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Expert: Go slow on staff cuts despite harsh times

Prof Robert Kaplan, Marvin Bower Professor of Leadership Development, Emeritus at the Harvard Business School. PHOTO | FILE
Prof Robert Kaplan, Marvin Bower Professor of Leadership Development, Emeritus at the Harvard Business School. PHOTO | FILE 

Kenyan firms have been warned against laying off staff as a reform tool when faced with harsh economic times.

Harvard academic on leadership and development, Prof Robert Kaplan, says the best strategy execution involves considering staff as assets and using them to create more revenues rather than shedding them.

The renown American engineer, who together with David Norton created the “Balanced Scorecard” — a means of linking a company’s current actions to its long-term goals — said losing human resource should be the last resort in a restructuring plan.

“People are assets, according to the strategy scorecard; they are not expenses. If you have to lose them, then you must have a well thought-out process that prepares the company for it. And execute it once, rather than in bits, because that has a disconnecting effect on the remaining staff who get delinked from the reform strategy. The cut should also be humane and reassuring to those left working in the firm for continuity of the strategy,” Mr Kaplan told the Business Daily in an exclusive interview.

The business academic met staff from financial services group Britam, where the management is implementing a six-year strategy using Kaplan’s Balanced Scorecard.

The scorecard is a multi-dimensional approach to measure performance. It incorporates both financial and non-financial factors. The framework has been adopted by thousands of strategy management practitioners around the globe with great results.

Britam group managing director Benson Wairegi said the firm was confident of using the acclaimed method to execute its business strategy and widen its geographical, financial and product scope.

“We came across this formula in 2009. By then we were in one country and had a single product, but now we are in more than one country and have a diversified portfolio,” he said.

Many governments and non-governmental organisations have executed the Balanced Scorecard, which the Harvard guru believes should come from within an organisation rather than from external strategists.

Mr Kaplan said most firms fail to include non-financial aspects in formulating and executing their strategies, a factor that contributes to failure in the long run.

Kenyan firms are famous for cutting down human capital after engaging external strategists who recommend staff layoffs as one of the ways to cut costs.

Recently, banks went into a staff cutting frenzy after a law capping interest rates on loans and deposits was passed, thinning their profitability prospects.

First Community Bank is the latest to have shed more than 100 staff, following a strategy restructuring method by an external consultant.

The Islamic lender gave redundancy letters to the affected staff asking them to clear out immediately and await their dues by Monday, December 5 (tomorrow).

Standard Chartered Bank already disclosed plans to lay off about 600 workers, while Ecobank   said it would retrench an unknown number of employees following a recent decision to close nine of its 29 outlets in Kenya.

Family Bank and Sidian Bank, Equity Bank and Cooperative Bank have also experienced staff reductions attributed to voluntary exits or retrenchments.

Portland Cement and Kenya Airways are among firms with significant government shares that have also resorted to employee reductions in the wake of economic difficulties.

Professor Kaplan, who is also the Marvin Bower Professor of Leadership Development, said he was in talk with several government agencies in Kenya to adopt the plan that has been endorsed by companies such as Mobil and Sears.

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