Knowing Who, When, and How to Fire

I will never forget the first time that I had to fire somebody.

In the days, hours and minutes leading up to the meeting that morning, sleep was elusive, my heart was racing, my mind was completely incapable of focusing on anything else, and the sense of existential dread growing in the pit of my stomach seemed to gain strength with each passing minute.

In sharing this with you, I am not at all suggesting that I was the person in that meeting most deserving of sympathy (I was not), nor am I suggesting that firing somebody is more difficult than being fired (the opposite is clearly true). What I am saying however is that firing somebody is a truly miserable experience, and unless you’ve done it yourself, you’re unlikely to appreciate just how miserable it is.

Perhaps this explains why so many CEOs don’t fire the people that they know they should, or at the very least why they so often defer doing so until the evidence points to only one remaining option.

Unfortunate at this reality may be, I will argue below that firing (specifically knowing who, when, and how to fire) is a required core competency for any CEO, and is arguably as important as hiring, communication, capital allocation, and other tools within the CEO’s toolkit. The extent to which this is an unpleasant (and perhaps even unpopular) topic to discuss doesn’t negate its critical importance in building and sustaining a healthy and vibrant company.

Some may associate the idea of firing with toxic, authoritarian, or fear-based work cultures. While firing can lead to these types of outcomes if done in an arbitrary, thoughtless, or fear-inducing way, if and when done correctly, it can actually become one of the CEO’s primary tools in building a healthy, inclusive, fair and meritocratic culture.

It’s important for me to note that this isn’t because firing itself is value-creating. It clearly isn’t. Being flippant or cavalier with the professional lives of your employees represents the surest path to destroying your company. Instead, one of the primary reasons why firing is so (unfortunately) important is because of how difficult, error-prone, and subjective most hiring processes are.

Firing: Who, When and Why

If one were to poll 100 randomly selected CEOs to inquire about their mistakes and regrets, it is a virtual certainty that within the top 3 most frequently cited regrets would be keeping the wrong employees on for too long. I certainly made this mistake, particularly in my early years as a CEO, despite understanding the risk of doing so at an intellectual level.

The first time that I made a hiring mistake, it took me almost a full year to rectify it by letting that person go. My final hiring mistake as a CEO, one that took place 7 years after the first one, was rectified within the employee’s first 4 weeks on the job. The difference in the speed with which I was able to move in these two instances was the result of several lessons that I had learned related to hiring and firing during my time as a CEO. These lessons included:

Hiring Mistakes are Inevitable

Countless studies have concluded that the job interview (the primary vehicle through which most hiring decisions are made) is fraught with dozens of subconscious biases that hinder the effectiveness of the decisions made on the basis of those interviews. Indeed, the probability of fit and success of an average hire has been shown to be roughly 50%. Even if you are above average with respect to your ability to hire great people (most people think that they are – yet most people are not), it is a virtual guarantee that you will make a hiring mistake, or more likely several mistakes, as you build out your company. For this reason, the ability to quickly identify and rectify bad hires is arguably as important as the ability to make good ones.

It’s Best to Move Quickly

Whether you’ve made a hiring mistake yourself or have inherited somebody else’s hiring mistake (even if that mistake was made years ago), it behooves all parties (yourself, the rest of the company, and the employee in question) to rectify that mistake as soon as possible.

Retaining a bad hire for too long is an incredibly easy trap to fall into: Perhaps you don’t want any further disruption to the team. Perhaps they’ve made some degree of progress, and firing them would represent a total loss of time and effort. Perhaps you’re subconsciously trying to justify the sunk costs of making the hire in the first place. Reflecting back on the rationale that I came up with when justifying my own bad hires (which included all of the above), I eventually came to see that they all amounted to excuses that prioritized short-term ease and convenience over the long-term health of my company.

Listen to Your Gut

Several mentors of mine told me to listen closely to my gut any time that I was contemplating whether or not to terminate somebody, be it on the basis of poor job performance or a lack of fit within the company’s culture. Though this advice sounded somewhat “soft” and nebulous to me at the time, it turned out to be wise counsel: In my experience, in all of the instances in which I suspected I had made a hiring mistake, it turned out that I did indeed make a hiring mistake.

