Lloyds to cull low performers

In the 1980s, the massive conglomerate GE was led by Jack Welch, who became known as “Neutron Jack” in no small part for his scorched-earth policy of firing the worst 10% of performers each year and to get fresh hires.

"Up until this point, people who had a job at a company like GE or IBM basically figured that they had a job for life. But he explicitly said that this notion was going to be a thing of the past under his watch," says author David Gelles in an NPR interview about his book The Man Who Broke Capitalism.

And it looks like Charlie Nunn, Lloyds Banking Group’s CEO is channelling his inner Jack – the big bank is tightening the screws on staff performance at the very moment its mortgage engine is humming again, a twin-track strategy that will be watched closely by lenders and brokers alike.

People familiar with the plans told Reuters that roughly 3,000 employees — the bottom slice of the group’s internal rankings — have been earmarked for “structured support”, with a significant proportion expected to leave if standards do not improve. While there is no fixed target for dismissals across the 63,000-strong workforce, the move signals a harder edge to the bank’s internal regime following a period of subdued attrition and shrinking high-street presence.

A Lloyds spokesperson said the group is transforming the business and “striving to embed a high-performance culture.” They added: “We know change can be uncomfortable, but we are excited about the opportunities ahead as we propel forward to achieve our growth ambitions and deliver exceptional customer experiences.”

Read more: Lloyds execs get nearly £2 million in bonuses amid cost-cutting measures

For brokers and distributors, the question is not the headline number of potential exits but where those pressures land. Lloyds — including Halifax, one of the market’s most active brands — has been reallocating resources from branches to digital channels after earlier decisions to close physical sites. That migration underpins a direct-to-bank remortgage journey that helped lift market share, and any reshaping of headcount will need to preserve — or improve — service levels in underwriting, case handling and retention.

Read more: Blast from the past – Meta to slash poor performing quotas

Through the first half of 2025, the group notched £5.6bn of gross new mortgage lending, a 14% rise year on year, and lifted total mortgage balances to £317.9bn. Halifax and its sister brands completed about £8bn to first-time buyers in the six months to 30 June, with new business written at an average 65% LTV against a portfolio average of 43.4%. Direct-to-bank lending now accounts for roughly a quarter of the mortgage book, supported by a digital remortgage process designed to accelerate completion times and reduce friction for customers who might otherwise shop around at the end of a fixed deal.

The risk for intermediaries is familiar: headcount reduction in the wrong places can lengthen response times, slow document verification and clog product-switch queues just when borrowers are highly rate-sensitive. Conversely, a leaner, better-targeted operation can quicken approvals and bolster retention, particularly where digital self-serve is paired with prompt human escalation on complex cases.

The clampdown lands after a period of unusually low voluntary turnover at the bank, with departures reportedly running near 5% annually versus a more typical 15% in earlier years. In effect, fewer people moved on of their own accord just as the bank sought to lift productivity and redeploy towards data-led and mobile-first services. The result is a sharper formal mechanism to flush persistent underperformance — and a test of whether talent can be recycled into growth areas without unsettling frontline execution.

Read more: Lender share bloodbath as Reeves rattles markets (again)

Across corporate Britain and further afield, versions of “rank and yank” have resurfaced as boards push for efficiency in a higher-cost world. Lloyds’ approach stops short of a quota-driven cull and instead leans on support plans and measured exit routes. For managers inside mortgage operations, the immediate priority will be to shield core casework from disruption while maintaining training pipelines for newer hires on broker-facing desks.

Financially, Lloyds has earned the right to be choosy. Pre-tax profit in the first half rose 4% to £2.5bn, with mortgages contributing alongside corporate and institutional banking. The group has guided that cost control, asset quality and capital generation remain on track, giving shareholders a fatter interim dividend and the promise of further distributions if performance holds.

Charlie Nunn, group chief executive, said: “The fundamentals of the UK economy are robust and we welcome the ambition of the recently launched industrial strategy and financial services reforms by the UK government.” He added that the bank is delivering “income growth, cost discipline and robust asset quality,” while reaffirming guidance for 2025 and expressing confidence in 2026 commitments.

That momentum raises expectations for the mortgage franchises. Intermediaries will look for clarity on turnaround times, product transfer processing, and exception handling as the staffing model changes. With the bank emphasising digital remortgages, brokers need reliable hand-offs when cases fall out of straight-through processing — for example, on complex income, high-LTV flats, new-builds with incentives, or quirky leaseholds.

What brokers should watch

• Service resilience during reorganisations: Track case-processing SLAs and escalation pathways. Small slips here can erase the benefit of headline rate cuts.
• Retention versus acquisition balance: A slick digital PT journey helps Lloyds defend its back book; brokers will want clarity on pricing parity and switching windows to avoid surprises at maturity.
• Credit posture into year-end: With average LTVs still conservative, any shift in appetite for higher-LTV or complex credit could influence sourcing outcomes for first-time buyers and movers.
• Protection attach rates: The bank reports a 20% take-up among mortgage borrowers, up seven points year on year. Expect continued cross-sell nudges inside digital journeys.

