Maybe you’re dealing with an underperformer whose lackluster work is beginning to affect your bottom line. Or perhaps one of your star-performers clashes with others on the team. What do you do when your instinct tells you that someone has the potential to drag your company down?
Some experts, like Andreessen Horowitz, counsel that “it’s never too early to fire.” But others suggest that, if a dedicated employee who fits your startup’s culture begins struggling, changing their role might make more sense than firing. Deciding to let someone go is costly, complicated and emotionally draining for everyone involved. Shikhar Ghosh sat down with five entrepreneurs who share their experiences judging how, when, and why to fire an employee—and how to do it in the least disruptive way possible.
Practical Steps to Take When Deciding to Fire Someone
- Define the Problem Clearly and Objectively
- Explore Underlying Causes for the Problem
- Express Your Concerns to the Person & Discuss Potential Outcomes
- After Making a Decision to Terminate, Begin the Process Promptly
Define the Problem Clearly & Objectively
As a startup begins to grow, many employees might not be aware of new metrics they’re expected to meet. Ghosh recommends beginning a conversation by first stating the problem, then reviewing expectations the person did not meet. Sometimes, he cautions, in a startup environment, an employee might not be aware of metrics or expected deliverables because they are working on multiple projects simultaneously without a clear understanding of priorities.
Matthew Bellows, serial entrepreneur, shares, “the signal to me has been, has the person stopped learning?” And that can be difficult because it relies on subjective judgment.
Be Transparent About Your Concerns
Plan to have a series of ongoing conversations in an atmosphere in which people can communicate honestly without feeling defensive. That can be tricky as most people will react defensively, perhaps citing reasons for missing a target that place blame on a colleague or lack of process. In an early-stage startup, the CEO should investigate causes that might impede your team’s ability to perform.
“Ask open-ended questions specific to the problem—”you were assigned X target and fell 20% short. What happened?”
You might learn that you need to change something else. But if, after investigating, you determine the problem is directly related to the employee’s performance, devise some plan for addressing the problem. “It’s not just that this person should try harder,” Ghosh notes. Bellows emphasizes, “it is absolutely the job of the CEO to make that judgment call and to be right or be wrong.”
Explore Underlying Causes for the Problem
During periods of rapid scaling, role expectations and responsibilities can grow faster than individuals. What do you do when the performance of staff who were previously superstars begins to decline because they are unprepared to handle the changes created by rapid growth? Kevin Ryan, founder and CEO of AlleyCorp, has earned widespread respect as a leading internet entrepreneur in New York shares his insights.
Growth Can Outpace a Good Employee
In the process of founding and growing widely successful companies including, MongoDB, Business Insider, Gilt Groupe, Zola, and Nomad Health, Ryan has witnessed many instances of company growth outpacing the ability of leaders to keep up.
Often, the most expedient decision is to hire someone more suited for the expanding role. But that doesn’t mean you have to fire a good employee whose role expanded and outpaced them.
The situation entails having an equally difficult conversation—informing someone of a demotion. Ryan warns that telling an employee, “we’re going to have to split your division or we’re going to have to hire someone above you” may result in them deciding to leave.
Decide to Demote or Fire
It’s important to acknowledge their desire to be promoted as their role grows, Ryan shares. And he frames a decision to demote an employee within a larger industry context. For instance, “I don’t think other people are going to hire you for VP of Marketing for 300-person companies either.”
Highlighting how growth impacts your decision at the time can help soften the blow—”I think you’re really a director-level right now. I think you’re going to get to VP sometime, but just not yet.”
He confesses, “I’ve lost some people” after those discussions, typically, because the person views the news as a demotion or personal failing.
People think, “Am I always moving forward? Is someone coming in in front of me that’s going to slow me down?” What’s important is not whether you allow them to move up, but when you allow them to move up.
Like Ryan, Lara Hodgson, co-founder and CEO of NOW Corp, takes pride in NOW Corp’s low turnover and endeavors to groom and promote staff from within. She also agrees that in periods of rapid growth, “to keep moving forward, you have to bring people in, in the right parts of the organization.”
