It can be one of the most gut-wrenching decisions a boss has to make, but also one of the most necessary. It's awkward and uncomfortable and emotionally taxing on both parties. Unless you're Ari Gold, firing an employee is never fun.
The business breakup can be especially tough for entrepreneurs, who closely manage small teams that they very likely helped assemble themselves. Personal relationships are on the line -- and occasionally, for better or worse, friendships. We warn against that, of course, but when a group works 15 hours a day building a venture together, bonds are bound to form.
Dissolving those bonds can be tricky. Corporate America is not known for its deft touch when it comes to letting employees go -- sudden mass layoffs, group firings, even dismissal by e-mail. George Clooney's fictional character in Up in the Air, a jaded "corporate downsizer" who literally crisscrosses the country to fire people he has never met, wasn't all that much of a stretch from reality.
But entrepreneurs are a slightly different breed. Sure, they're focused on profit and loss just like their pinstripe-suited counterparts, but many pursue the entrepreneurial path to create something bigger than just a balance sheet. They take pride in creating jobs and nurturing their staffs. Many of them decided to start companies after they were fired themselves. So when a hire goes wrong, even someone who proves to be woefully incompetent, an anonymous pink slip just won't cut it. The reality, however, is that economic downturns set in, employees screw up or maybe you made the wrong hire in the first place. For better or worse, cleaning house is often necessary, for the greater good of the company and the rest of your employees.
During their entrepreneurial careers, the members of our Board of Directors have employed thousands of people. But with that, inevitably, has come the task of letting some of them go. We asked them how to arrive at the decision, how to execute once its made and how entrepreneurs can learn from the experience and move their companies forward.
Warren Brown
Founder, CakeLove and Love Cafe
"Never pleasant, for either side. But I think the best way to let someone go is with honesty. Even though no reason is really required by law, it's only fair to have a reason why when letting someone go. When it's happened, I've made it very clear: It's either circumstances beyond our control (like the economy) or they've forced my hand with their extremely poor performance or judgment, or both."
Rob Adams
Director, Texas Venture Labs at the University of Texas
"Yes -- quickly and professionally. Even the best hiring managers have a success rate of 50 to 60 percent, so if you've made a hiring mistake, recognize it and take action. Entrepreneurs are usually very positive and optimistic by nature. But there are plenty of bumps in the road when you're running a business."
Danielle And Jodie Snyder
Co-Founders, DANNIJO
"Never easy. We always play up the person's strengths and let them know that it's apparent that the position isn't a good fit for them and that there is something out there that they will be more passionate about. It's a dirty job, but someone's got to do it -- and as an entrepreneur, its important that you're able to."
Tom Szaky
Founder, TerraCycle
"I don't know if there is a right way, but the way I do it is sit the person down and immediately tell them the news. Don't skirt around the issue. Then I typically ask them if they'd like more details as to why. In most of the cases, the people don't. The whole process is typically a few minutes. You know if you've done your job in managing properly if the person is not surprised by the news. If they are surprised, then you probably haven't been giving them the feedback they needed."
Phil Town
Investor And Author Of Rule #1 And Payback Time
"Option A: This is the sneakiest way to do it. Move them into a 'better' job, give them a great title and then have the job just not work out. Then you can say, 'I'm so sorry, I totally don't want to let you go and there is no way I would do it if it could at all be avoided but THEY are cutting this whole department and unbelievable as it is, and as hard as I fought it, THEY are letting you go. I know. I can't believe it either.' "Option B: The RIGHT way to do it. Tell them as soon as possible, tell them the real reason why and give them a nice severance. However, if you actually do it this way, remember that no good turn goes unpunished and be prepared for a lawsuit. After you do it this way once, you'll probably go back to Option A."
Bob Parsons
Founder And CEO, The Go Daddy Group
"Absolutely. The employer needs to be direct, to the point and respectful. There should be no discussion attempting to justify or defend the decision, as it has already been made. Depending on how long the employee being fired has been with the company, there should be a generous severance package."
Jennifer Hill
Startup Advisory And Venture Lawyer, Gunderson Dettmer LLP
"Yes, the process can be as important as the act itself. First, confer with your company's legal counsel to ensure that you are abiding by state and federal laws, as well as the company's HR department. Determine whether there is a plan for termination (i.e. a reduction-in-force or whether this is an isolated incident based on performance). Involve a third party if you can, such as the person's manager or an HR manager. This reduces the 'he said, she said' nature of it and tends to keep it more professional. Prepare what you are going to say and stick to a few key points. Avoid overdramatizing or editorializing it. Keep it very matter-of-fact, yet empathetic. Listen and avoid appearing dismissive. Ensure that the person terminating an employee is properly trained and can embody the best of the company while doing it. Although it's a difficult deed, there are ways to do so and still maintain a positive relationship between the company and employee. Last, have an action plan for next steps with the employee. Assemble a package of exit information (i.e. last paycheck, benefits information, severance - if any, state and federal unemployment resources, exit interview questions, and any company resources such as outplacement service recommendations). "The more you can help the employee to think constructively about the future, the more likely the employee is to handle the situation professionally and adopt a pragmatic view about the company."
Elizabeth Busch, Anne Frey-Mott And Beckie Jankiewicz
Co-Founders, The Event Studio
"There a right way to fire someone. Absolutely. It's not about a scripted set of words or a standard protocol, but the way to fire someone is to be as honest, respectful and direct as possible. In business (as in life) there are often times when people aren't just the right fit. I think it's really important to remember that that doesn't make the person who needs to go an evil force of some sort. Especially as a business owner, it's really easy to take everything very personally, but very seldom are people actually trying to do you wrong. If you have to send someone out of your organization, be direct, be honest about what the problems are/were and remember not to make it personal. Keep it all on the table of what is best for your business. Oh, and don't forget that even from the worst situations you can take away meaningful and useful learning -- don't forget to mine the situation for what you need to know about your business moving forward."
The original version of this article appeared on AOL Small Business on 6/8/11.