You feel like it’s time to fire an employee. How do you know if firing is the right decision?
If firing is the right course of action, what’s the best way to go about it?
Firing an employee is never fun. Even if an employee has hurt your business. The firing process can drain you emotionally and mentally.
If you consistently ask four questions when considering firing, you better your chances of making the right decision, and protecting your business:
- Is termination the appropriate action?
- Are you following company policy?
- Are you complying with the law?
- Is your company reputation protected?
When is termination the right step?
If there was a single formula to answer this question, every business owner and HR professional would know it by heart.
Unfortunately, no such formula exists.
The best we have is guidelines. While equally successful business people will argue about the details of when to fire guidelines, three broad categories of behavior deserve termination:
- Violation of a core company value, or damage to company reputation
- Employee doesn’t learn from mistakes
- Employee doesn’t meet the communicated performance standards
Your core company values serve as the foundation of your company culture and reputation.
Some common values shared across businesses and industries include:
- Honesty and integrity
- Compliance with law
- Customer respect
Other values are more unique to specific companies, but they are core to the individual company’s operation:
- St. Jude Children’s Hospital (mission statement):
- …no child is denied treatment on race, religion or a family’s ability to pay.
- Southwest Airlines (hiring values):
- Warrior spirit (a desire to excel, act with courage, preserve and innovate)
- Servant’s heart (the ability to put other first, treat everyone with respect and proactively service customers)
- Fun-loving attitude (passion, joy and an aversion to taking one too seriously)
- Zappos core values:
- Deliver WOW through service
- Embrace and drive change
- Create fun and a little weirdness
- Be adventurous, creative, and open-minded
- Pursue growth and learning
- Build a positive team and family spirit
- Do more with less
- Be passionate and determined
- Be humble
If an employee violates a core company value and puts your company’s reputation at risk, termination is a no-brainer.
Warren Buffett, often considered the greatest investor of all time, puts reputation above investment:
“Lose money for my firm and I will be understanding. Lose a shred of reputation for the firm and I will be ruthless.”
Mistakes are inevitable. In fact, many argue that employees who don’t make mistakes aren’t taking enough risks.
However, employees who don’t learn from their mistakes will harm your business in the long run.
Ray Dalio, founder of Bridgewater, believes that mistakes are necessary to a healthy company, but employees who do not learn from mistakes cannot be rehabilitated. In his book, Principles, Dalio states:
“Create a culture in which it is okay to make mistakes and unacceptable not to learn from them.”
You have a responsibility in helping employees learn from mistakes. Your average employee will not self-identify mistakes.
Identifying mistakes, and helping employees learn from their mistakes, requires you to consistently review and provide transparent feedback to your employees.
Your employee should know when he or she makes a mistake, and should not be surprised at being fired after repeating the same mistake multiple times.
Of the three reasons for termination listed above, not meeting performance standards is the most difficult to set up a rule around. Your performance standards are unique to your business.
Successful business builders vary greatly in the approach to performance standards. Consider Netflix’s approach to performance:
“Unlike many companies, we practice ‘adequate performance gets a generous severance package.”
On the other hand, Richard Branson avoids termination at all costs:
“I think that you should only fire somebody as an act of last resort. If someone has broken a serious rule and damages the brand, part company. Otherwise, stop and think.”
If someone is messing things up royally, offer them a role that might be more suitable, or a job in another area of the business. You’d be amazed how quickly people change for the better, given the right circumstances, and how willing they are to learn from costly mistakes given a second chance.”
You set your performance standards based on the culture you desire to create. Once you determine the standard, communicate it to your employees, and be transparent with your employees regarding their progress towards achieving such standards.
A common HR rule of thumb is no employee should be surprised by their termination. Whether the employee violates a core value, doesn’t learn from mistakes, or misses their performance, your employee should know firing is due.
The best way to ensure that your employees know that a firing is coming is if you have followed a sound set of company policies.
Have you followed company policy?
Company policies relevant to employee terminations include:
- Performance management
- Employee handbook policies
- Termination protocol
Performance management is a process.
A quality performance management system allows you to provide feedback to employees about their performance.
Three elements are critical to a good performance management policy:
You should keep written records of all performance evaluations. This includes both formal reviews, and disciplinary actions taken in between formal reviews.
The written record provides evidence to support your termination for poor performance.
If an employee challenges your termination as unlawful, a written record showing a history of underperformance is your best defense.
Too often, managers claim that he or she told the underperforming employee numerous times that work needed to improve. Inevitably, the employee claims the warnings never happened. If there is no written record, the dispute is based on the manager’s word against the employee’s word.
A written record of performance evaluations is your best evidence, but only if it is an honest record.
Dishonest employee performance evaluations will doom any performance management system.
Unfortunately, many managers fail to give negative feedback because it’s uncomfortable.
If you or your managers give underperforming employees satisfactory reviews, this will hurt your company when terminating such employees for poor performance.
