Opinion: Tories advised to make it easy to fire people, for the sake of growth

The Telegraph reports today that a leaked paper advises the Government to consider changing the law to make it easier to dismiss ineffective workers without risk of being sued for unfair dismissal. The report’s author, Adrian Beecroft, a venture capitalist, apparently believes that Britain’s employment laws are a serious factor in affecting the success of companies and that freeing managers up from having to consider unfair dismissal claims would encourage growth. He claims:

The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation.

This report is surprising for a number of reasons. Having worked with senior managers and executives across a large range of industries in the corporate sector, I am in no doubt at all that there does exist a very real problem with businesses’ inability to terminate the employment of unproductive workers. The press love to write that this is a problem in the public sector too. If they work in the same way as the corporate world I imagine this is true.

However, I would draw a drastically different conclusion than Mr Beecroft on the causes of this malaise. Without a doubt, the main reason that underperformance is not addressed in the business world is that managers and leader largely lack the skills to have difficulty conversations necessary to develop people. This is a feature of humanity, we hate confrontation and have no training for it.

People with great technical expertise get promoted into management roles with no idea how to best have these performance conversations. They stumble, the fail and they avoid. Often they cite employment law as an excuse for not tackling the issues head on, but make no mistake, it is an excuse. What is required is a training intervention with the managers themselves, not a change to the law that means they don’t even need to have the conversation at all but can just fire people without recourse, moaning about the complexity of the safeguards in place.

Even if a business is lucky enough to have a leader or manager with the skill and will to address poor performance issues, often it’s an HR department that is overly risk averse and stops the leader from taking action. Colleagues have told me about torturous processes within organisations themselves, as HR tries to ensure that the business is not exposed to tribunal proceedings. I am sympathetic to this, as for sure there are examples where an HR department would rather you just ignored an issue. Does this mean that the law should be changed so that there is no proof of wrongdoing required? I think somewhere in the middle is the sweet spot.

This call is somewhat surprising coming from the Tories, a party which believes firmly in personal responsibility. The managers and leaders must take responsibility for developing the skills necessary to have the difficult conversations. It’s their failure to address this skills gap and the risk aversion of HR departments that is causing the problem, not the complexity of the law alone. It’s the businesses challenge to encourage this skills development and to ensure HR is courageous, not simply the government’s role to address it for them.

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18 Comments

  • Of course this Tory wish won’t come true . The Lib Dems are in Government.

  • This call is somewhat surprising coming from the Tories…..

    You are kidding right? Your analysis is pretty spot on in the article but the political insight I have to question!

  • Matthew Huntbach 26th Oct '11 - 11:59am

    My experience is that if you make people scared they will be thrown out of their jobs, they will keep their heads down, do whatever is necessary to tick the boxes, stop trying to think differently or be innovative, and the resulting destruction of morale and stifling of creativity will seriously damage overall performance. I have seen this again and again in organisations I have been involved with or know about. Rule by fear really does not work. Only those who come from such privileged and wealthy backgrounds that they have never known true fear about survival when no job means no money means no home cannot see this and so go on spouting out such clueless nonsense as these latest Tory proposals.

  • If employees are afraid they may lose their jobs without recourse to legal protection then they may be less likely to spend money and more likely to be savers. If people don’t spend money then the economy will not improve.

  • Nonconformistradical 26th Oct '11 - 12:17pm

    “People with great technical expertise get promoted into management roles with no idea how to best have these performance conversations.”

    The whole idea that managers should somehow automatically be regarded as superior in terms of status and salary to those with great technical expertise is a real problem. The person using their great technical expertise may be worth far more to the employer than the same person ‘promoted’ to a managerial position for which they may have neither the aptitude nor the desire but who forsakes the role at which they perform well for a higher-paid one at which they are as good as useless.

  • I think that getting rid of useless managers is far too difficult at the moment. In companies which are either so big that some areas can effectively be insulated from markets or where the market they operate in is very large (and the consumers in it are loath to change suppliers) you get a lot of completely useless managers floating around who waste huge amounts of money.

    I’m thinking of a specific company when I say this, I know plenty of people who work in different divisions of this company – which is very large for its sector. The universal comment made is that the most profitable division of the company is also by far the most worst managed, with managers that couldn’t organise a piss up in a brewery effectively throwing hundreds of thousands of pounds down the toilet. This is because the other departments (which are run very efficiently) have small niche markets with strong competition; whereas the most profitable department has several very large and loyal markets – competition isn’t a real threat to this department and they feel no need to be responsive to the market place or the needs of employees. The department shifts around incompetent managers rather than investing in firing them, as there’s no incentive for them to put in that effort!

    So it’d be very good to be able to remove poor managers.

    On the other hand, in countries with very few workers rights (eg USA) you tend to end up with lower ranking employees getting fired for spurious reasons but those higher up remaining in place even when they are incompetent. I think that the labour laws are fine for those lower down but specific legislation needs to be brought in to make it easier to sack those higher up, specifically. Simply relaxing workers rights is more likely to lead to those lower down facing the axe more easily, whereas those who can’t do their job higher up still find a way to cling on.

    I have two more criticisms of the (otherwise excellent) piece:

    “People with great technical expertise get promoted into management roles with no idea how to best have these performance conversations.” – my experience of managers, first and second hand, is that those who have actually done the work they are managing tend to be better managers.

    Lack of promotion prospects often leads those with technical expertise to leave companies out of frustration and the most useless managers tend to be that particular kind of manager who regard management as a career rather than a rank. I am, again, thinking of the same specific company I alluded to earlier.

    So, basically, we need to move the other way in my opinion, it’s easier to teach management skills to a person with technical expertise than to teach technical skills to a person with management expertise.

    “This call is somewhat surprising coming from the Tories, a party which believes firmly in personal responsibility.” – the Tories believe many things and one is deregulation for the sake of it, which I suppose makes sense given their funding. So I’m not too surprised at all. As usual our job should be to moderate or kill whatever bad policy the Tories throw up.

  • Andrew Wimble 26th Oct '11 - 3:31pm

    How about a bit of evidence based policy making for a change. If this report is right and difficulty in dismissing people is a serious barrier to growth it should not be hard to find evidence. Where are the figures that show that countries with strong employment laws (i.e. Germany) are doomed to have inefficient companies and low growth. It is easy to make the assumption that making it easy to sack people will be good for business, but that doesn’t necessarily make it true.

  • Andrew Suffield 26th Oct '11 - 8:11pm

    This isn’t even really the Tories. Make no mistake, I know there’s a few in their ranks who would agree, but mostly this is the ranting of a nutty vulture capitalist.

    The government has already issued a mild comment to the press that they don’t expect this report to be implemented.

    I agree with the general principle that we shouldn’t follow random suggestions made by crazy people.

  • Good article Lee. I have observed that it is often the case that the quick fix of a dismissal results in a very costly and often backward step of replacing the individual/team/department with something that turns out to be worse than the original (I have always worked in the private sector). Making this easier seems wrong from a management point of view, let alone the clear negatives for the employee.

  • Clearly Cameron is having problem sacking underperformers and needs legislation to enable him to do a proper reshuffle

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