New Venture Lab: Equipping Christian Entrepreneurs

Question

How do you know when to let an employee go?

Answer

An easy way to think about employees is "Skill and Will".  You should let an employee go if their lack either one and you are way past due on letting them go if they lack both.  Another reason to let an employee go is the capacity issue.

"Skill" of course relates to their abilities, gifts and training - in short, their ability to get the job done.  Perhaps you misjudged their skills when you hired them, they misrepresented their skills or the skill requirements changed over time and they couldn't keep up.  I see the latter quite frequently in early-stage companies as they move from the launch phase, through start-up and into the growth stage.  One example is that of the role of the Chief Technology Officer (CTO).  A good launch-phase CTO needs to be high on creativity and thinking outside of the box as he is mainly responsible for new product visioning and development.  A good growth-phase CTO, however, needs to be an expert project manager as he is mainly responsible for maintaining and operating what was developed in the launch and start-up phases.  Often an early stage company will need to trade out members of its senior management team (such as the CTO) over the course of the first several years as the company's needs shift during the various stages.

"Will" has to do with the employee's character - their willingness to do the work.  Although an employee may have the "Skill" to do the work, if they do not have the "Will," then it is time to let them go.  In a fast-paced work environment, there is precious little time to "train" an employee in character.  Either they brought that with them or they didn't.  People often cite personality conflicts, but in my experience, these too, are a will issue in that the problem employee was not willing to demonstrate good character qualities in the work place and therefore demonstrates a bad personality that conflicts with others.  Everyone gets along with employees that are polite, genuine, team-players.

On the capacity front, employees need to be let go when you no longer need their work because you have gained efficiency and can get the work done without them, when the demand for your product or service has declined, or when you've hired someone else that was higher on the Skill/Will chart and you no longer need the lower ranking employee.  These employees are harder to let go, because the capacity issue is not their fault, but rather the market/company capacity requirement has simply changed and rendered them redundant.

No matter what the reason for letting someone go, it is best to move quickly, decisively and compassionately.  I prefer open and honest communication with them on why I am letting them go.  Also, I always give them some kind of severance (except in the case of dismissal for dishonesty or similar issues.)  And I usually try to give them some suggestions on other job opportunties or networking to assist their job search.  It's always best to be in prayer for them for God's leading, blessing and to restore their confidence.  Few things are worse for an employee's confidence than to be fired.

See the Termination letter downloads for example forms to help get you started in the event you need to let an employee go.