If you fire an employee for bad performance, but that employee has a history of positive performance reviews, the employee (and the employee’s lawyer) will conclude that the termination is based on something other than performance.
If the termination isn’t for performance, it could be based on a protected characteristic like race or age. Your business will likely face legal consequences if dishonest performance reviews lead employees to conclude that you terminated based on age, race, or another protected characteristic.
Finally, you need to conduct honest, recorded performance evaluations on a consistent basis. Employees and their managers should expect and plan for a scheduled performance review cycle (no less than once a year).
If you don’t start documenting performance reviews until you see poor performance, this suggests that you are targeting a particular employee in preparation for firing them.
Targeting claims provide disgruntled employees with a wide range of potential legal claims (e.g. discrimination, harassment, retaliation, etc.)
An honest, written record can actually work against you fail to conduct performance reviews on a consistent basis.
Implement your performance management system consistently across all employees at a common time schedule. This ensures your performance policies work to your benefit in the event that you need to terminate for poor performance.
Employee handbook policies
You company policies should work to your advantage in firing an employee.
Company policies allow you to set expectations with employees regarding acceptable behavior, use of company property, and interactions with business partners.
Fireable offenses not addressed in performance reviews should be addressed under your company policies.
Policies that might be applicable to a termination include:
- Anti-harassment policy
- Core values
- Code of conduct
- IT policies
Company policies should be required reading before an employee joins your workforce. As you update the policies, employees should be notified of changes.
Require employees sign off on their reading and understanding your company policies. They can sign off through a physical signature, or an electronic method. The goal is to create a record that each employee has read your policies and verified an understanding of the policies.
If you need to terminate an employee for violation of any company policy, that employee’s sign off will be a useful piece of evidence in defending your decision to fire the employee.
Implement and follow a termination protocol when making the decision to fire an employee and when terminating the employee.
If you are a new or small business, your termination protocol might be simple.
The larger your employee base becomes, the more details you will need to consider.
The goal of the termination protocol is to ensure that you handle each termination consistently and lawfully.
Common elements of a termination protocol include:
- Decision maker: determine who makes the ultimate decision that termination is the correct course of action.
- Witness: have a witness present that can take notes and verify any events that take place during the separation process.
- Script: Read a simple, and straightforward script when terminating an employee. Give the lawful reason, and avoid irrelevant facts.
- Limit discussion: You must control the conversation. The broader the conversation becomes, the more likely the employee is to expose a potential liability to your company.
- Allow the employee to ask relevant questions: employees often feel personally attacked in a termination. Allow the employee to ask relevant questions and redirect answers to the reason for termination. Tell the employee that you will follow up regarding questions not directly concerning the termination.
- Post-termination protocol.
- Conduct terminations at the beginning of the day, or the end as to avoid disruption to the rest of your business.
- Discuss any post-termination benefits that the employee needs to know (e.g. COBRA, severance payment, etc.).
- Make the employee leave your place of business immediately after the separation. Ensure the employee that you will safely ship personal belongings as soon as possible.
Are you complying with the law?
Most of your employees are at-will employees.
This theoretically means you can fire them for any reason. Likewise, at-will employees can quit for any reason.
Although the default employment status for most employees in the US is at-will, you cannot fire an employee for a protected reason.
Protected reasons fall into two categories: protected characteristics and protected activities.
Examples of protected characteristics include:
- Genetic information
- National origin or ancestry
- Physical or mental disability
- Religion or creed
- Sex, including pregnancy
- Veteran status
Examples of protected activities include:
- Making good faith complaints
- Filing lawsuits
- Concerted activity (e.g. join a representative organization (union), collective bargaining)
- Discuss working conditions
- Request access to personal employee file
The above lists are based on federal law. Your local government or state may further protect certain characteristics and activities.
Just because an employee is protected by one of these categories does not mean that you cannot fire the employee. You simply cannot fire an employee because of the protected reason.
Performance management systems and company policies will help you avoid terminating employees for protected reasons.
Is your company reputation protected?
Protecting your brand and company reputation are unquestionably important.
Remember this when firing an employee.
Keep the following question in mind when terminating an employee:
“How do I want this employee to speak of my company after he or she leaves my company?”
If you are hostile during an exit interview, don’t expect positive reviews from the ex-employee on Twitter, Glassdoor, and other social media outlets.
And keep in mind, future job candidates will see your reviews when considering your company for employment.
A recent study from Indeed showed that 70% of job seekers won’t apply to your company without researching your reputation online.
In addition to protecting your reputation for future employees, others are looking at your online reputation as well: customers, partners, investors, lenders.
Your separation from an employee is a key moment for you to protect your company reputation. You want former employees speaking well of you, even those you fired.
Firing employees is an unfortunate reality of running a business.
If you follow consistent policies and procedures to monitor employee performance and behavior, you will make the separation process easier on your company and your employees while protecting your business reputation.