Hire Well, but Fire Better

Have you heard about the software developer who, unbeknownst to his employer, outsourced his job to China while he sat in his office, surfed the Web and deposited his six-figure paycheck? How about the two local government employees in southern Spain who failed to show up for work…not for a couple of weeks but for 15 years? And their bosses never noticed.

While it’s nice work if you can get it, I reference these stories to open a conversation about firing. Because no matter how well you think you hire, as a manager, sooner or later you’re going to have to say those two dreaded words, “You’re fired”.

But the real story isn’t the occasional ne’er-do-well employee. It’s the fact that in the majority of cases what you’re really saying is, “I’ve screwed up.”

And nowhere is that more true than in a high-growth environment (particularly a start-up). When experimentation, reorganizations and change are standard-operating-procedure, you’re going to make mistakes. And if you don’t recognize, admit and correct them quickly, you may find yourself getting the boot too. So hire well, but also develop an effective firing process.

Both Sides of the Desk

I find it interesting that even with professional HR departments, psychological profiling tools, video technology and emotional intelligence tests, I estimate that the best seem to get hiring right maybe between 60% and 80% of the time. If I’m right, that means 1-2x out of five, we get it wrong.

As one who’s been on both sides of the desk, I can honestly say that when it comes to firing, it’s barely better to give than receive. Honestly, I still shake in my boots from the first time I had to fire someone. And that was more than 20 years ago.

Although we had worked our way through a progressive disciplinary process that moved inextricably to a termination event, when the time came and the weight of what I had to do hit me, I froze. Fortunately, my boss had anticipated my potential paralysis and had insisted on joining me in the event. And when I got that deer in the headlights look, my boss jumped in and did the deed. Bill, I can’t thank you enough for having my back.

I still remember that painful event and can recall my emotional despair every time I have to fire someone.

Then about three years ago, I was fired. Wow, I didn’t see that coming. It hurt like hell and caused me to question my entire value system and self-worth. But having come through it, I’m thrilled it happened. I see now that I was in an untenable position that only would have gotten worse and I would have ended up resigning, and in the process, leave behind lots of people I cared deeply about. And the silver lining – I’m now a better manager and empathetic when I find myself in the horrific situation of having to let someone go.

But I’m not in the Jack Welch camp or cut from the Al “Chain Saw” Dunlap mold – two infamous corporate slashers whose antics were well documented at GE, Scott Paper and Sunbeam-Oster. Their heightened sense of efficiency through firing virtually institutionalized a policy for separating the wheat from the chaff in the 1980s and 90s.

Still, I believe there’s more to firing than systematically and annually cutting the bottom 10 and 20 percenters. There’s doing what’s right for your employees (including those you have to fire), your bosses, the Board and the investors. But first we need to understand the situations that most commonly lead to firing.

Necessary for the Organization

As companies grow, they change. That’s especially true of start-ups. Unfortunately, with change, sometimes good people get fired. I’m not saying that employees are blameless, only that the decision to fire can often be a gray area. And as an early-stage company flays around trying to find itself, one needs to be mindful of employees that can get caught in the middle. The three most common situations that lead to firing in venture-backed entities that I’ve experienced are:

• The Failing Role: When you’re building a company, you’re constantly experimenting—with product, markets, positioning, everything. And you’re hiring people to carry out those controlled experiments, knowing that sometimes your hypothesis will flame out on a grand scale. While some people are versatile enough that their skills can be repurposed, sometimes that’s not the case. Their skills won’t transfer, and your only option is to …let go…lay off…disengage…reorg – choose whatever word is most comforting to you but let’s not sugarcoat it…you’re firing someone. There’s no good way to say it, and what’s most striking about these circumstances is that firing under these conditions is admitting a personal defeat – your failure…not necessarily the employee’s. You tried something, you were wrong, and you’re left with the painful reality that your course correction will result in you hurting someone deeply as a result.

• The Failing Company: A failing company doesn’t necessarily go out of business quickly. And there’s a term that has cropped up to define these situations, zombies. They are often flush with cash, losing money by design so the fatal business design and lack of product-market fit is masked by goals other than profitability. For those reading this note within a few miles of highway 101 or walking distance from Bart in the SOMA neighborhood of San Francisco, you’ve probably worked at one of these entities in the past decade or two. And most of you are like me…you’ve been caught up in the reality check that eventually comes. When the market turns cold or sensible management shows up, judgment day arrives and the brutal right-sizing of staff volume and functions is here. Although it may be true that the zombie start-up apocalypse is upon us (likely again for the 4^th time in two decades by my math), the course-correction of companies in a pre-zombie state is actually an important event for a company, as it often means life or death. The horrible news is that even if the company gets saved in the process, many people will lose their jobs as a result. Well, let me rephrase that…many good people can be fired in the process. Let’s call a spade a spade.

