Thousands of Lloyds staff face axe in performance overhaul

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Lloyds Banking Group will put thousands of its staff at risk of dismissal, with the UK bank’s lowest performers set to be told their work must improve or they face the axe.

The bank plans to overhaul how it manages the performance of its 63,000 employees, according to people with knowledge of the plans, with about 3,000 people deemed among the bottom 5 per cent set to be put at risk of dismissal. Around half of those could lose their jobs, the people added.

The new approach, which was discussed at a recent meeting of the bank’s group executive committee, comes as chief executive Charlie Nunn enters the final phase of his plans to cut costs at the UK lender and diversify its sources of income.

Nunn and other members of the executive committee will be reviewing data from the HR software programme Workday to monitor progress, with Lloyds bosses keen to address low rates of turnover among its employees and to shed those seen to be underperforming.

Lloyds said it was “transforming” its business and “striving to embed a high-performance culture”.

“In line with wider industry practice, we continuously look for ways to help our colleagues perform at their best. We know change can be uncomfortable, but we are excited about the opportunities ahead as we propel forward to achieve our growth ambitions and delivering exceptional customer experiences,” it added.

Managers at Lloyds have already been told to start ranking staff performance, with underperformers set to be placed on “structured support” programmes. This is similar to a performance-improvement plan, when managers coach poor performers who, if they do not improve, are dismissed.

At the meeting where the changes were discussed, Sharon Doherty, chief people and places officer, said Lloyds needed to see higher turnover among its lowest performers, according to people familiar with the matter.

The bank is battling low turnover rates, as workers avoid leaving their jobs amid economic uncertainty. Current turnover at Lloyds is barely 5 per cent each year compared to an average of closer to 15 per cent historically, according to one person familiar with the matter.

Doherty added that high-performing organisations routinely reviewed the bottom 5 per cent of their workforce with about half of those leaving, according to people with knowledge of the discussions, an approach Lloyds plans to emulate.

The practice, sometimes referred to as “rank and yank”, was popularised by Jack Welch, chief executive of General Electric in the 1980s and 1990s. He advocated sacking the bottom 10 per cent of staff every year as a way of upgrading the workforce.

Adopting a version of this approach would align Lloyds more closely with US banks, particularly investment banks. Consulting firm McKinsey, where Nunn was a partner, adopts a similar approach known as “up or out” — meaning staff must progress internally or face the axe.