Hire & Fire vs. Corporate Training: HR Practices in the U.S. and Europe

This cartoon seems to perfectly capture the divergence of HRM practices between the U.S. and Europe. These differences have major implications on how human capital is managed and also how L&D is applied in terms of training on the European continent as opposed to the U.S.

In Europe, there has been an increasing interest over the last decade to foster staff development in terms of providing training—especially on soft skills—when facing underperformance in an organization. However, in the U.S., it is more common to look for better candidates and to replace staff if necessary. The result: European workers tend to stay longer with the same company than American employees, who move between jobs at a faster pace. Both approaches are perfectly eligible practices to increase productivity and performance amongst your workforce. However, they reveal different advantages and disadvantages, as well as short- and long-term implications for your business.

The "Hire & Fire" Approach – A Predominantly U.S. Strategy

If you notice underperformance in your team, it is easy to think that the best way to increase your productivity is to get rid of the ‘troublemaker’ and replace him or her with a more suitable candidate.

The "hire & fire" approach provides huge flexibility for the company in terms of being able to react quickly to market changes. From the organizational perspective, this is an advantageous position to be in as it follows the principle of supply and demand with regards to the employment process. It can be very cost effective. However, this approach also increases staff turnover rates enormously. The turnover can lead to difficulties in managing your knowledge transfer as people leave and take their experience and insider information with them to potential competitors. The disadvantage of a high turnover rate: You can lose your company’s valuable assets.

By following a fast hiring policy, your organization can constantly look for new talent and find staff with higher qualification and better skills for specific jobs. This increases the talent pool in your organization; new people on board also bring fresh ideas and valuable experience. Nevertheless, applicants can deceive you despite amazing CVs, qualifications, and references. Potential hires may not tell you anything about relevant soft skills, which are often the deciding factor of whether or not a team can work effectively. It takes a couple of weeks to see if necessary soft skills are demonstrated and whether or not this person is really a fit for your team.

You may also argue that hiring new staff is more time efficient than training current employees. Nonetheless, constant changes in the team can disrupt team building; the working group has to repetitively define and re-define group roles, establish trust amongst co-workers, resolve conflicts, and develop a daily routine. These processes simply take time and are essential for team members to be able to work together efficiently. The more new people join the team, the longer it takes for all to reach their full performance level. Also, it can be challenging for the team leader to build a stable workforce while always welcoming new recruits. Furthermore, the hiring process is time-consuming as you need to advertise, recruit, and assess potential candidates. This is why you do not really save time favoring new hires over training existing employees. Instead, you simply use the same time toward less favorable outcomes.

The Training Approach – Predominantly in Europe

Another way of dealing with inefficient performance outcomes is to provide training for your staff to develop the required skills to overcome performance shortcomings. Generally speaking, the focus of the HR department shifts toward developing sustainable training solutions for new and existing staff.

A common obstacle against the training approach is that it is expensive, and it may also seem that employees spend too much time training instead of working. When attending training, staff is unable to deal with day-to-day business operations and precious working hours are lost. Also, you might not see immediate employee improvements (of course, a single training session will not change everything overnight). Training solutions, which are long-term oriented and focus on the future development of your staff, are likely to have a positive impact on your organization in the long run. When training is implemented strategically, the advantages often outweigh the disadvantages.

With training, you demonstrate that you care about your staff’s personal and professional development, which makes them more likely to stay as they can see that they also benefit from working for your organization. Moreover, once you have trained staff, they can teach others and pass on knowledge, skills, and the right attitude to establish a productive work environment. You just need to get the ball rolling!

Dealing with underperformance can be done in the form of soft skill training, as the majority of employee issues can be traced back to interpersonal conflicts due to a lack of soft skills. This can be especially helpful when you are not sure where the problem lies. In such unsure scenarios, you can seek for assistance from your L&D department or from external training providers who identify the root cause of the problem in order to tackle it effectively. This will not only resolve existing issues, but is very likely to prevent future problems as your staff learns how to deal with challenges.

Another positive effect of training is that you are likely to have higher return on investment (ROI) as workers gain valuable experience and deep insight into your business practices and are able to establish long-term relationships with clients. Understandably, companies may fear that training is not a profitable investment as people could leave the business shortly after being trained. Nevertheless, training is very likely to have the opposite effect and reduce turnover rates as employees cherish a positive learning environment. On the other hand, untrained staff can do immense harm to your business. As performance shortcomings still remain, your organization may not develop further and staff turnover rates can increase in the face of greater job dissatisfaction.

So, what is really in it for you when focussing on training? You will get a workforce that demonstrates higher employee motivation and increased performance and job satisfaction, all of which contributes to higher overall productivity. It’s a win-win situation for everyone when you have a higher qualified staff willing to stay and further your business development.After all, the main question may not be, ‘Can you afford to train your staff?’ But rather, ‘Can you afford NOT to train your staff?’

Vera Hillmann is a Training Assistant at the business training company, Kwintessential. In her role, she communicates with professionals in the HR sector to discuss training solutions for issues related to International Human Resource Management.