Preparing to Fire an Executive
When you recruit an executive, you paint a beautiful picture of her future in your company. You describe in great depth and in vibrant color how awesome it will be for her to accept your offer and how much better it will be than joining that other company. Then one day you realize you must fire her.
Like so many things, the key to correctly firing an executive is preparation. Here is a four-step process that will treat the executive fairly and improve your company:
Step 1: Root Cause Analysis
While it’s possible to fire an executive for bad behavior, incompetence, or laziness, those cases are rare and relatively easy. Unfortunately, unless you have a horribly deficient hiring process, those are probably not the reasons why you got to this point. At this level, almost every company screens for the proper skill set, motivation, and track record. Yes, the reason that you have to fire your head of marketing is not because he sucks; it’s because you suck. In other words, the wrong way to view an executive firing is as an executive failure; the correct way to view an executive firing is as an interview/integration process system failure. Therefore, the first step to properly firing an executive is figuring out why you hired the wrong person for your company. You may have blown it for a variety of reasons:
- You did a poor job defining the position in the first place. I you don’t know what you want, you will be unlikely to get it. Far too often, CEOs hire executives based on an abstract notion of what they think and feel the executive should be like. This error often leads to the executive not bringing the key, necessary qualities to the table.
- You hired for lack of weakness rather than strengths. This is especially common when you run a consensus-based hiring process. The group will often find the candidate’s weaknesses, but they won’t place a high enough value on the areas where you need the executive to be a world-class performer. As a result, you hire an executive with no sharp weaknesses, but who is mediocre where you need her to be great. If you don’t have world-class strengths where you need them, you won’t be a world-class company.
- You hired for scale too soon. The most consistently wrong advice that venture capitalists and executive recruiters give CEOs is to hire someone “bigger” than required. “Think about the next three to five years and how you will be a large company” is how the bad advice usually sounds. It’s great to hire people who can run a large-scale organization if you have one. It’s also great to hire people who know how to grow an organization very fast if you are ready to grow your organization very fast. However, if you do not or you are not, then you need someone who can do the job for the next eighteen months. If you hire someone who will be great in eighteen months but will be poor for the next eighteen months, the company will reject her before she ever gets a chance to show her stuff. Your other employees will wonder: Why did we give her all those stock options when she’s not contributing anything? Those kinds of questions are impossible to recover from.
- You hired for the generic position. There is no such thing as a great CEO, a great head of marketing, or a great head of sales. There is only a great head of sales for your company for the next twelve to twenty-four months. That position is not the same as the same position at Microsoft or Facebook. Don’t look for the candidate out of central casting. This is not a movie.
- The executive had the wrong kind of ambition. There is a difference between ambition for the company and ambition for oneself. If an executive has the wrong kind of ambition, then despite her skills, the company may reject her.
- You failed to integrate the executive. Bringing a new person into your company in an important role is difficult. Other employees will be quick to judge, her expectations may be different from yours, and the job may be largely undefined. Be sure to review and improve your integration plan after you fire an executive.
- The special case of scaling. A fairly common reason for firing an executive is that when the company quadruples in size, the executive no longer does the job effectively at the new size. The reason is that when a company multiplies in size, the management jobs become brand-new jobs. As a result, everybody needs to requalify for the new job, because the new job and the old job are not the same. Running a two-hundred-person global sales organization is not the same job as running a twenty-five-person team. If you get lucky, the person you hired to run the twenty-five-person team will have learned how to run the two-hundred-person team. If not, you need to hire the right person for the new job. This is neither an executive failure nor a system failure; it is life in the big city. Do not attempt to avoid this phenomenon, as you will only make things worse.
- The special case of fast growth. If you build a great product and the market wants it, you will find yourself needing to grow your company extremely quickly. Nothing will ensure your success like hiring the right executive who has grown an organization like yours very quickly and successfully before. Note that this is not the same as inheriting a very large organization or working your way up to running a very large organization. Make sure you hire the right kind of fast-growth executive. Also, do not hire this person if you are not ready to give them lots of budget to grow their organization; expect them to do what they do. The successful fast-growth executive is so important to building successful startups that recruiters and venture capitalists often advise CEOs to bring them in before the company is ready.
