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Chris Dixon on firing people

It is an unfortunate fact of life that hiring is an inexact science and mistakes will get made, even if the recruitment process is best in class and executed with diligence. It is simply impossible to know for sure how people will work out until you have been working with them for a while. On top of that companies change as they grow and there are some people who are great at the early stages but aren’t so good when process and discipline become important.

So even the best startups and founders will most likely have to fire someone. In two of my recent investments the short company history up to the Series A included parting company with a senior member of the management team and I took that as a positive. Firing someone senior in the early stages of a company’s life is espescially difficult and I was pleased to see the founders in question had the courage and discipline to take a hard decision.

I’m writing all this because I’ve just read an excellent post on the topic of firing people from Chis Dixon, a prominent US entrepreneur and angel investor. It’s so good I’m going to quote it in full:

Firing is awful. You can try to avoid it, but even the most selective founders make serious mistakes. Here are a few things I’ve observed about firing:

1) The good people bounce up, the bad ones bounce down. I was told this by my boss once when he was firing one of my friends. At the time, I thought this just made him feel better about himself. Over time, I’ve seen the wisdom in what he said. Some people who get fired react by fixing their weaknesses. Others spiral down.

2) Do it early. If you think you’re going to fire someone over the next six months, you probably will. Don’t wait too long. Too many founders do. It’s better for management and employees if it happens fast.

3) It’s awful. You’re in control of a situation that will meaningfully hurt someone. It’s an awful place to be. The fired person will go home and tell his/her family about how terrible it was. It was your fault. Perhaps your mismanagement caused it. Who knows. You’ll question it, and perhaps you are right to do so.

4) The other choice is firing everyone. You’re the founder of the company. If you run out of money, you’re forced to fire everyone. If you don’t fire the bad employees, you risk everyone else’s jobs. It’s an impossible situation.

5) The feeling is more likely to be mutual than you think. Most of the time, the person getting fired was already about to quit. The antipathy you feel is likely reciprocated. It’s surprising how often this happens and management doesn’t see it coming.

It would be great if startups were all about growth, hiring, and success. But the reality is that founding a company is a brutal job and lots of the pain gets passed down to employees. Creative destruction sounds nice in textbooks, but in the real world it means telling friends to go home, stop getting paid, and find new jobs.

 I also want to bring out two of the comments:

If you’re doing your job firing someone should never come as a surprise to them. I’ve fired pleanty of people over the past 20 years and the vast majority are still valued contacts and many are even friends. Being proactive mitigates 90% of the issues of firing someone but that makes it no less difficult to do…particularly the first time you do it!

——

The amount of build-up it usually requires for you to even approach the subject of firing someone prevents you from making a mistake.Firing someone sucks. You don’t fire people “on the bubble” in your mind. You fire people as a last resort.

This last comment is important. Firing people is a last resort. The right thing to do for the individual and the company is always going to be to try and find a way to make things work. In some cases it won’t be possible and then the right thing to do is to quickly recognise when that is the case and take appropriate action.

  • http://twitter.com/andrew_in_paris Andrew Buckman

    Every time I fired someone I always regretted having to do it but wished I’d done it sooner because of the effect it has on the rest of the team. They know when someone isn’t batting for the team and they lose faith if you let it carry on. When they see you take affirmative action by punishing poor performance they place extra value in the recognition you show for their good performance.

  • http://www.theequitykicker.com brisbourne

    Great point. Thanks

  • http://www.facebook.com/people/Sharky-Rechinas/100003609817993 Sharky Rechinas

    As a startup you don’t have the time/luxury/resources of a later stage company so you take more risks which means bigger chances for hiring mistakes.
    I do not agree with the right people for early stages and the right people for later stages.. Right people are the right people. Best big companies are trying to be “entrepreneurial” startup like etc.

    How you achieve that unless you have those type of people.
    Of course at SPARC Xerox the employees who created the first visual computer interface were not “suitable for teh company stage” – I would say the company was not suitable for them :-).

    Not saying you don’t need controls and discipline – just to keep your entrepreneurial core protected.

    Nic – can you comment on how VC funding affects the recruitment?
    Is there a big impact on company culture ? What is in your opinion the manageable growth rate for a company which needs to culturally assimilate newcommers ?

    Tx,
    Andrei

  • Axel Schmiegelow

    Nic, as always an excellent post. 

  • http://www.theequitykicker.com brisbourne

    Thanks Axel

  • http://www.theequitykicker.com brisbourne

    The trick to scaling is introducing an appropriate amount of process and not killing innovation.
    To your question, hiring usually accelerates after a funding round. Companies that execute well recognise the pressure this will put on their culture and take steps to maintain it (e.g. identify the key elements of the culture and make them hiring criteria).

  • neil_lewis

    Great comments – I especially like “4). The other choice is firing everyone” – if the startup founders are honest with each other – and recognise things such as the fact that businesses pivot and needs / skills / attributes change – also means that no one is on board for life and that there will come a time for and every founder member to leave (some do it via trade sale or IPO but they are still leaving…)

    Equally, the honesty that startups are resource scarce means that they need to take these decisions early – in fact, it is even more important to take them early.

    However, the issue not addressed here is equity. Most founders ‘earn’ equity not salary for their early contribution to a startup. Therefore, the ‘firing’ needs to ensure that there is a fair share of equity for the effort and commitment given so far – and the ability for the company to offer a meaningful share to the new people it is going to hire.

    Hence, underpinning the ability and willingness to fire founders – when necessary – needs to be a sound shareholders agreement that all parties recognise as fairly sharing the rewards.

    In my experience, if you duck the issue of what happens to shares if someone leaves and get that written into the shareholders agreement then parting company with a founder partner becomes nearly impossible.

  • http://www.theequitykicker.com brisbourne

    Good point Phil – agreeing what happens to founders equity if they leave is definitely best practice.