The Ghost of Ebenezer

Last week three of my clients implemented staff reductions. All three are financially healthy service companies, but they had far more capacity than they had work to fill it. In a service company, of course, capacity means people.

Naturally there was considerable agonizing among the owners and managers about the timing of the move. While everyone involved in the decision process agreed with the numbers and the necessity, when the time came to name the names of people to be let go they balked. Some wanted to wait a bit longer to see if things improved. Some felt that the company had an obligation to keep employees until it was clearly unprofitable and deeply in trouble.

Many prevaricators, however, simply didn't want to look like Scrooges by doing something now. They wanted to make the necessary business decision, but hold off on the announcement until just after the first of the year.

Why would you think that terminating someone in January would make them think you are a good guy? Most folks aren't stupid. The normal lull in business activity at the end of the year isn't a surprise and wouldn't be the reason, so they would know that the decision was made some time before. As they thought about it, they would realize that at least some folks were toasting them at the holiday party and giving them best wishes knowing full well that they were dead men walking.

Then the January bills come in. "If I had only known..." they would say. I wouldn't have bought so many presents. I wouldn't have thrown that party. I wouldn't have booked that airfare for a short vacation. I wouldn't have blown my year end bonus.

I wish I had known when I went to those business open houses and our vendors' holiday parties. There were lots of opportunities to network there, if someone would just have warned me that I needed to.

Finally, many if not most employees spend the holidays with family. The security and affirmation or loved ones is at its highest over the next few weeks. The common post-holiday let down isn't a great base for dealing with a new shock.

There is never a good time to tell people that they are no longer employed. In a small business, where the owner knows every employee and probably their families, downsizing is especially painful. Making the decision and telling people after the holidays, however, is a special form of cruelty. Like the Santa Clause bonus bosses mentioned in my last posting, these are self-serving motivations. The boss just doesn't want to look bad; to have folks think of him as cold and heartless when he is working so hard and spending so much money to look like a great guy.

Instead, let's praise the boss who makes the painful decisions to protect the employment of the majority, even though those decisions may not make him look good personally. That takes courage and leadership.

Gifts are not incentives, and incentives shouldn't be gifts

I knew a couple who owned a company with about 20 employees who had what may be the worst incentive distribution plan I've ever seen.

The company gave out large holiday bonuses every year at the company party, which was the last day before closing at Christmas. There was no documentation of how the amounts were decided, each employee received what the owners felt they "deserved."

Worse than that, they gave out the bonuses by putting them in envelopes and hanging them from the company Christmas tree.

Wait- it gets worse. The owners had a standing family obligation for the holidays in another city, so every year they left the employees to celebrate on their own, and to open the bonuses together!

One year things had not gone so well for the company. They had eked out a small profit, but nothing like the highly successful year prior. The owners were determining bonuses, and each was running at about a third of the prior year's amount.

The owners weren't particularly concerned. The bonuses were gifts, after all, and they had no obligation to pay them. The employees certainly knew that it hadn't been a great year, so further explanations shouldn't be necessary.

They came to one employee who had worked very hard. He had really stood out that year, and was largely responsible for what success they'd had. The owners discussed it, and decided that he needed to be rewarded for his exceptional performance. Instead of a third of his prior year's amount, they gave him 80%. Since they knew the employees discussed their bonuses, the recognition would be obvious to everyone.

The employee party went as before, with the envelopes distributed from the tree, and all opened at once. The high performer took out his check, read it, exclaimed "Those bastards!" and walked out the door. He never came back or spoke to another person in the company again.

A holiday gift should be just that, a gift. It should never be a major portion of the employee's compensation. Even if your business structure dictates end of year incentive distribution, keep it separate from the holiday "bonus." Give turkey, or a ham, or a check for $100 inside a card.

Gifts are gifts. They are tokens of appreciation. Bonuses are rewards for work performance, and must always be tied to specific goals and measurable objectives. In the case above, all the employee had to go on was a yardstick that said "I worked a lot harder this year and they appreciated me less."

It's weird how this time of year makes so many business owners start acting paternal (or maternal.) They run a great company 364 days a year, but for one day they want to play Santa Clause or Ebenezer (after the ghosts) by displaying warmth and largess and goodwill towards man.

That's a great sentiment, but put it in the right place. In January you will want employees who understand they have a boss, not an extra Daddy or Mommy.