She shares an example that, shortly after elevating a person widely regarded as a superstar on the team to running a small team, NOW Corp began to double in size. Problems began to arise due to her lack of managerial experience. Hodgson recalls, “We sat down with her. We got her some mentoring. We had some of our more senior folks sit with her and help her with some of the management things, and then, what we realized is, with this next fast growth phase we’re going to, it’s a big risk for us for her to be in that role.”
Talk with High-Performers Candidly
Over a period of weeks, Hodgson had candid, ongoing conversations with the employee, reassuring her that the job was hers, but talking through how growth would impact the role over the coming months. Hodgson’s employee admitted, “I used to go home so proud of what I’d accomplished. Now, I go home anxious. I go home worried that I didn’t get my stuff done, or I didn’t spend time with my people and they’re struggling.”
Knowing that NOW Corp was entering a critical phase, Hodgson decided to “bring somebody in to run the overall department” but instead of firing the employee, they shifted her role, “to be less management, more doing.” Hodgson described the situation as a win-win. NOW Corp retained a mission-driven high-performing employee and they crafted the role so it didn’t feel like a step backward.
Reframe Horizontal Moves
Many companies who experienced bursts of rapid scaling advise that retaining good staff who align with the company culture—even if that means reassigning roles—ultimately benefits the company. Hodgson comments “people tend to see their careers as linear, and yet, in hindsight, we all know that’s not true. Some of the best moves you can make are horizontal, but that’s not the way people think.”
We have to constantly remind people that the fact that you were going from A to B and someone was brought in does not mean you won’t get to B. You’re just not going to get to B right now. That person also has a career path. They’re going to move on—on their path—and you can continue on in yours better-positioned than before.
Deciding to Terminate
While “firing is an expensive process and should be the last step you take,” Ghosh counsels. But there will be times when it’s the best course of action. How do you let go of somebody who you discover is not a good fit for your company? How long should you wait before moving to fire someone?
A serial entrepreneur with three decades of experience, Rob Gierkink, has grappled with the decision to fire staff many times. Gierkink, who has built, scaled, and sold three companies counsels, “If you have a bad feeling in your stomach about this person you’ve just hired, in my experience, it almost always doesn’t work out.” The best you can do is substantiate your judgment with specific facts.
It can be embarrassing to say ‘I was wrong.’ But you have to fix it. The more it lingers, the worse it is. And it’s not right for the person either. They’re not going to be successful in an environment that’s not a good fit for them.
Don’t Avoid the Problem—Address It Promptly
To terminate someone fairly, the process can take weeks or even months, to complete, so it’s imperative to address the situation early. Moving swiftly to start the process can mitigate the damaging effects of an obvious bad hire. Start the process by conducting conversations that document underperformance before having the final conversation that terminates employment. Kevin Ryan explains, “If I’m eliminating or demoting you, it’s not the first conversation.”
Matthew Bellows, agrees “It’s an effort to try to figure out, “Can we salvage this? Can we make it work? And if the answer is “no,” then you’ve got to pull off the Band-Aid as quickly as you can.” The worst thing you can do is wait too long to begin the process.
Begin the Conversation by Being Direct
Bellows, who in 2019 co-founded and became CEO of BodesWell, a digital financial planning software company, advises anyone having to fire an employee to start the conversation directly. “Just say, ‘It’s not working out. You’re fired.’ Or, ‘I’m sorry to say this is your last day at the company.’ Be very clear about it and direct about it.”
Be very clear about it and direct about it. Say, “It’s not working out. You’re fired.” Or, “I’m sorry to say this is your last day at the company.”
He shares, “I remember the last time I got fired, my boss, the CEO said to me, I was a VP of sales, and he said to me, “Matthew, we’re going to have to let you go.” And that just struck me as absolutely the wrong way. You don’t have to do anything. You’re the CEO, you’re deciding to do this.”
