Firing People — CEO Shoptalk

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Firing people and laying folks off is a hard day. Here are some thoughts on how to do it.

Big Red Car here on a cloudy, but soon to be sunny, day in the ATX, God’s country. On Earth as it is in Texas! Muggy today.

So, a CEO has a series of things she struggles with. We talked about that right here:

CEOs — Doing Tough Things Shoptalk

One of those things is terminating employment either by firing someone (for cause) or laying someone off (not for cause).

They are both difficult to do. Here’s some thoughts on the subject.

Building and reducing staff is a normal part of a CEO’s responsibilities. It is, hopefully, not something that is done often or with a cavalier attitude. You are messing with people’s lives and what goes around, comes around.

Still it happens. Be ready, plan it out, execute it with precision.

Firing

I use the term “firing” to suggest that someone is being terminated for cause. It may be a matter of discipline or it may be a matter of not the right person. Could be culture misfit. You will know it when you see it.

I am an advocate of firing quickly. One criticism I would level at myself is that I always thought I could do missionary work and rehab the offending person — WRONG. It was all vanity on my part.

As an employer, your job is to provide a workplace, an environment in which your employees can be productive. It is their job to be productive. If you have done your job as it relates to workplace and environment, then unproductive persons are actually firing themselves.

From a global perspective, I have always thought that if a company got rid of its bottom 5-10% performers (on some objective scale), the enterprise would run better. I have found this to be the case.

Now, don’t go out and fire a bunch of people, just think about it.

So, Big Red Car, how do you fire someone?

Remember, firing is based on “cause.” Understand why you are doing this for your own purposes.

 1. Document the cause. Write a memo to yourself and convince yourself it is the right thing to do.

If it is a senior person, run it by the Chairman of the company (particularly if you have a Comp Committee).

 2. If there is evidence, aggregate the evidence. Put the evidence with the memo. Do not let that memo and evidence out of your possession.

No digital copies of anything. Keep it under lock and key. Show it to your Chairman if you must.

 3. Call the person in and, in the presence of your HR person or CFO, tell them they are fired.

“Joe, we have decided to go a different direction and, unfortunately, your position is no longer going to be part of that effort. Thank you. Here’s what I have in mind for a severance arrangement.”

Look, there is no combination of words in the English language which makes Joe feel good about this. It’s like getting a flu shot. Get it over. Resist the temptation to linger.

You are amputating somebody from the body of the company. Wield a quick, sharp knife.

 4. Pro tip: Do not tell them it is for cause. Tell them anything else you want. Give them no explanation. Say, “We are making some cuts.” Do not tell them you are firing them for cause.

If the guy has done something terrible, you don’t need to tell them why. They know.

This is hard to do and it feels unfair, but it is the smart play.

 5. Do not linger. Fire them and have them leave immediately. For this reason, I like firing people early in the week at 4:00 PM with an eye toward being able to answer any questions from the team during the balance of the week and the person leaving the premises, never to return.

You can different opinions on this. Consider them all and do what feels right to you.

 6. Do pay them severance. Since you are not positioning this as a “for cause” termination, pay them at last one week’s pay for each year of employment. Be generous.

You are buying peace. Peace is less expensive than litigation if done correctly.

Pay them their severance over the normal pay cycle. No lump sums. Their future paycheck creates caution. This is important as it may keep a crazy person from writing an article for Medium. Money is a handcuff when used correctly.

 7. In return for the severance, obtain a mutual General Release which incorporates confidentiality, no hire, non-disparagement provisions.

 8. Offer to provide a letter of reference. If they are an odious person, then only verify dates of employment, job description, and salary. Nothing more.

Give them the letter immediately, but don’t discuss it with them.

 9. Turn off all access to anything the minute before they enter your office. This can be a huge consideration. Get the company credit card and turn off everything (repeating myself).

 10. Do not apologize. Keep it short, crisp, professional.

 11. Announce it to the company as quickly as you can. Do not be the second or third person to tell them.

Do not tell them the cause. Tell them, “I have decided to go a slightly different direction and Joe is not part of it.”

If you feel the inclination, take questions, but remember — this is a personnel issue and you don’t discuss personnel issues.

 12. If there is an organizational change — Bob gets Joe’s job — announce it at the same time. Make damn sure Bob knows about it. Do not catch Bob off guard.