Once you identify the problem, then you create the basis for the next steps.
Step 2: Informing the Board
Informing the board is tricky and many issues can further complicate the task (i.e. this is the fifth or sixth executive that you had to fire or the candidate was referred by a board member). Realize that in any of these cases the board will be at least somewhat alarmed and there is nothing you can do about that. But keep in mind that your choices are: (a) alarm the board or (b) enable an ineffective executive to remain in her position. While choice (a) is not great, it’s a heck of a lot better than choice (b). Leaving a failing leader in place will cause an entire department in your company to slowly rot. Let that happen and the board will be more than alarmed. You should have three goals with the board:
- Get their support and understanding for the difficult task that you will execute. You should start by making sure that they understand the root cause and your plan to remedy the situation. This will give them confidence in your ability to hire and manage outside executives in the future.
- Get their input and approval for the separation package. This will be critical for the next step. Executive packages are larger than regular severance packages and rightly so. It takes about ten times longer for an executive to find a new job than it does for an individual contributor.
- Preserve the reputation of the fired executive. The failure was very likely a team effort, and it’s best to portray it that way. You don’t make yourself look good by trashing someone who worked for you. A mature approach to this issue will help keep the board confident in your ability to be CEO. It’s also the fair and decent thing to do.
Finally, firing an executive turns out to be a piece of news that’s handled better with individual phone calls than in dramatic fashion during a board meeting. It takes a bit longer, but it’s well worth the effort. Individual conversations will be particularly important if one of the board members introduced the executive to the company. Once everyone agrees individually, you can finalize the details in a board meeting or call.
Step 3: Preparing for the Conversation
After you know what went wrong and have informed the board, you should tell the executive as quickly as possible. In preparation for that meeting, you should script or rehears what you plan to say so that you do not misspeak. The executive will remember the conversation for a very long time, so you need to get it right.
As part of your preparation, you should review any performance reviews or written performance conversations to understand any inconsistencies in your prior communication. Three things to getting it right:
- Be clear on the reasons. You have thought about this long and hard; don’t equivocate or sugarcoat it. You owe it to them to be clear about what you think happened.
- Use decisive language. Do not leave the discussion open-ended. This is not a performance review; it’s a firing. Use words and phrases like “I have decided” rather than “I think.”
- Have the severance package approved and ready. Once the executive hears the news, she will stop caring about the company and its issues; she will be highly focused on herself and her family. Be ready to provide specific details of the severance package.
Finally, the executive will be keenly interested in how the news will be communicated to the company and to the outside world. It is best to let her decide. You cannot let him keep his job, but you absolutely can let him keep his respect.
Step 4: Preparing the Company Communication
After you have informed the executive, you must quickly update the company and your staff on the change. The correct order for informing the company is (1) the executive’s direct reports—because they will be most impacted; (2) the other members of your staff—because they will need to answer questions about it; and (3) the rest of the company. All of these communications should happen on the same day and preferably within a couple of hours. When disclosing the firing to the direct reports, make sure you have a plan for whom they will report to in the meantime and what’s next (executive search, reorganization, internal promotion, or something else). Generally, it’s smart for the CEO to act in the executive role in the meanwhile. If you do act in the role, you must really act—staff meetings, one-on-ones, objective setting, etc. Doing so will provide excellent continuity for the team and greatly inform your thinking on whom to hire next.
As you did when you updated the board, keep the message positive and refrain from throwing the executive under the bus. The best employees in the organization will likely be the ones closest to the executive. If you trash her, you will put all her best employees on notice that they are next. Is that a message you want to send?
When you update the company, you might worry about employees misinterpreting the news and thinking the company is in trouble. Do not try to maneuver around such a reaction. When you expect your employees to act like adults, they generally do. If you treat them like children, then get ready for your company to turn into one big Barney episode.
Every CEO likes to say she runs a great company. It’s hard to tell whether the claim is true until the company of the CEO has to do something really difficult. Firing an executive is a good test.