Bellows, who sold his first startup, WGR (Wireless Gaming Review) Media, Inc. to CNET and built his second startup, Yesware into the leading email productivity platform, has unique insights on firing. Eight years after founding and growing Yesware, Bellows stepped down as CEO—essentially firing himself when he believed that the company’s growth was beginning to outpace him. How did he retain objectivity in such an emotionally-charged situation? He recommends staying focused on two things: the best interest of the company as it moves into a new phase of growth and concrete examples of an employee’s performance that demonstrate they are no longer the best fit for moving the company forward.
Ground Your Decision in Concrete Examples
Because the decision to terminate an employee may begin with a subjective judgment, it’s important to use data to support the decision. Try to stay focused on how underperformance affected the company, Bellows suggests, “the company needed to have a closed beta test on this day and we didn’t have it until three weeks later. The company missed this sale, on this date, because you did not deliver your piece on time.”
Similarly, during the final talk in which firing or demotion occurs, Kevin Ryan recaps specific instances, highlighting “things I can point to that are as concrete as possible.” Data doesn’t always satisfy the person you are letting go since, at a startup, functions are interrelated and affect one another. But being able to bring up three or four concrete examples, “helps the person ground a difficult emotional experience with reality and therefore understand the decision that it’s just not working out.”
Be prepared for the person to provide explanations and even resist. At the end of the day, it’s your judgment.
Enable People to Leave with Dignity
Nick Grouf, co-founder of several tech-startups including Firefly, PeoplePC, Clementine Capital—a tech-based incubator—and Alpha Edison—a venture capital fund—agrees that, ultimately, firing an employee is a judgment call. And often, despite careful explanation, an employee who has been terminated feels demoralized and may be judged or ostracized by former colleagues. Decades of experience haven’t made firing staff any easier or less emotionally taxing, but he learned there are ways to “do it in a way that really respects the individual.”
“The fact that they were not the right person for the role at the time” does not mean that they shouldn’t exit the company with dignity. In his experience, “too often when people are terminated they’re not seen as potential ambassadors for the company as they leave.” He encourages, think about ways to “let people go in a way that their head is held high” so they can “continue to feel a part of the company that they were involved with building” because someday, they might “become extensions of that.”
Hodgson exhibits a similar view and approach, “nobody leaves the company that I don’t at least talk to—even if it’s to talk to them about what they want to do next or where I think they might need to develop more skills. I almost always will make a connection for them.” Two of her former employees ended up starting their own businesses. “They were good people in the wrong job” whom she “knew could be successful, just not with our company” at that time.
Too often when people are terminated they’re not seen as potential ambassadors for the company as they leave.
How Firing Affects Your Company Culture
Having the right person in the wrong role doesn’t just lead to underperformance, it can negatively impact your company’s culture. Failing to address underperformance or hold people accountable for metrics can cause high-performing staff to feel resentful and cause the underperformer’s self-esteem to plummet. “Nobody,” Hodgson notes, “feels good going home from work every day not feeling like they did a good job.”
Additionally, if staff perceive that someone is being fired unfairly, randomly, or prematurely, they will become anxious and unsettled, causing morale to plunge.
Communicate to the rest of the team that there’s a thoughtful process to get to that point. Because the worst thing for the rest of the team is for them to feel like getting fired is random.
Make Time to Explain Your Decision to the Team
For most people, informing an employee—even someone who underperformed—that they no longer have a job is never easy. Firing someone who poured their heart and soul into your startup can be especially gut-wrenching and will have an impact on morale. As CEO, Bellows delivers the news in-person for senior leaders.
He emphasizes the importance of allowing remaining staff to process by providing closure—going to employees to talk about it allows for some of the emotions to dissipate. “I have to be the one to go out to them and explain what was happening and explain why” he learned, because, despite an open-door policy, awkwardness or fear can make staff reluctant to ask questions about someone’s involuntary departure.
