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Should Underperformers Receive Severance?


In an interesting turn, underperformers at Ford Motor Company are being offered money to leave. Well, sort of. They’re being given the opportunity to accept a severance package or, if they stay, the more traditional performance enhancement plan (PEP).

As the Wall Street Journal has pieced together:

  • The talent-management policy primarily focuses on Ford’s long-term employees who have eight or more years of service and whom the company has identified as underperformers who have demonstrated a pattern of declining performance.
  • These underperformers can take the severance or enroll in the enhancement plan, which can take four to six weeks to complete (The Detroit News adds that the process entails weekly check-ins during that time).
  • Those who choose the enhancement plan but fail to improve won’t be eligible for severance.
  • Managers who have low-performing employees with less than eight years of experience can skip the performance-enhancement plan and move to an involuntary separation with severance.

The changes are intended to simplify how managers confront poor performance and provide an alternative to the improvement plan, which can be an intense period of work for employees, a Ford spokesperson told WSJ.

As SHRM points out, it’s a bold move—and a stark contrast to mass layoffs which, by the way, Ford also executed in August. However, as Entrepreneur brings up, this new phase is taking a gentler approach—a scalpel versus a sledgehammer, if you will—to reduce its headcount further.

Not all employers have the resources to be so generous, but that doesn’t mean they can’t walk away with a bit of inspiration on how to manage their own underperformers. After all, many will agree that innovation is long overdue when it comes to performance management. Gartner reports that 95% of managers are “unhappy” with traditional performance reviews and spend 210 hours a year administering performance management tasks. And for what? Half of employees believe that annual reviews are inaccurate and unmotivating. About 98% of businesses believe performance management is important, but only 64% say they have an effective approach.

It’s been a strange few years when it comes to managing underperformers. The hard-and-fast productivity rules were thrown out the window as the pandemic hit. Even workers who stayed as (or even more) productive during the pandemic have inevitably burned out—either by actually quitting or quiet quitting. As we settle into a new normal, employers attempt to redefine productivity and reassess who their underperformers are (and why they fit into that category). Employee feedback loops and other communication tools are coming into focus to supplement performance management measurements.

Austin-based software platform Fourth told BuiltIn about the incremental changes it plans on making in 2023 to improve retention and track performance.

“Based on feedback, we are…implementing a new human resources information system next year as well as building career pathing, modernizing our performance management process and implementing succession planning,” says Melissa Garza, Fourth’s CHRO. The company is also piloting an accelerated program that provides funding for employee development and the opportunity for applicants to have face time with executive and senior leadership teams. Also in 2023, Fourth will implement a new segment in which each executive leadership team (ELT) member will share tools that have helped them throughout their career. “This will provide access to the ELT for all employees and the opportunity to engage with them in new and different ways,” she adds.

Paychex HR Coach Lindsay Mastrogiovanni tells SHRM that managers should rely on input from underperformers to “draw a road map” with clear goals from management to help them get better at their job. 

“Give opportunities for employees to ask follow-up questions so they can better understand expectations and the outcomes they should be producing,” she says. “Monitor your reaction to these conversations—negative responses can discourage employees from seeking help or asking questions.” 

As for the voluntary severance aspect, the policy isn’t particularly new to business. Ford even admits it results from “conducting market research and benchmarking its practices against those in the tech industry.” Experts see it as part of Ford’s grand “refounding” plan to restructure the business as part of its Ford+ growth plan which The Detroit News reports “looks to leverage electrification, digital connectivity and commercial vehicles to drive new forms of recurring revenue and change Ford’s relationships with customers.”

If you follow suit, be sure that any voluntary severance packages you offer are thoughtfully constructed and free of language, determining factors, and decision periods that could bring age discrimination or other legal issues into question. Chrysler parent Stellantis also recently offered voluntary buyouts, but to salaried employees ages 55 or older who have been with the company for at least ten years. It’s a different approach—seemingly not tied to underperformers—but one also aimed at reducing the more expensive headcount in the top half of the food chain.