Remember that your objective is to get this done with as little blowback on your company as possible.

Now, there are folks who will try to tell you there is some secret sauce which makes this more digestible. OK, listen, but this is the advice of 33 years of having dealt with this personally and another six years of advising folks.

OK, dear reader, that is it for today. Tomorrow, we will discuss laying folks off. Until then, be good and enjoy life.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. 

 

 

 

12 thoughts on “Firing People — CEO Shoptalk”

  1. Can you expound on “Pay them their severance over the normal pay cycle. No lump sums.” I don’t quite understand how you defer severance? Cheers!
    Also, I’ve fired a lot of people and they always want to discuss why. How do you manage that?

    • .
      You pay an employee six months of severance over six months in accordance with your normal pay cycle.

      I always said, “We are going to head a little different direction and your position is no longer going to be available.”

      Then, I shut up and began to talk about severance.

      You cannot ever provide an adequate explanation of why you are essentially “rejecting” an employee. It is a legal minefield. Don’t get into the minefield.

      BRC
      https://www.themusingsofthebigredcar.com

  2. Agree and good list. Only thing I would add is ‘tell them something positive that they can tell their wife’.

    In other words something that you know they will repeat, that is positive, and that allows them to save face when telling others (including their wife).

  3. Mostly off-topic: There’s an old remark:

    We don’t care how much you know until we know how much you care.

    Well, one way for Trump to get more voter support for the practical things he knows will help the country is to show the voters how much he cares.

    So, e.g., there is

    http://media.breitbart.com/media/2017/10/AP_17277685179637-1024×734.jpg

    That and similar pictures should help.

    The guy & Melania DO look like they really care. I never doubted that, but such images should help.

      • > Why would they not be?

        Of course they are concerned. But the NYT, WaPo, CBS, …, are awash with people saying every bad thing they can thing of about Trump, just saying those things, no evidence, no reality, just nasty accusations, all fake. So, the voters need to be reminded of how much Trump and Melania really do care, and for that “a picture is worth 1000 words”.

        For the media lies about Trump, each morning they are half way around the world before the truth gets its boots on, and the pictures can help with the truth.

        > She’s a national treasure.

        Of COURSE she is. We’re darned lucky to have her. Sometimes she looks vulnerable: I very much hope she is okay.

        One little point is, those dress designers who claimed early on to refuse to dress her by now can see that they missed out big league! Apparently nearly every time she steps out of the White House, she is wearing some new designer original, and wearing it very well in excellent taste! At full retail, her dress budget must be north of $25,000 a week! The designers she is buying from are getting total big league advertising! I learned only a tiny drop about women’s clothes from my wife and know next to nothing, but to me Melania does well with clothes.

        When Melania is with children, her face lights up with kilowatts of smiles!

  4. That’s a keeper, kept, indexed. It’s precisely written, polished, very carefully considered, etc.

    But, I’m left uneasy.

    My suspicion is that the person was from OK up to excellent at the actual work but was fired for other reasons. To me, that’s bad because the actual work is darned important; good hiring is a lot of time, money, and effort; and a firing is a big loss.

    I can divide the other reasons into two categories:

    (1) The Employee. In my experience, typically the employee doesn’t really know that they heck they are (were) supposed to do; didn’t know just what it was they didn’t do or did poorly; had some misunderstandings about what they should, should not do, etc.

    Net, they really would not be able to explain just what it was that they didn’t do they should have.

    Why? Because for a lot of the really important stuff on a job, it is not clearly and openly described and discussed. Yes, much of that stuff should not be important but, unfortunately, in practice, is important. That important stuff is not in the job description. The managers don’t discuss that important stuff with their subordinates. That stuff is so obscure that the employee might not be able to explain why they were fired.

    E.g., a manager can easily have buddies they want to do well in the rankings and others they want around just to fill in the bottom of the rankings. So, the rankings are all based on buddies, say, hidden alliances, and not the work.

    The situation is too much like the hidden, obscure, intricate rules — e.g., etiquette — of a high end Victorian garden party where everyone’s brain is running at 200%, like BRC at 8000 RPM, but nothing, zip, zilch, and zero is actually being accomplished.

    In this context an employee can be (A) unaware of the intricate garden party rules or (B) take the supposed rules so seriously that they are blocked from much of the real work.

