Billy's Ninth Law: The Dangers of Settling

Hire Slow…Fire Fast

From Fortune Magazine’s Best Advice I ever received.

Now I am not so sure that this is always the best advice, however; in the world of business Human Resources is amongst the least understood and the poorly executed aspects in business.  Because people can ‘take care of themselves’, there is a tendency to focus first on Sales & Marketing, then on Production (or provision, if you are in a service industry), then on finance (see the law on cash flow) and finally on Human Resources.  Human Resources strategy is the last developed and Human Resources tactics are often the worst applied.

Human Resources, is often the least respected parts of enterprise.  When was the last time that a Human Resources Executive became the CEO of a major company?  In my experience addressing the needs of small and medium sized enterprises for over 25 years, most business owners claim to know the least about finance…in reality they know the least about Human Resources. 

When I work with business owners, executives and managers I ask this question, “Do you have anyone working here whom you know you should fire?” People look uncomfortable, and inevitably they admit to having “one or two.”  My next question is, “Why haven’t you fired them yet?”  People have ready excuses, but in their own hearts they know the answer… firing people is hard for most people.

Firing goes with the territory.  It is one of the unpleasant aspects of management and business ownership.  Firing for cause, or for downright incompetence is one thing, but firing someone for mediocrity is quite another.  As a business changes, especially when it is growing, there are changes needed to not only the staff levels, but to the staff composition. 

One client, in the financial services industry no less, had an employee who resisted any notion of productivity measures or expectations.  His attitude was that professionals were not subject to such pedestrian measures.  The problem for the company; he was generating fewer billable hours than his contemporaries.  His work was good, however he was insufferably slow.  His poor output was causing problems with respect to profitability and there was resentment amongst his peers.  The company and importantly the owner had settled for this level of performance.

In another case, again a growing company, growth caused the job to outgrow the employee.  A person may be able to fake one level, for example a bookkeeper working as an accountant, however; it is impossible to stretch two levels (i.e. the bookkeeper now having to stretch to a comptroller.)

These and other similar situations create challenges for the owners and managers.  Traditionally we only fire for incompetence; however you should always ask yourself, "Would I hire this person for this position if it were vacant?" The decision not to settle can have positive, unintended consequences.

I had a client who, on finally making and acting on the decision not to settle, found that everybody was on his side...and that the dismissal worked to improve rather than diminish morale. The most comment was "It's about time."  Often our worries about the negative impact of dismissals are overblown and exist only in our own minds.

Jack Walsh of General Electric used the formula that in any organization 20% of the people are stars, 70% are good and you should fire the remaining 10%.  When companies put this into practice, they found that the first two years were easy, but that by year three it became difficult.  Jim Pattison is alleged to fire the poorest performing sales person at his car dealerships. 

I wouldn't make hard and fast rules such as those previously mentioned, however when a company is growing, finding new challenges or are in a rapidly changing environment, it is useful to ask yourself, "When it comes to people, am I settling, and how does settling impact the company".  This is a tough but necessary question every owner and manager must ask him or herself on a regular basis.