VC superstar Mark Suster on the costs of rewarding weak employees because of guilt.
According to venture capitalist titan Mark Suster, deciding to postpone a difficult decision as a leader is a decision to expose your company to capital waste and indsidious opportunity costs.
In a post on his blog, Both Sides of the Table, Suster offered a parable of a timid CEO. This CEO, which Suster advises, knew he needed to fire a weak CTO. Instead of stepping up and letting him go, the CEO couldn't decide--so he did nothing. Nine months (and $100,000 in salary) later, Suster and the board forced the CEO's hand and the CTO was fired--but not before the weak-willed CEO pleaded to offer the outgoing CTO $25,000 more in severance pay.
“My view was he had already earned nine months extra pay...$25,000 is a lot of money. Wouldn’t it be better to surprise two unsuspecting people with an unexpected reward?” Suster wrote.
“Don’t the performers deserve more spoils than the unmotivated, uncommitted, and non-performant? Or are we merely buying off our own personal guilt from the economic and societal consequences of the hard choices we make? That’s the easy way out. We sleep better at night. It’s egocentric."
Though Suster and members of the board ardently adivised him against parting with such a large figure, the CEO won the battle for a larger severance--but, according to Suster, lost some respect as a leader.
"He just didn't perceive the costs of the board losing a small amount of confidence in him that day. He sold it cheaply," he wrote.
Suster added that he doesn’t see the utility in motivating an employee that’s on the way at the door. Resources should be saved for the “team that’s in the field.” Let your firee's new employer spend the resources inspiring their new employee.