Hiring well is hard, firing is even harder, the person receiving the news has it hardest. Probably all CEOs at some point have to face such a situation – below are four practical guidelines for startups.
1) Individual Performance Issue – Three key questions to consider:
- Is it an ethical issue? Has it been investigated satisfactorily?
- Else if the person is not meeting expectations, is it something temporary or recent? Have they received feedback and help?
- As this person’s manager, what would you say if a new employer asks you for a reference?
The stakes are high, the perils even higher, and perhaps there is no better recent case study than Better.com (no relation to CEO).
2) The Role Is Simply Not Needed Any More – Three key questions to consider:
- Does it make sense to transfer them to another team / role?
- Does it make sense to furlough (i.e., bring back later) or convert to an advisory / contract capacity?
- Is the company going to provide resources to such employees, such as advance notification, severance, or connecting to recruiters?
There are always exceptions but overall we are proponents of radical candor i.e., telling someone the truth in a kind but firm manner. Severance is not common among startups, with budget being often the main consideration, but definitely factor who the person is and any expectations you had originally set.
3) The Company Overall Is In Trouble – Three key questions to consider:
- How and when does the company expect to emerge from this downturn?
- How do we decide who goes and who stays? And for the latter, how do we keep morale high?
- Is there a problem even bigger than the company i.e., domestic or global markets?
Companies obviously cannot guarantee employment unconditionally but at Tau we do believe there are choices. The pandemic in 2020 prompted tech to lay off thousands, how each company did it shows the extent of these choices.
4) Someone Who Is Particularly High-Profile – Three key questions to consider:
- Is it better to do it swiftly or to have a transition plan, typically of 1-3 months?
- Should the person leaving help finding a replacement?
- Should the person leaving stay involved in some capacity, perhaps as advisor or maintain a board seat if they have one?
Firing someone who has significant influence in the company, either because of their background, their role, or their seniority, obviously adds an extra level of challenge. Particularly visible case studies on the top person getting fired are Uber and WeWork – with debate on whether that should have happened earlier, later, or at all. Such a decision is not taken lightly and has a tremendous impact on culture and morale. Indeed, ask any founder and they will invariably name being ousted as one of their key fears. For them the natural advice is to look at an investment diligence process as a two-way street i.e., also the entrepreneur’s right and responsibility to understand how prospective investors have behaved in the past and might in the future.
All that said, our view at Tau Ventures is that such moves are increasingly less common as the overall startup culture is trending into being founder-led. The data does show 60% of companies that go IPO have a non-founder CEO, but to draw further conclusions requires looking at whether those founders took a different role (Google, Yahoo) or actually fired (Uber, WeWork).
Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I am the Managing Partner and Cofounder of Tau Ventures with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are my own.