In almost every organization, people spend a lot of time talking about interviewing, recruiting, and creating a great culture. They talk about how to identify the right people, but they don't really spend any time talking about how to identify the causes of cultural problems within their organization. How do you identify the other people, the poor performers? If you don't work to get the wrong people out of the company quickly, you're only really working on half of the business.
CEO coach Cameron Herold has coached business leaders all over the world, all the way up to the CEO of Sprint. He typically works with entrepreneurs to help run million to hundred million dollar companies, and he considers getting rid of people to "almost be a yin yang approach. You need to work at bringing the right people in and you need to work at getting the wrong people out."
In his experience, the cost of keeping the wrong person can be up to 15 times his or her annual salary. So if you're paying Bob $100,000 a year and you know he's the wrong person, it actually may be costing the company $1.5 million a year to keep him. You lose other great employees that quit because they don't want to work with Bob anymore; some customers won't give you the rest of their business because they don't like Bob; desirable new employees won't join your company because they've heard bad things about your culture, stemming from--you guessed it--Bob.
"You've got all the negativity and the management problems of, 'Bob did this and Bob said that and how do we work around Bob?' and all that time that you're spending working around the negative energy."
There are different types of problem employees, and it's important to be able to identify each for what they are so that you can deal with them appropriately.
Sometimes you'll have an employee who simply may be someone the company has outgrown. When Herold was helping to build 1-800-GOT-JUNK as its Chief Operating Officer, they had had six consecutive years of 100% revenue growth. At some point, he can see when a company "starts to outpace some of the early stage individuals, unless they really keep up." You might be cutting a person because they just can't perform at the level the company has now reached.
Moreover, the culture of an organization changes over time, as new people are added, as the company scales and you go from 10 people to 100 to 1,000. There is a big shift, and different individuals need to be able to work within those cultures. Herold recalls having to cut a number of people over the years because they just no longer fit the organization. There's nothing inherently wrong with them, but you're not going to succeed unless you free up that budget to hire someone who's better suited to the role.
But before you consider firing this person, you owe it to them to step back and consider if you have fulfilled your own responsibility. Herold has seen that it's often managers or leaders who "don't let the individual know along the way what's going on, so it blindsides them. That's really our obligation to give them the respect and give them feedback along the way." If you can recognize when this sort of situation is developing, you can head off the problem before you have to cut the employee.
However, the sad reality is that some people will never perform. They just aren't up to snuff in terms of ability, they're too slow, or they don't like to work in general. On the lower end of this spectrum is the cultural misfit, the person that just isn't nice to be around. They're the negative, the naysayers, the grumpy people, just toxic--the "cultural cancers inside of your organization," as Herold puts it. "If we knew we had a cancerous tumor in our body, we'd replace it tomorrow morning. We'd go in, we'd get it cut out, we'd get the chemotherapy. But in business, we often wait far too long."
According to Herold, companies tend to wait four to six months on average from the point that management knows they should cut the cord to the time that they actually let that individual go.
"There's a point that when you know that it's not working, and you either need to have that come-to-Jesus meeting or you need to make the cut in the organization. But we often second-guess it and wait too long."
It might sound like a rationalization, but it is quite likely that you're doing a favor to this employee if you make that decision that you've been putting off, and let them go. If you do it right, it can be beneficial to both the employee and the person being let go, with no hard feelings. Herold tells the story of one ex-employee he fired around 10 years ago, "and he's used me as a reference three times since then. And that is because he really understood that I cared about him as an individual, even after we had to let him go."
Help them understand why it is happening, treat them with respect, and they can see that the decision is right. You're setting them free to go apply their time and energy somewhere where they're a better fit, and while also ensuring the success of your business--and isn't that a win-win?