The cost of keeping unproductive employees on the payroll too long can mean more than financial losses for a business.
Take it from Don Milley; with seven years of experience buying and selling companies, he ought to know.
Some years back, as the new owner of a video-conferencing technology company, Milley had to call security to escort an employee from his office in a troubling scene that perhaps could have been avoided.
“He was insubordinate, wasn’t performing, but I didn’t want to rock the boat,” says Milley, now president of Acquisition Associates, a Philadelphia middle-market business brokerage he founded in 2003.
It took two weeks of sub-par performance and a bad attitude before Milley decided he’d had enough.
“We had another ‘conversation,’” Milley says. “Then he ran out of the office and started bad-mouthing me to the other employees. The next day was spent doing damage control.”
For business owners, disciplining and firing bad employees is one of the hardest parts of their job. Some go for months or years tolerating a worker’s chronic lateness, dull work habits and missed deadlines – all while getting paid and taking advantage of your company.
The idea of confronting others with their faults may seem like more than you can handle, but you’re the boss. It goes with the territory.
“They’re uncomfortable conversations,” says Vince Thompson, author of Ignited: Managers! Light Up Your Company and Career (Financial Times Press, 2007, $25.99). “Hard feelings develop. They might ask you about the direction you’re giving them. That exposes that you’re not such a good boss.”
Stop Trouble Before it Starts
Some managers recommend taking an aggressive approach: hire great people and quickly fire those who aren’t working out. Low performers drain resources, undermine morale among high performers and send the message that poor performance is acceptable.
“The goal is to have every position filled by a superstar,” says Byron Elton, who manages about 50 employees as a regional vice president for AOL Media Networks. “You never do anybody a favor by keeping them in a position that they’re not great at. It sounds harsh, but that’s it.”
It’s business, not personal. More often than not managers and employees don’t communicate regularly. The workplace is dynamic and expectations often change. Productive meetings can help you get the best from your employees more consistently.
“The key is to build a culture where performance is discussed on a regular basis,” Thompson says. “At least monthly or bi-weekly, confirm to your employees what your expectations are for them and then what the deadlines are.”
Let Go of Your Fear of Firing
In the U.S., unless there’s a contract restricting termination, workers are considered at-will employees. That means they can be terminated at any time for any reason – or none at all – as long as no state or federal statute is violated. Under this doctrine, employees are also free to quit whenever they like.
Equal Employment Opportunity laws prohibit discrimination on the basis of age, gender, race, color, religion, ethnic origin, disability and veteran status. However, employees can be fired without warning for serious offenses, such as harassment, stealing and insubordination.
Even so, most employers put up with under-performing personnel to give them a chance to improve, keep turnover low, promote good morale, avoid replacement hassles, and out of fear of retaliation or a lawsuit.
6 Steps to Improvement – or the Axe
To weed out problem employees, entrepreneurs can apply progressive discipline, a six-step action plan traditionally used by human resource managers:
- Start with an informal, verbal warning.
- In a formal disciplinary interview, address the problem and describe the impact it’s having on your company. Collaborate with and enable the employee to find solutions that will improve his or her performance.
- Follow with a written warning. Give the employee a copy as a reminder of objectives, expectations and consequences.
- Set a probationary period, and outline the repercussions if performance problems persist. (Steps 2, 3 and 4 are often combined.)
- Suspend the employee without pay for a defined period of time.
- If the first five steps fail to improve the situation, fire the problem employee.
At each step, document everything with detailed notes for the employee’s file or in a written performance appraisal to protect your company in a wrongful termination suit. And hang onto them. U.S. Equal Employment Opportunity Commission rules require employers to keep all personnel records for one year from the date of termination.