A Survey of the Criteria Used by Commercial Banks in Kenya to Determine Employees to Retrench

Abstract

The purpose of this paper was to establish the criteria used by commercial banks in Kenya to determine employees to retrench. The findings of the study suggest that commercial banks use seniority (Last-In-First-Out), employees' individual productivity, misconduct, incapability, early retirement programs, First-In-First-Out (FIFO) and employee obsolescence as criteria for determining employees to retrench. The criterion that is most popularly used is assessment of employees' individual productivity. Misconduct as a criterion for retrenchment is also popular and some of the behaviors that banks consider as misconduct include fraud, insubordination, regular unauthorized absenteeism, financial mismanagement, leaking out confidential information among others. Early retirement programs are also used to a moderate extent. Last in-First out (LIFO) is used to a moderate extent while incapability as a criterion is used to a less extent. It was also found that all banks use the same criteria despite their age, ownership and size.

Mixed-method Evaluation of Perceived Approach and Criteria of Employees Retrenchment in Selected Commercial Banks in Southwest, Nigeria

“…However, most Nigerian banks have been reportedly adopting reactive planning retrenchment approach of which employees have been unexpectedly terminated without following due process and procedural rules, [10]. Scholars such as [11,7] recommended that fair and objective retrenchment approach should incorporate required procedures, therefore prior notice of contemplated retrenchment must be given; prior consultation must be done with affected employees, financial information must be disclosed. Also, fair and clear selection criteria must be used: e.g.…”

“…Furtherance to this, adequate retrenchment approach and process increased survivors' trust and fairness for management; based on this, making decision to retrench is one of the crucial approaches in retrenchment exercise, and this requires banks' management to embrace employees' interest and consider all possible alternatives such as salary freezes, pay cuts, elimination of bonuses, voluntary separation and early retirement with severance benefit, before deciding to retrench. Also, making retrenchment announcement as well as implementing are relevant; in implementing the retrenchment, management must be objective in its decisions and be fair in treating the employees by telling the employees the truth and also involving them in retrenchment implementation, as well as helping departed employees to find other jobs by absorbing them into other parts of the business through outplacement services such as career counseling, stress management, skill assessment, retraining reimbursement [7].…”

“…Moreover, the criteria should focus on past performance and should fit with the vision of the future. Study of commercial banks by [7] identified retrenchment criteria such as seniority systems, i.e. first in first out (FIFO) method of which senior people in each class are laid off; unsatisfactory performance/performance appraisal, and last in first out (LIFO).…”

“…The schemes usually allow firms to be more flexible though at a higher cost. But among these criteria, [7] reported that performance appraisal is the most commonly used criterion in banks to select employees to be retrenched while [13] affirms that performance appraisal schemes provide a useful structure for establishing fair and objective selection criteria and that the use of appraisal data can help employers in ensuring that the act of selecting employees to be retrenched is not itself un fair. However, in most cases, especially in the ongoing post consolidation, the process/ approach and criteria used by some banks to identify employees are perceived to be subjective, unfair and non-transparent, [10].…”

“…Interestingly, various scholars have evaluated the cause of retrenchment in the banking industry while others assessed the effect of retrenchment such as work stress, low work motivation and performance, job insecurity and uncertainty, [5,6] and [4] but little attempt has been made to investigate retrenchment approach. Also, scholar such as [7] has conducted a study on retrenchment criteria in Kenya commercial banks, but no attempt has been made to study the criteria used by Nigerian commercial banks to determined employees to be retrenched. This study therefore intends to bridge this gap by investigating the approach and criteria the Nigerian banks used in selecting employees to be retrenched.…”