Wednesday, August 17, 2011

Lesson #76: How to Implement an Employee Change


Back in Lesson #34 and Lesson #35 we talked about how to best recruit and screen employee candidates for your startup.  And, in Lesson #15 we talked about hands-on vs. hands-off management styles in developing your staff, once hired.  But, sometimes, despite our best recruiting and development efforts, a staff member is just not working out.  This can be due to poor work performance or simply not fitting into the cultural fit within the office.  Today's lesson is going to discuss how best to deal with situations like this.

The most important thing to remember is that this process is not a one-time event, it is a step-by-step process that you lead up towards over months.  To protect yourself legally, you need to have a very clear paper trail documenting that you had communicated key areas of improvement with the staff member (preferably that they have acknowledged via their signature), and gave them a reasonable time period to fix such issues, prior to actually terminating their employment.  And, to the extent you have witnesses present in those employee review and termination meetings, the better it will be to defend your position, in case the terminated employee ever sues you for wrongful termination for reasons other than performance (e.g., gender, age, race).

I typically follow the following process when dealing with employees I need to change: (i) let the employee work for a period of time; (ii) if things not working out as planned, communicate such to the employee as a key area of improvement in the coming months; (iii) if things still not working after that period, I would give the employee a "last chance" review, that if you do not see material improvement in the next 30 days, you may need to make a change; and lastly (iv) if things still not working, you have properly laid the ground work to implement the termination.  The key advantage of point (iii) is, that thirty day notice may end up being the impetus they need to start looking for a different job and quitting on their own, before you actually need to terminate them.

Before we even get to the point of termination, I do everything I can to try to have the employee come to the conclusion themselves, that things are not working out.  I would ask questions like "are you happy here?" or "are you comfortable in this position?".  To try to get them to admit things are not going as planned from their perspective, to then lay the groundwork for a mutually acceptable transition period.  I would respond with "I want what's in your best interest, so if you are not happy, let's figure out a win-win transition".  That way they are not embarrased by being fired, and they think the decision was their own.  And, you keep them involved long enough to transition any required files, passwords or contacts.

If you get them to start this transition process on their own, you typically don't have to pay any severance.  As any salary you are paying them in the transition period, is like paying them severance, but you have the added benefit of them still doing their day-to-day job during this period.  And, make it easy for them to schedule time out of the office, to schedule new job interviews.  And, make sure they know you will serve as a good reference for them, in case any recruiters call.  This ends up being best for all parties, not risking embarrassment or reputaton risk by the employee that comes from a firing, and not exposing the company to a potential lawsuit for wrongful termination, since the employee ended up quitting instead.

As you can see, I try to avoid terminating staff for many reasons: (i) wrongful termination lawsuit risks; (ii) having to pay severance payments; and (iii) giving the employee the chance to file unemployment claims, which the company ultimately has to pay for in its insurance premiums.  So, where you can, creatively plant the transition idea with the employee, so they feel the decision was theirs, not yours, and you can creatively avoid many of these issues that come from terminations.

And, don't forget, any time an employee exits the company, make sure you talk to your lawyer, and get all the appropriate employee termination documents signed (e.g., non-disclosure, last day of employment verification, agreement not to bring claims).

But, worth mentioning, getting an employee to meet your goals is a two-way street: you as the manager need to be making an effort to make sure you are mentoring and training all employees with the right skillsets desired for the position.  So, make sure you are doing your best efforts here, before you start this process.

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