First published in the Sunday Times on 15th November 2015.
The hardest task for any boss is to shut a business. And the next worst duty is to fire people. Often the latter is necessary to prevent the former. There is no nice way to do it, and no one on either side of the process enjoys the experience. But it goes with the territory if you want to be in charge.
In the past, employers had almost total carte blanche to sack workers at will. That approach is history in many advanced economies.
Today, the matter of laying off staff is highly bureaucratic and often very expensive. The irony is that in the 21st century, companies need much more labour flexibility than in the past to remain competitive — but employee rights and protections are significantly stronger than they were.
Even with all the legal rigmarole, there remains the human aspect: the painful matter of telling someone they no longer have a job. Nowadays the procedure is usually so drawn out that any staff member will already be aware that they might face dismissal when the message is finally delivered. Even if an employee has committed gross misconduct, they can be suspended only while an investigation is carried out.
Sometimes these rules act against the interests of the staff. For example, the enforced consultation period if 20 or more people are being made redundant stretches out the uncertainty for all concerned, and can mean it becomes impossible to operate a business. I’ve known of situations where employees have begged to be told either way — if they have a job or not — before the 90-day statutory consultation is over.
The best way to avoid having to fire anyone is to recruit the right team in the first place. Nothing is more important — talent is arguably the most valuable resource of any company. Making the correct appointments is especially crucial for small companies and the ability to find outstanding personnel is a sure sign of a great entrepreneur. The most impressive founders cultivate and retain excellent people so they can promote from within wherever possible, which is typically a better bet than bringing in outsiders.
In the 1980s I was fired by my then boss, Jonathan Aitken. I was not the ideal employee, because I was always off moonlighting with my own ventures when I should have been working for him.
At the time I didn’t enjoy it, but getting the sack did me good. I took comfort from the fact that Thomas Edison, perhaps the greatest industrial inventor of all time, was discharged by Western Union in 1867 for conducting secret experiments in his office. He became a full-time inventor afterwards. For me, becoming an entrepreneur has been the best career move I’ve made.
Indeed, being fired can often be the catalyst someone needs to start their own business. In 1981 Michael Bloomberg was sacked as a partner at Salomon Brothers, after 15 years with the bank. It was merging with Phibro and he wasn’t wanted. He did receive a $10m severance payment, however, and with that he started his eponymous financial information business, which is now worth at least $25bn.
And, famously, Steve Jobs was kicked out of Apple, the company he co-founded, when the board felt it needed a more corporate style. Afterwards he said: “Getting fired from Apple was the best thing that could have happened to me.” He went off and founded NeXT, then co-founded Pixar, and subsequently returned to Apple — and made it vastly more successful than it had ever been. For him, losing the company he created was a stimulus to make a new start.
All too often when we let someone go, or come to some compromise agreement over their departure, I regret that we did not make the move earlier, especially if the person is senior. Most of us tend to give people the benefit of the doubt or hope they will improve, but it rarely happens. If they are in the wrong job, they should leave — both for the health of the organisation and for their own prospects.
Of course, the procedure should be conducted with dignity and according to the law. But procrastination only delays the inevitable.
We all make hiring mistakes, but we compound the error if we admit our mistakes only reluctantly — rather than taking decisive action. We also fear the cost and distraction of employment claims and tribunals, even if we are confident the endless rules have been followed to the letter.
Sometimes people are unfairly fired, sometimes they fire themselves, and sometimes it leads to a better future. I take the view that being fired is a little like being an entrepreneur: if you’ve never had a failed venture, you’re not taking enough risks. If you are unlucky enough to be axed, there is only one thing to do: put the past behind you and find a new challenge.