Firing and Personal Finance
Q When you think you need to fire an employee, is it best to terminate the person immediately, wait for him to make a big mistake, or give him a chance to improve?
Boca Raton, Florida
Donald Trump makes firing look easy--kind of a kick even. As usual, he's a unique case. CEOs consistently call termination one of the worst parts of running a business. It represents both the employee's failure (to perform) and the boss's failure (to extract performance) all in one dismal package.
It's best to get it over with fast, the way you remove a Band-Aid. That's the metaphor used by Clint Greenleaf, CEO and founder of Greenleaf Books, a publisher in Austin, who has fired about 10 people in the past few years. "So many times you keep putting it off," he says. "You can always find an excuse." But procrastination means more sleepless nights for you; meanwhile, the incompetent, unmotivated, or simply culturally misaligned employee could be hurting your company.
That doesn't mean fire on a whim: Employers are legally obligated to provide cause for termination. But they needn't wait to catch someone cooking books in the finance department or crystal meth in the kitchenette. The reason can be as simple--and subjective--as "you don't gel with the team" or "you're too negative." Ideally, dismissal won't be a huge surprise to the dismissed. Greenleaf recommends bringing up problems as they arise. "If there's an issue, address it immediately," says Greenleaf. "Don't wait around until the next review."
Senior managers usually prove hardest to jettison. "You feel the void will be too big," says Nancy Traversy, founder of Barefoot Books, a children's publisher in Cambridge, Massachusetts. Like many entrepreneurs, Traversy came to grips with firing the hard way. "I used to agonize over it," she says. "I'd sit through reviews pulling my hair out thinking this person will get better or maybe it's my management style." One day, Traversy realized she had kept an employee on nearly three years too long, hoping for improvement that never materialized. "I learned to focus my compassion on the rest of the team," she says. "They're the ones whose jobs have become more difficult because of this person."
No matter the reason for termination, Greenleaf advocates severance. The payment should be a bit higher for terminations based on murky issues such as personality conflicts, he says: "Let them leave with a slightly better taste in their mouths." After all, nothing dulls the pain of separation like exciting parting gifts.
Q I want to start a business, but when I was younger I ruined my credit. What steps should I take to get my credit back on track?
New York City
A fresh start is possible, but you'll have to work for it. What's more, it could take years to repair something you screwed up long ago. First, you'll need to know how bad is bad. You can get your credit score for free on the FICO website (myfico.com). The national median FICO score is 725 (out of 850). With a score of 680 or lower, you'll have difficulty getting good terms on loans or equipment financing, says the aptly named Gerri Detweiler, a small-business credit consultant and author of The Ultimate Credit Handbook.
If your score's troubling, then verify what's being said about you. Under federal law, you're entitled to one report per year from each of the three credit reporting agencies: TransUnion, Experian, and Equifax (NYSE:EFX). Scour the reports for errors, and if something looks hinky--a company claims a late payment you know was on time--dispute it with the credit bureaus. And pay any lingering debts, though it won't make a difference for a while. Information on credit reports is like chewing gum in your stomach: It sits there. In this case, for at least seven years.
Next, you need to pay your bills on time. All of them. All the time. If you're prone to procrastination or forgetting, most companies will automatically deduct payments from your bank account if you sign up for it. Assuming you don't have closets full of charge cards already, you should also apply for more credit lines or loans that you know you can repay. Your credit score is weighted toward the most recent two years of activity, so boost it by taking out (and paying off responsibly) an auto loan or a retail credit card. If your credit is truly abysmal, secured credit cards let you pay a flat amount up front and prevent you from charging more than that.
Maintain about four different active credit accounts, Detweiler recommends. For a better score, your balance on each credit card should not exceed 30 percent of your credit limit. So don't transfer everything to the card with the lowest interest rate. And don't close an account, even if you've completely paid off your balance on a card. That may sound like fiscally responsible behavior, but it doesn't sit well with the credit gods. Instead, use each card at least once a year to keep building your credit history. Over time and used with discipline, plastic makes perfect.