Firing Key Employees; When You Must, and How - Availigent

24 June 2006 Written by 

CEOs have the duty to stay on mission and pursue the firm’s vision, even if it means firing a troublesome employee with critical knowledge.  This article talks about how to reduce the risks to the company and prepare to make the change, using CEO Bud Michaels of Availigent, a software firm, as a case study.

Every business needs bright people.  But some businesses sell what their bright people think about.  When Bud Michael came to the realization that he would have to fire one of his brightest and most senior engineers, it took courage.  Having only been CEO of Availigent for six months, the problem seemed clear to him.  The technical team, after five years and two prior management regimes had settled into a low productivity pattern.  The software business had settled into a negative cash flow pattern.  Mr. Michael’s job was to turn the tide.

After six months of gentle leadership and building his credibility with the team of 16, he grabbed hold of the tiller firmly and announced some key targets and a time frame, and told everyone that to succeed; the team would have to work hard.  Everyone seemed ready for the stepped up pace.  He brought the four informal leaders of the team into his office one by one and explained that their behavior would have to change to set an example for the rest.  They confirmed that they were on board.

When “The Talk” fails

After two weeks, the senior engineer’s behavior had not changed.  The 10 a.m. arrival – followed quickly by foosball games, extended lunches and long breaks – was only occasionally interrupted by work.  Mr. Michael had another meeting with him, advising him that change needed to happen, and fast.  Again, the senior engineer said the right things.

The entire organization as well as Mr. Michael believed that this engineer held many of the keys to their core technology, called checkpointing.  Numerous patents had been won, and everyone on the team would turn to this engineer for key answers and resolution of problems.  And of course, he had kept about 60% of this key knowledge locked up in his head.  He couldn’t be fired – especially in this new crunch time.

A month after the CEO’s big speech, the senior engineer’s behavior was still unchanged.  The rest of the team had improved some, but the senior engineer’s call to the foosball table was still coming twice daily and was being heeded by others.  Mr. Michael could either let it be and face a loss of personal credibility and know the company would never gain the momentum needed to turn around, or he could fire his most senior engineer – his best intellectual capital.  Worst case, the company would fail sooner rather than later, saving the investors money.  Best case, the remaining team would rise to the challenge of facing their past dependency on the senior engineer.

Mr. Michael did what CEO’s are paid to do – make the big decisions.

  • The next morning, the senior engineer was gone.
  • That afternoon, there was shock, disbelief, insecurity and worry for the future.
  • Two weeks later, the team knew they could fill in all the holes, and was more productive than they had been in years.  Availigent hadn’t missed a beat.
  • Within a month, the senior engineer had found a new job he loved, and was performing quite well there.

Doing the right thing

Most CEO’s know that a common failing is firing too slowly.  Most of us are guilty as charged.  But the gutsy move that Bud made at Availigent serves as a reminder and as encouragement to all executives to fire executives that don’t fit.

The underlying value that motivated Bud to dismiss the engineer was that every employee, including the CEO must always be true to the business, and deliver value.  Too much play time and leading the other employees in bad habits was not about producing value, and likewise, for Bud to be true to the business, he had to step up the intensity of the whole organization.

When you have someone that everyone turns to for help, look for signs of unhealthy dependency.  Is everyone relying on this person because it is easier to ask than to figure it out?  Is the person not creating system and documentation so that people can be more self-sufficient?  Do you have insufficient depth of staff such that no-one else has a clue?  Avoid unhealthy dependency, and the recovery period from a dismissal will be much shorter.

No-one is indispensable.  If this doesn’t prove it, I don’t know what will.  I’m not saying that firing key executives, technology leaders, or key salespeople won’t hurt – it usually will.  But the ongoing benefits are almost always greater than the damage during the recovery period.

Everyone in the company has to be on ONE team, and the CEO is the leader of that team.  In matters of values, strategy and underlying behaviors, never tolerate anyone that is not following your lead.  Tolerance of deviants destroys your credibility, weakens your leadership and damages the value set you are trying to create of enforce.  Of course, be sure you’ve firmly established your credibility as a leader before you take on an informal leader in the company.  Many will feel a loss at the time of the dismissal, but you need them to feel safe and secure in switching their leadership to you.

The CEO’s job is to replace anyone that doesn’t fit really well into the company’s future plans.  Fire the misfits.

Takeaways:

  • The CEO has the duty to dismiss any executive that isn’t pulling the company forward to its desired future state.
  • Identify signs of unhealthy dependency on one person and work hard on reducing the dependency.
  • You can survive firing key executives if you plan it well and work your plan.
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Robert Sher

Robert has published extensively on the successful leadership traits of CEOs of mid-market companies. He is a regular columnist on Forbes.com as well as CFO.com, has written a book ("The Feel of the Deal”) and numerous articles for such publications as the Silicon Valley/San Jose Business Journal and the East Bay Business Times. He also publishes his own newsletter, The CEO Insomnia Factor.

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About Robert Sher


Robert Sher

Robert Sher is founding principal of CEO to CEO, a consulting firm of former chief executives that improves the leadership infrastructure of midsized companies seeking to accelerate their performance. He was chief executive of Bentley Publishing Group from 1984 to 2006 and steered the firm to become a leading player in its industry (decorative art publishing).

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