This article is an excerpt from the Shortform book guide to "The Hard Thing About Hard Things" by Ben Horowitz. Shortform has the world's best summaries and analyses of books you should be reading.
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How do you fire someone professionally? What if that person is an executive or a loyal early employee?
If you are a CEO, manager, or business owner, chances are that at some point in your career, you’ll need to fire somebody. Here is advice on how to fire someone professionally and how to handle different types of lay-offs.
Continue on for advice on how to fire someone.
How to Fire or Lay Off Someone
When the company fails to meet its plans, you will need to lay people off to survive. We’ll talk about the general principles, and then talk through three situations: a general layoff, firing an executive, and demoting a friend.
Here are general principles for every negative staffing change:
- Act quickly: Once you know you have to take the action, execute it as soon as you’ve finished preparation. Waiting longer makes the situation worse. Also, the bad news may leak.
- Define the correct root cause: Be honest about why the layoff or demotion is happening. It’s most often a problem with the company’s performance or hiring procedures, not with the person herself.
- Have a clear exit plan for the people affected: You should have details on severance and benefits planned before the meeting.
- Have a clear transition plan for the team remaining: They will want to know how this changes their reporting structure and their day-to-day work.
- Rehearse your meeting: You don’t want to misspeak.
- In your meeting, be clear on the reasons: Communicate the root cause clearly.
- In your meeting, be firm and unwavering: State the decision is non-negotiable. Use words like “I’ve decided” rather than “I think.”
- Afterward, message to the rest of the company: This speech is for the people who are remaining. Be respectful to the people affected. They’ve built friendships with the rest of the team and made real contributions. The team that’s staying cares how you treat people who leave.
Now let’s apply this general advice to the three situations.
How to Lay Off Multiple People
Root cause: When you need to lay people off, it’s because the company failed—failed to meet its targets, failed to execute its strategy, or had the wrong strategy in the first place. Don’t use other feel-good excuses, like “we’re getting rid of the bottom performers.” Admit the company failed; this builds trust with the rest of the team.
Managers should lay off their own people. Don’t be a coward and pass the task onto HR or an outsourced agency. The people being laid off want to hear the bad news from your face or from their manager’s. The people remaining want to know you have the courage to own your decisions.
How to Fire an Executive
Executives tend to be easier to fire, because they’ve fired plenty of people in the past. But given their higher position, the root causes and preparation can be more nuanced.
Root cause: Most often, it’s not the executive’s fault she’s being fired. It’s the company’s fault for having a bad hiring or onboarding process. Here are a panel of reasons:
- You didn’t know what you wanted. If you weren’t sure what exactly the company needed in the next 1-2 years, you wouldn’t have filtered for the right qualities.
- You looked for lack of weakness rather than for strength. This is most common in hiring by committee, where people reject people they have problems with, leading to a vanilla candidate who is not hated by anyone but is also not particularly strong at their core function. You need to hire someone who is world-class at what they need to do, regardless of tolerable faults.
- You hired an executive by archetype. You probably have an image in mind of what an ideal, say, sales manager looks and sounds like (tall, suave, smooth-talking). This likely has a poor correlation with what job your company needs done. A VP of engineering at Google might be a terrible fit for your company.
- You hired for the wrong stage of the company. Executives are specialists at certain stages in company growth. Don’t hire someone who will be appropriate in 3-5 years—she’ll be useless in the next 18 months, and the team will reject her.
- You hired for the wrong expertise in growth. When you’re scaling fast, you need someone who has personally scaled from small to large. You don’t want someone who merely worked in a large company or inherited a large department.
- You didn’t integrate the executive properly. Executives are like organ transplants and can be accepted or rejected by the host (your team). You need to smooth the way for employees to welcome her. Make the team expectations clear on how she should be treated.
In the next chapter, we’ll discuss how to run a hiring process to avoid these mistakes.
Inform the board. Ben advises broaching this with individual phone calls, then finalizing the decision at a board meeting. It can be especially sensitive if you have high executive turnover or if the executive was recommended by a board member. Steps to take:
- Communicate your root cause and how you plan to fix it.
- Have them approve the separation package.
- Don’t bad-mouth the executive. Doing so makes you look childish.
Let the executive determine the outside messaging. The executive cares about protecting her reputation. Ben advises that you let the executive decide how to communicate the news to the team and the world.
Exit plan: The executive’s direct reports will want to know what the plans are to replace the executive and who they will report to in the interim. Horowitz recommends the CEO take on the executive’s role since this provides smooth continuity and helps inform your hiring plans.
How to Demote a Loyal Early Employee
When your company grows, people who have been in senior positions from the beginning may no longer be appropriate. It’s rare for a great manager of the 5-person team to also be great at leading the 50- or 500-person team. You may have to demote someone from her position, promote a colleague above her, or hire someone from outside for a role she was expecting to be promoted to.
Root cause: Explain that the person is under-equipped to do the job and why. You also have fault in not being experienced enough to coach her into the role.
Exit plan: If you want the person to stay, come up with a plan that lets her preserve her dignity and motivation. Working under her new boss might not be the best solution. Consider moving her to another team where she can learn new skills. Meanwhile, consider giving her a raise, just to reemphasize how valued she is.
Execute With Failure in Mind
In feudal Japan, the samurai code of honor bushido prescribed warriors to “keep death in mind at all times.” The purpose was to prepare constantly for death, to live life honorably and to plan for a good death with honor intact. Keeping death in mind would protect the value of each living moment.
Horowitz advises the same thing. Keep your company’s death in mind. This will make you focus when building your company. If you don’t want to go through the pain of firing an executive, then you’d better hire a great one from the start. If you don’t want to go through the pain of laying off half your team, then you’d better get the strategy right and hire appropriately.
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- What it was like to head a company through the dotcom bubble and subsequent burst
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