The Great Termination

The #greatresignation is turning into the #greattermination. Increasing borrowing costs and cooling of consumer sentiment in the face of rising inflation are driving down revenues and putting pressure on margins for companies. It seems like the job market is turning back against workers in favor of managers and owners.

Recessions provide managers with ample opportunities to rebalance workloads and trim employees they regard as a low-performers.

There are myriad ways to terminate an employee. Perhaps the most famous was practiced on NBC’s The Apprentice. On that show, each week the lowest performer was summarily terminated by the show’s host at the behest of the show’s producing team. The highest performer received a reward, and survived until the next round of performance reviews, repeating the process.

In real world business circles this is called stack ranking and is not without its critics. The working environment it tends to foster is one of intense competition and dog-eat-dog energy. Salespeople and others who make their living meeting concrete revenue numbers thrive in this kind of system. Is it not effective for more collaborative work—for instance a team of engineers working on a new software system or a team tasked with producing content. Stack ranking can also devolve into a system that rewards favoritism and cronyism and discourages dissenting opinions.

For its faults, stack ranking is fair—assuming employees know that the system exists and they are being graded on it. Once you’re in the bottom 10% (or close to it), you know it’s time to polish the resume and find a new home. This is known when you are hired, and you work to make the cut.

A more sinister tactic for firing people is constructive discharge. In a nutshell: managers turn up the heat on employees and starve them of resources and respect to a point where they voluntarily find a new job. This process could involve overwork, shifting benchmarks, ignoring requests for guidance or support, setting unrealistic or impossible goals on performance reviews, etc.

For employees, constructive discharge can lead to work related stress and resentment. It can also foster an environment distrustful of management amongst the target employee’s peers–they see a person being forced out this way and wonder when it will happen to them.

For employers, however, this process has many benefits: it is legally difficult to define and hard to prove in court. It also saves managers the hard work of actually firing someone.

A third, and perhaps more equitable, method of firing is transparent separation. This method gives ample warning to an employee that they are about to fired and they need to start looking for a new home. There is no ambiguity: they know they’re cut and can start looking immediately for a new job. This can help the fired employee because they are more likely to land a new job while employed and can help with onboarding a replacement or shuffling off tasks to others on their team. It’s not for every employee, and not applicable to large reductions in force, but for many candidates it is a respectful move for management to make.

Managers believe “winter is coming” and the balance of power will again tilt again in their favor. With some prominent economists calling for years of high unemployment as an antidote to inflation, a recession induced by powerful economic forces seems imminent. Setting aside demographic and societal issues around the current work shortage, managers have to ask themselves: how will they handle the culling?