“You Never Take the Good People Home With you at Night”

By the time you reach the end of this blog post, I hope that the professional consequences of knowing who, when, and how to fire will be obvious. Less obvious however are the personal consequences to the CEO of developing this skill: As I reflect back on my time leading a company, I’m struck by the fact that so many of the worries, annoyances and frustrations that kept me up at night were ultimately related to having the wrong person in the wrong seat. It is only when one makes a truly excellent hire do they come to appreciate the costs (both professional and personal) of having a less-than-excellent person in any given position. As a fellow CEO recently told me: “You never take the good people home with you at night”. A truer thing has never been said.

Everybody Else is Watching

As the leader of the company, if you notice somebody who is either underperforming in their job or who is clearly not a fit within the company’s culture, the odds are overwhelmingly high that other people within your company are also noticing the very same thing, including that person’s peers and direct reports. Importantly, these other employees are likely to be watching what you do (or don’t do) about this problem, and your decisions and actions will have a formative impact on your company’s culture, whether you know it or not.

What is a high performer to think if they see a drastically underperforming peer who is getting paid the same amount as them? How do you explain to a star employee that they have to do more than their fair share to compensate for the efforts (or lack thereof) of their underperforming peers? How can you trumpet the importance of company culture while allowing a toxic employee to remain within your company? If poor performance isn’t properly dealt with, why should star employees believe that excellent performance will be properly rewarded?

The Needs of the Many Outweigh the Needs of the Few

Though being terminated is a truly terrible experience for the person being let go, the CEO must always prioritize the needs of her company above the needs of any single individual within it. Indeed, making these types of unpleasant, uncomfortable, and difficult decisions is precisely what a CEO gets paid to do. If somebody on the boat isn’t rowing in the same direction as their peers, or isn’t rowing with the same levels of rigor and enthusiasm, then you owe it to everybody else to replace them with somebody who can and will.

You Still Need to Fire the “Successful Jerk”

One of the hardest decisions for any CEO to make is what to do with somebody who is smart, capable, and high performing within the context of their job, but who is a net-negative from a cultural perspective. The best framework that I’ve encountered for how to deal with such situations comes from Gino Wickman’s Traction, where he suggests that good employees must be both:

• “Sitting in the Right Seat”: Defined as the employee understanding her job, wanting her job, and having the capacity to successfully do her job (the “successful jerk” likely passes this test); AND
• “The Right Person”: Defined as representing a fit within the company’s culture and core values (the “successful jerk” likely does not pass this test)

While “right-person-wrong-seat” problems can usually be addressed without the need to terminate (often by finding a more suitable role for the employee in question), “right-seat-wrong-person” problems are much more difficult for CEOs to address without having to make a personnel change. If the person in question hasn’t changed despite you bringing the issues to their attention and giving them an opportunity to improve, then in all likelihood you must remove this person from the company, in spite of their on-the-job success.

It’s worth explicitly mentioning here that this type of termination in particular is much easier said than done. Though it’s importance can’t be overstated.

How to Fire

To guide the actual conversation where you have to deliver the unfortunate news to the employee in question, I’ve found the framework contained within Bob Pritchett’s “Fire Someone Today” to be the most useful (despite its title, the book is about a lot more than just firing). The five-part framework is as follows:

(1) We’re letting you go
(2) Why we’re letting you go
(3) Here’s what you should expect from us
(4) Here’s what we expect from you
(5) Goodbye

On the surface this may sound overly formulaic or lacking in empathy, but remember that it’s a framework within which details can be included, not a script to be followed verbatim. Other important details of the framework include:

• The conversation starts with the news that the employee is being let go, it isn’t built up to in any way.
• The discussion of why the employee is being fired should be as short and concise as possible. Having anything beyond a highly concise “why” discussion almost never leads to any productive outcomes for employee or employer. Further, the employee is unlikely to truly digest much of anything that is said after it’s made clear that they’ve been let go.
• If you’ve done your job as a CEO (specifically with respect to communication, coaching, and providing genuine opportunities for the employee to improve), then most terminations shouldn’t come as a surprise to the employee in question. If they do, then the CEO likely bears the lion’s share of the blame. 
• Following the framework keeps the discussion purposely short and to the point. The length of the conversation is in no way correlated with your levels of empathy or compassion as a manager or human being, despite what the uninitiated may think. Longer conversations don’t make the news easier to digest. Instead, they tend to introduce more opportunities for problems to surface. Shorter = better.
• It’s made clear that, despite the termination, the company still has obligations to the employee (often things like notice, pay in lieu of notice, assistance finding a new job, etc.), and the employee still has an obligation to the company (often things like timely return of property, signing and returning certain legal documents, etc.)

