…make sure it is smart loyalty.

One suggestion we make for companies dealing with challenging economic or political situations is to try to keep your workforce on, since if you cut them now you are probably going to have to hire them back later when things get better, and you will have a better relationship with them if you keep them engaged throughout this period (or you may end up hiring brand new people, which will slow down your efforts to restart since they are not as familiar with your company).

Having said that, you may feel like you must let some people go if your firm is to stay in business (as both Caiphas and Mister Spock taught us, “the needs of the many outweigh the needs of the few…or the one”). Or, you may simply feel someone is not pulling their weight, whether in good times or bad, and it is time to let them go. Either way, you are going to have to deal with the conflict between your business needs and your sense of loyalty.

You hope for loyalty from your employees, and so in turn you must demonstrate it to them. People who do good work for you deserve to be treated fairly and respectfully, and if they work hard for you then you should try to keep them in the job. The basis for that loyalty, though, needs to be something important to the firm. Ideally, you should be demonstrating the strongest sense of loyalty based on performance and potential rather than simply on longevity and seniority.

Unfortunately, the latter criteria often become most important, especially here in Asia. An HR executive in Malaysia shared with us recently that their firm is preparing to lay off as much as 20% of their workforce by the end of this year, due to some turmoil they are facing in the financial markets. However, the CEO has identified one person who absolutely will not be laid off because “he’s been here so many years.” When employees are being considered for layoffs, his name will not even be on the list for review.

Now, it is nice that this employee has been with the firm so long, but is that really relevant? The real question should be what he is doing for the firm. You would like to think someone with that much longevity is a contributor, but it might simply be that he knew no one else would hire him because he’s so bad, so he managed to stay on. Do you want to be cutting skilled people while holding onto somebody for the simple fact they have been around a long time, regardless of their abilities? If so, that is a recipe for trouble.

That is not just a hypothetical situation; in this case, the employee in question not only does not do much, but also, since learning of the CEO’s decision, now does even less because he knows he cannot be fired. Removing his external motivation to do good work leads him to be an even less productive employee.

If you want to consider longevity in your layoff decisions, fine. Just do not make it the only factor, or even an important one. While you want to be loyal to individuals, you also need to be loyal to the firm as a whole, and keeping individuals who are not as talented does not satisfy that need. Reward those who do well and you will end up rewarding the whole company instead of just a few individuals who may not even deserve it.