• Change of Priorities: Certainly less dramatic than zombie companies is simply the company that makes a strategic change. It could be closing down a line of business or choosing to pursue a new one. Or taking a channel-oriented distribution strategy and switching to a direct method. Outsourcing development that was previously in-house. Moving from a field-based sales model to inside sales. It is the normal course of business that an entity makes strategic changes in how it builds products, services customers or pursues markets. As these tactics change, so too does the composition of the employee base. And in the start-up world where a week equates to a month, a month a quarter and a quarter a year, these decisions need to often be made very quickly and with frequency that seems brutal in the ‘real world’. But when you’ve been given millions of dollars of other people’s money to make a market and hopefully not flame out brilliantly trying, the time-frames by which one has to show viability is hyper-converged. And as such, making constant and dramatic strategic changes that cause employees to be fired (in fairness, hired too) is the norm. For those of us who have chosen to make our careers in the business of birthing companies, this is what we sign up for. And if you choose the wild ride of being employed in the high-risk, adrenaline-pumping world of start-ups, you need to recognize the downside…you being downsized as normal and needed strategic changes happen as your embryo of an employer fights for life in a Darwinian and brutal world.

The Right Thing for Employees

Every start-up needs more people than it can afford to hire. Employees are working every waking hour at breakneck speed to gain traction and show viability. When bootstrapping your business, there’s no room for slackers, clock-punchers, dead weight or disrupters. And keeping folks who are less than 110% committed to the cause is a disservice to others who are working tirelessly to make the organization successful. In my experience, the most common type of folks that need to be shown the door include:

• The Cultural Mismatch: Whether it’s a philosophical clash or an untrustworthy employee, a disruptive personality can turn your workplace into a toxic cesspool. There are even cases in which these folks can be among your highest performers. But their emotional toll if left unchecked, can create such a wake of frustration and downstream angst among other employees, that one needs to evaluate the net-impact of these cultural cancers. Life’s too short to work with jerks. Start-up life is too hard to allow others to coast.

• The Underperformer: With the exception of Garrison Keillor’s Lake Wobegon, where all kids are above average, the bell curve of employee performance is, well, a bell curve. The ideal of an early stage start-up is to always find employees in the first standard deviation above the average…but sometimes the flawed interview process results in finding someone below versus above. And when that happens, one needs to correct it. With everyone working their asses off, keeping uncommitted or uninspired staff around is bad for morale, and in the long run, you are doing the person a disservice by accepting mediocrity.

Take Action

Although it’s preferred that we manage our hiring mistakes by keeping people on payroll by finding something else for them to do, that luxury is not often the case in a start-up. And regardless of the cause and blame for needing to fire someone, here are my six rules to consider when doing so:

1. Hire Well: Try to prevent the firing by hiring well. I always remember that a group of investors have put a lot of money into our business and given me the temporary job of returning good results. I do my part by having the right team in place. Before you can explain to job candidates what you’re looking for, be clear in your own mind about what you need. Building a team isn’t about passing judgment on them as human beings, but rather, the rational matching of skills to organizational need. Be very clear and brutally honest with yourself first.
   
2. Encourage Honesty: When interviewing candidates, encourage them to share what they’re good at and what they’re not. You do the same as the employer in not over-hyping your company’s circumstance. Hiring shouldn’t be about impressing one another by selectively sharing only the best one has to offer, but rather, in the words of Kelly Clarkson (don’t judge…I have a few daughters) “Everybody’s got a dark side…Will it make you run away?”
   
3. Challenge Their Start-up Readiness: Start-ups are not for everyone. Some of us are attracted to the risk and reward and dopamine rush. But you have to join knowing that unless you can perform Herculean tasks against serious odds, you may end up being cut from the team. As Nick Cronin explained in his post, you need to ask, “Do I have what it takes to work in a start-up?”
   
4. Be Humane: When you have to fire, follow legal procedures and work closely with your HR team. And always show respect and empathy to the person you are firing, no matter the cause. Firing is not about bad people; it’s about a bad fit. Firing someone is massively disruptive to another human being, often impacting spouses, children, financial obligations and emotional stability. If you can’t build a process that takes into account these real world impacts, chances are you should be fired too.
   
5. It Shouldn’t Be Personal: Guilt or embarrassment over having made a hiring mistake isn’t a justification for not correcting it. If you fire with professionalism, you’re helping people get to a better place. Every time I’ve done this, people have ultimately thanked me. We may not exchange Christmas cards or have a “beers on Friday night” relationship, but everyone I’ve fired recognized the part they played in the situation or realized it was the right thing for the organization.
   
6. Fire with Conviction: Just as we have dog years, we also have start-up years. When you have to make a change, avoiding doing so is often worse than the event itself. You can’t hesitate in your obligation.

I take no joy in firing people. My failures that resulted in firing people are much more ever-present than the huge deals that have been celebrated briefly over the years. But because I see too often poor firing and the avoidance of this management inevitability, I urge all of you to commit to doing it better.

This article was first published on the HG Data Blog.

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