Lloyds is attempting a delicate manoeuvre: tighten performance discipline while expanding a digital-first mortgage franchise that has regained speed. If execution holds — keeping underwriting lines smooth and broker communications crisp — the group’s scale and technology investments should continue to draw volumes, particularly in remortgaging and first-time buyers. If it stumbles, rivals will be ready to pick up overflow from harried case managers and anxious customers.

For now, the signal from the top is unambiguous. The bank is, in its own words, “striving to embed a high-performance culture,” and believes it is “excited about the opportunities ahead.” The mortgage market will judge that promise on the punctual arrival of offers in brokers’ inboxes.

Should firms wield the axe on underperformers every year?

When Jack Welch ran General Electric in the 1980s and 1990s, he became notorious for his insistence that the poorest 10 per cent of employees be shown the door each year. The policy, trumpeted in his 1999 shareholder letter and later in his memoir Jack: Straight From the Gut, was designed to keep the organisation lean and relentlessly competitive.

That philosophy was subsequently borrowed by others: Ford, Conoco, Sun Microsystems, Cisco and EDS all adopted versions of forced culling in the belief that removing the weakest links would sharpen overall performance. The logic seemed simple enough — replace the laggards with brighter recruits and watch output rise.

Not everyone agreed. Edward Lawler, a professor at the Marshall School of Business at the University of Southern California, published research in 2002 questioning the wisdom of automatic sackings. He accepted that tolerating mediocrity corrodes a workplace, but argued that annual purges were a blunt instrument that often did more harm than good.

The problem of finding the “bottom ten”

Identifying genuine underperformers is far from straightforward. Lawler noted that most staff rate themselves as at least average, with few volunteering for the title of weakest link. Managers, meanwhile, are reluctant to brand colleagues as failures — out of empathy, fear of disruption, or simply a lack of robust tools to measure contribution.

Some firms attempted to solve this by imposing rankings, obliging managers to classify a set percentage of workers as poor performers. Yet this presumes employee ability is normally distributed. In high-performing teams, that assumption fails, and solid contributors can be wrongly stigmatised. Instead of raising standards, such misclassification risks demoralising strong groups and driving talent away.

Risks in the courtroom and on the shop floor

Compulsory ranking has also attracted legal challenges. Courts have made clear that dismissal is acceptable only when rooted in demonstrable failings. Proving that in systems driven by quotas is difficult, as several companies, including Ford, discovered.

The exercise also becomes harder over time. Welch himself conceded that after the first year or two, the hunt for weak performers turned into “a war” as managers struggled to identify a fresh tenth to dismiss. By then, the process risked being more about fulfilling a numerical target than tackling genuine inefficiency.

Measuring knowledge workers

Where output is easily quantifiable — such as sales targets or production lines — the assessment of performance can be relatively clean. Knowledge workers, however, present a greater challenge. Their contributions are often collaborative and qualitative, requiring sophisticated appraisal systems. Lawler argued that before demanding annual culls, companies should invest in balanced scorecards, better data and training for managers so that performance reviews are credible and consistent.

The hidden expense of constant turnover

Even when the right people are identified, removing them is costly. Severance payments, benefits, recruitment fees and training for replacements can easily add up to a year’s salary, Lawler observed. Worse still, there is no guarantee that a new recruit will outperform the person they replaced, meaning the exercise can turn into a costly cycle of churn without appreciable gains.

In specialist fields such as technology, biotech or professional services, replacing talent can be especially difficult. Labour shortages can make it impractical to shed staff annually, regardless of their relative contribution.

Culture at stake

Perhaps the most corrosive effect of all is cultural. Forced ranking encourages internal rivalry, deters collaboration and tempts managers to game the system. Development efforts may be focused only on those most likely to survive the next cull, while managers can be tempted to water down or even disown appraisals to avoid conflict with their teams. The result is a weakened culture where fear and distrust overshadow teamwork.

A call for leadership, not quotas

Lawler concluded that organisations should avoid bureaucratic quotas and instead rely on clear-eyed leadership. Senior managers must treat talent management as a core responsibility, holding rigorous evaluations that focus on development and fairness. By applying judgement rather than mathematics, he argued, companies can weed out underperformance without damaging morale or risking costly legal disputes.

The lesson from Welch’s legacy is therefore mixed. Discipline in performance management is essential, but a rigid insistence on dismissing a set fraction of staff each year risks proving self-defeating. For firms, the real challenge lies not in swinging the axe but in wielding it wisely.