in the harsh Darwinian climate of foreign capitalist organisations, that being incompetent doesn’t qualify as a reason to get fired in Japan.

Is this the time to fire them and blame it on Covid-19? It will release some cashflow every month with them gone and reduce the amount of management time that they suck up. The issue becomes what happens after Covid-19 declines and things get back to something resembling normalcy? If we think ahead and we have to consider replacing these staff in the future, there will be costs to that. The current people may not be producing much. Their replacements will also be getting paid about the same amount and for the first period of employment, won’t be producing much either. It varies from firm to firm, but we can expect from 12 to 18 months of very little as the new folk in sales, for example, learn the business and start to create clients. Other vocations may be quicker to skill up, but there is still that gap in performance that equals what the previous incumbents were doing. There is also the groupism of Japan, which doesn’t welcome tossing people overboard like jetsam. “But for the grace of God, there go I” is the dominant fear within the ranks of the survivors.

Getting people is hard, getting good people is expensive. Trying to keep your lower performers may not be possible, if bankruptcy is looming. In that event, many of the team are going to be tossed out regardless, just to reduce fixed costs. Assuming that is not the case and you think you can hang on until the coast is clear, then keeping everyone together may be the better solution. Maybe you have to adjust some salaries down or increase the at risk component of the salespeople’s packages to make it work.

Unlike your competitors who sacked their people, you will have a highly experienced, trained, knowledgeable and full strength team to lead into battle in the marketplace. Your competitors will be down on numbers. They will also face a long period of adjustment, to recruit, train and equip these newcomers to go into battle against you. Their survivor’s engagement levels will be low and their cynicism high. Your team, on the other hand, will be fired up and appreciative. So, if you can afford to keep the team in place, this will be a powerful launching pad for you in the post Covid-19 universe. Presuming any of us actually ever get to those sunny uplands.