Select Other Lessons Related to Firing

Treat Employees as Well on The Way Out as You Treated Them on The Way In

Most leaders appreciate that when they have to fire somebody, they are delivering some of the worst news that the person in question will ever have to hear (at least, I hope most leaders appreciate this). Even if the change becomes a net-positive for the person in the long-term (which is often the case where there simply isn’t a good fit between employee and employer), in most instances the news tends to be devasting for the employee in the short-term. It is for this reason, and this reason alone, that your duty as a CEO ought to be to help the person in question as much as you possibly can when letting them go. This can include being overly generous with notice, pay in lieu of notice, the continuation of benefits, career coaching, assistance finding a new job, the willingness to act as a reference, and anything else that might help that person transition out with dignity and respect.

Though the reasons to treat people well on the way out should start and end with this general sentiment alone, there are additional reasons why doing so is in the CEO’s best interests:

First: Your employees will always watch how you treat people, and this includes the instances in which people are asked to leave your organization. Like so many decisions and actions undertaken by CEOs, how you treat people on the way out will have a formative impact on your company’s culture, whether you know it or not

Second: Legal issues stemming from terminations (often resulting from short notice periods, underwhelming severance pay, and the like) are enormously burdensome, expensive and distracting for CEOs to deal with. This is definitely not the place to save a nickel.

How to Communicate a Termination to the Rest of the Company

In my experience managing employees, when you treat people like adults, they tend to act like adults. When you treat people like children, they tend to act like children. Partially as a result of this, I believe in being transparent with the rest of the organization when a termination is made. The CEO should communicate the change to the rest of the company as soon as is reasonably possible to avoid the rest of the company learning about the change through less formal means. Even if employees don’t agree with the decision, they can at least appreciate the transparency with which it was communicated.

Though I believe that honesty and transparency are important when communicating decisions like this, it is certainly not a ticket to be disparaging about the departing employee. Indeed, in their communication to the rest of the company, CEOs must ensure that they are deeply respectful of the person in question for all of the reasons articulated above. As Ben Horowitz of Andreesen Horowitz has famously said: “You can take somebody’s job, but you don’t have to take their dignity.”

In a Crisis: Cut Deep and Cut Only Once

Earlier in this post, I referenced a theoretical study in which 100 randomly selected CEOs were asked about their mistakes and regrets related to hiring and firing. I suspect very strongly that somewhere on that list of regrets would be having to execute on several rounds of layoffs in situations where they otherwise could have executed on only one round of them.

When companies face a true crisis (early 2020 likely serves as an all-too-familiar example for many of you), CEOs are often tempted to cut as few people as possible, and for good reason, at least in theory. In contrast to “cutting deep”, they think that “cutting shallow” will:

– Be emotionally easier for employees to digest
– Be emotionally easier for management to actually execute on
– Position the company better if the market turns around more quickly than anticipated
– Be less disruptive to day-to-day-operations
– And countless other reasons

While these may sound logical and intuitive on the surface, in actual practice one of the most frequently cited regrets among CEOs in crisis is not cutting deep enough. The reason why this regret is so common is because in a majority of cases, the first round of shallow cuts wasn’t enough, which then necessitates a second or (heaven forbid) third round of cuts. What these CEOs eventually come to realize is that few things are more demoralizing to employees than several rounds of job cuts. Indeed, two shallow cuts are almost always much more culturally destructive than a single deep cut would be. One of the reasons why this is so is because the former creates uncertainty (“Will I still have my job next month?”) while the latter eliminates uncertainty (“That was really difficult, but I still have my job and can now focus on doing my best moving forward”). Learn from those who have made this mistake in the past: In a crisis, if you’re forced to make cuts, then cut deep and cut only once.

In Sum

Having to fire somebody is arguably the worst part of any CEOs job. However, knowing who, when and how to fire is arguably as important a skill as any other in the CEOs toolkit. This is largely due to the difficulties, ambiguities, and uncertainties inherent within most hiring processes.

If done in an arbitrary, thoughtless, or cavalier way, firing can lead to culturally destructive outcomes. However, if done thoughtfully, selectively, empathetically, and in the best interests of the company, replacing the wrong people with the right ones can become one of the CEO’s primary tools in building a healthy, inclusive, fair and meritocratic culture.