    (2) The Job. In my experience, a huge fraction of the job is based on gossip, gang formation, turf battles, empire building, jealousy, various hidden, strong alliances, formation of cliques, wars of cliques, hording of important information, arrogance, fighting people down the hall, middle management goal subordination, etc.

    Then the “low performer” is just someone attacked by others.

    Some of the worst attacks are to a high performer that makes others feel jealous or threatened. That high performer should be praised and rewarded, not fired. It’s up to management at least to defend such a high performer.

    IMHO, if there is a serious issue of a firing, then management might first look at themselves and try to see the destructive internal battles that have much of the actual work blocked.

    For PR, my experience is that those people are the grand masters of hidden, intricate, destructive Victorian garden party rules.

    If the problem really is management, then the middle management with their battles and the CEO can be faced with more firings of people the middle management has painted as “low performers” and, thus, slowly destroy the company. Then, sure, one of the middle managers will have a back door meeting with members of the BoD and get the CEO “who has been destroying the company” fired. Then that middle manager won.

    Or in politics, often a revolution is kicking in the rotten door. So the first step of a revolutionary is to make the door rotten. So, a middle manager can form a clique, get the CEO to do stupid things, go to the BoD, get the CEO fired, and then win a “revolution”.

    My first cut guess at a correction is to have a LOT of work to do, work that can be measured well, have each of the managers reporting to the CEO really, really busy doing their work, with such emphasis on the WORK filtering down the organization, leaving no room for destructive politics.

    I have a friend who often asks “Why should I?”. And for expecting subordinates to do something, e.g., work effectively for the goals of the organization instead of something else, ask “Why should they?”. Well, his hint is, without some darned good reasons, they won’t. So, in general, to get an organization being all “high performers”, the CEO needs to have some solid reasons “Why should they”.

    But I’m no expert at organizational behavior. But I do suspect that for a firing, (A) the real fault is with the organization and the CEO and not the employee and, in that case, (B) firing the employee will just be a big loss without solving the real problem that the CEO needs to solve.

    I remember in the 11th grade in high school when I was taking math seriously. Well, there were two math teachers, one nice and the other nasty. Neither knew much math, but they both knew what they were teaching well enough although not as well as they might — e.g., the geometry teacher was no A. Gleason at Harvard! So, in the 10th grade, I’d had the nasty one, and in the 11th grade I wanted the nice one. Well I was assigned to the nasty one again. BS! I just went to the class of the nice one, instead. So, I got sent to the principal’s office! He was a good guy! He smiled, said “I wish all our math students could have [the nice one].” and transfered me.

    So, how’d he know I was a “math student”? The teachers would not have told him; the teacher lounge gossip about me was awful. But, right, there were some standardized aptitude tests, and I did well on those! Also the 9th grade math teacher sent me to a math tournament.

    So, for me then, the principal acted like a good CEO, got informed before I reached his office, and did well.

    Then when the SAT scores came back, I helped the school look good, on a national level.

    • .
      One of the other duties of a CEO is to be clear as to job description and objectives. An employee has a legitimate beef if they are not aware of the objectives, their job description, or have not been counseled to improve.

      Nobody gets a perfect performance appraisal, so one must assume that there is ample opportunity to improve performance through performance appraisal.

      BRC
      https://www.themusingsofthebigredcar.com

    • “But I’m no expert at organizational behavior. But I do suspect that for a firing, (A) the real fault is with the organization and the CEO and not the employee and, in that case, (B) firing the employee will just be a big loss without solving the real problem that the CEO needs to solve.”

      “A” can be true but “B” is probably not true unless a company is about to run out of money (or in the extremely toxic politicking environment you described)

      Sometimes the company need to make more money and the CEO or HR person implements a systematic and objective approach to reduce head count.

      Sometimes a department does not deliver the outcome a CEO needs even though the individual employees may deliver solid work.

      Sometimes solid workers become overpaid and there is not room at the company for this person to stay in a different role and at a more appropriate salary (this may be because other department leaders do not have or want that person in his or her department or because the person’s skill set is not applicable to another department).

      If this happens to 1 employee, a company can usually figure out how to keep that person if they add to the company’s culture or some related intangible. If this happens for more than 1 person, the cost of maintaining this inefficient structure will be deleterious to a company.

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