If you don’t follow up with the people who are directly affected by the decision, you risk them assuming that you don’t care, that you made the wrong choice or that you are frivolous. Because they don’t see all of the months of preparation that went up to this decision.
Tips to Follow when Deciding to Fire an Employee
- Identify the problem clearly. Explore any underlying cause of the problem by seeking input from others—about the problem, not the employee in question.
- Express your concerns to the employee in a direct and transparent manner. Set clear expectations and have ongoing check-ins.
- Evaluate the specific situation: Is the person a good cultural fit at your startup and can they grow into the role? Would they excel in another role? Or has their behavior or underperformance negatively impacted others?
- Frame decisions in terms of your startup’s needs—especially in times of rapid growth—to objectively assess: does the employee possess the skills to help the company reach the next stage?
After Deciding to Terminate an Employee, Don’t Procrastinate.
Begin the process by:
- Documenting specific examples of the employee’s underperformance or problematic behavior
- Involving other trusted colleagues, such as HR—if your startup has an HR department—co-founders, leadership team, or advisors.
- Having ongoing meetings with the employee involved discussing concerns
- Working with HR, if possible, arrange for off-boarding actions, such as an exit interview, informing them about resources like COBRA, etc.
- Schedule time to meet with the employee in person, after documenting the situation thoroughly. Inform them, directly, that they are being terminated. Expect them to be upset and allow the information to settle. Arrange for them to meet with HR or an appropriate person for off-boarding at another time. If appropriate, offer to make introductions to your network.
- Be transparent with the rest of the team. Explain your decision and allow for questions.
In “How to Decide whether to Fire Someone” Harvard Business Review provides practical tips from Jay Conger, a professor at Claremont McKenna College and Patty McCord, former chief talent officer at Netflix on preparing to fire a staff member. Tips include reflecting on the problem, seeking input from others to determine the root of the problem, consulting with HR and involving them early in the process, being transparent with the employee, and documenting performance. The article provides two example scenarios.
In “A Founders Guide to Firing Someone for the First Time,” Maynard Webb, American business person and author of the bestsellers Rebooting Work: Transform How You Work in the Age of Entrepreneurship and Dear Founder: Letters of Advice for Anyone Who Leads, Manages, or Wants to Start a Business, shares a checklist for how to let someone go humanely, and how to set the rest of the team up for success.
In “It’s Never Too Early to Fire,” Lars Dalgaard, entrepreneur and investor with Andreessen Horowitz, shares why waiting to fire someone can have extremely negative consequences for startups. He explains, in the startup world “Not firing someone means not moving ahead with the right person that much earlier, you’ve now started the clock of underperformance, and the longer you wait, the longer that clock of lost opportunity is ticking. The longer you wait to fire them, the more compounded success is lost.” He also provides a list of signs to watch out for, including waning enthusiasm, avoidance, and lack of trust. Lastly, he gives practical advice on firing.
“Don’t ‘hire and fire fast‘,” Jotform founder and CEO Aytekin Tank shares his alternative philosophy, that the need to fire grows from hiring the wrong people, occurs when CEOs feel pressured to hire quickly as they scale. But “Growing slowly is a great way for entrepreneurs to maintain their sanity and their personal lives, while creating a viable (and potentially more satisfying) business. It can also help you to build a fantastic team.” He shares his experience slowly building his team as he scaled Jotform from 5 people to 150 and gives advice for others seeking to make wiser hiring choices.
“3 Ways to Create a Positive Exit Experience for Your Employees,” shares why most startups need to improve their exit process. According to Gallup’s recent exit study, 55% employees exiting a company in the U.S. have dissatisfying experiences with their exit process.
In “Knowing When to Fire Someone” Allison Rimm, best-selling author, consultant, coach, and strategic planning expert CEO of Allison Rimm and Associates, discusses how to strategically assess complex situations, such as a high-performing employee who may not fit within the culture and can impact the team’s morale. The article provides a link to a downloadable Employee Cost/Benefit Calculation Worksheet.