Is retirement an effective approach to performance management?

When the compulsory retirement age was abolished in the UK, it highlighted some interesting issues for organisations of all sizes.  Andrew Cave from the Federation of Small Businesses said “if you can’t get rid of someone, you then have to go through the process of performance managing someone out of an organisation.”  He pointed out that, while large organisations may have the experience and HR back-up to manage this, “the average business in this country employs four people; the owner-manager doesn’t necessarily have that expertise.”

Waiting for someone to retire doesn’t seem to be a great strategy for dealing with poor performance; what impact is their performance likely to have on the business before they go?  If managers lack the skill to deal effectively with the poor performance of those approaching retirement, they’re probably equally ill-equipped to deal with the poor performance of younger staff.  While it’s quite natural to want a problem to go away, getting rid of someone really should be the last resort.  Improving their performance should always be fully explored first, and this is where the resources available to larger organisations can be an advantage.  In my experience however, managers in large organisations quite often turn to HR expecting them to sort out the problem, preferably by getting rid of the individual, only to become frustrated when they realise they can’t totally absolve themselves of their responsibility for performance management.

One of the challenges of being an owner-manager of a small business is that you are responsible for everything.  If you lack the expertise to sell or to manage finances, you either have to learn these skills yourself, buy in expertise or face serious risks. The ability to manage poor performance is a similar essential skill.