Does ease of doing business hinge on, among other things, at-will employment policies? Did India modify its strong labour laws that protect employee interest for improving its ranking in the World Bank’s ease of doing business report? Thankfully, the bank has paused the reporting for now on allegations of data manipulation, and to refresh the methodology.

The only country in the world practising at-will employment is the USA, where anyone can be fired without a reason – and the number of cases suing for wrongful termination is also the highest there. While the rest of the world has labour laws that are supposed to safeguard societal interests, employers there find ways to fire people at-will, either by building a case or by creating hostile environment forcing them to quit at their will.

The authors Buckingham and Goodall of the book, Nine Lies About Work, brought home some painful facts about people management. First, the state of people management remains poor. Prior to the pandemic, Gallup reported that the quit rate is at an all-time high: 67% of employees are disengaged at work; and more than half say they are actively looking for a new job. Second, HR lacks a commitment to evidence-based people management (evaluating a decision or policy with evidence such as data and peer-reviewed scientific research to ensure the desired result is achieved).

The HR practices that remain in use, notwithstanding the evidence against them like the forced curve performance evaluations, stem from one root cause: the ability to fire employees even if the laws are not in favour.

Because of this, workplaces are prone to use counterproductive management approaches that evaluate rather than invest in and develop employees. 

Adopting a growth mindset

Each year a substantial number of employees lose their jobs everywhere. The last two years accelerated this trend because of the pandemic. And there is evidence that being fired is not a sign of incompetence, but possibly an organisational mistake. One ten-year study of 2,600 executives found that of those who were fired, 91% found a job as good or better than the one they lost, and 78% eventually rose to become CEO. The idea that the solution to poor performance is termination produces numerous unproductive approaches to managing people.

Research has consistently shown the benefits of adopting a growth mindset over an evaluating one. An evaluating mindset implies that if a salesperson is not meeting his/her target, the diagnosis is that person can’t sell – is not a natural – and should be either fired or moved into a different job. A growth mindset, on the other hand, implies that if a salesperson is currently not effective, that individual might benefit from training in sales techniques and coaching from mentors on what they are doing. A growth mindset implies that not only should individuals play to their strengths but also that many people, with the right information, development, and mindfulness, can in fact develop new strengths.

Implementing a growth mindset is difficult and requires more than just espousing it. There’s a great deal of effort required to develop talent through hard work, coaching and learning. If people are readily replaced, the temptation to fire them and find someone else can be overwhelming. If employers would think of firing as a last resort or consider the evidence on the effectiveness and importance of mindsets and if labour policy makes it more difficult and costly to remove people, employers would be more likely to actually embrace a growth mindset and work more diligently to develop everyone to their full potential.

Performance reviews, which many managers hate giving and few employees like receiving, may be the most detrimental HR practice when it comes to developing a growth mindset.

Evaluations presumably identify who needs to go on “performance improvement plans,” and are used to rank people against each other. If firing people weren’t at the forefront of these reviews, HR managers might still want to provide developmental information, but it almost certainly would take a very different form.  The conversation would focus on how the employee could improve and what the employer and employee could jointly do to develop that individual’s competencies, not the person’s “grade.” And instead of being performed annually or every six months, developmental conversations would occur all the time.

Nine Lies calls high potential programmes that separate employees into strata “apartheid”. If the focus was less on evaluation and more on development, every company would have more “high potentials” because companies would be committed to keeping – and developing – everyone.

Does firing even work?

Consider this logic. Unless the company is downsizing, every person fired needs to be replaced. Unless the company has somehow improved its selection process, or done something to become a more attractive place to work, the organisation will just return to the same labour pool from which it drew the now-fired individual, with the same “deal,” and draw again. What are the odds it will do better?

That is why companies that fire people – and those that downsize – tend to do it again and again, because these actions don’t solve anything.

Here's a useful analogy. Almost no parents have ever “fired” their child. When the child misbehaves or doesn’t live up to their potential, great parents provide love, attention, guidance and motivation, and work hard to ensure the best possible outcome for the kid. Wouldn’t it be nice if companies did the same to employees? Instead of disposing of people, give them second, third, maybe even fourth chances. Invest in them. Provide them the social support necessary for physical and mental health, and the opportunity to do better.

We live in a world of untapped human potential as the enduring pandemic has shown. Fulfilling people’s promise requires a commitment to their development that the opportunity to simply get rid of them renders unlikely.