Episode 8
· 17:49
Alright. Welcome back to opening the c suite. I'm Mike Corey, and we've got another audience requested topic that was not in our originally planned queue. And this can be a tough one as well. How to fire an executive?
Mike Shannon:You're talking about senior level, you know, oftentimes packed resume, individual, and for whatever reason not working out in this situation, and how a CEO identifies and thinks through this. Now our audience members came to you, Corey, with this question. So maybe if you can lay the groundwork, what were the questions? Was it as simple as how you fire an executive? And then maybe what are some of the situations that you've seen where this becomes now what the board or the Yeah.
Mike Shannon:C suite is talking about.
Corey Ferengul:Yeah. I mean, the the the basics of it, the the questions are like, well, where do I start? Is it just about letting them go? Where do I look for it? Do I replace them first?
Corey Ferengul:Yeah. Like, I think I've come to the conclusion I have to let them go. Now what?
Mike Shannon:Yeah.
Corey Ferengul:Effectively where it starts. And, Mike, you've lived in that.
Mike Shannon:Sure. Oh, yeah.
Corey Ferengul:You know? So first, how did you reach the conclusion you had to let an executive go?
Mike Shannon:Yeah. So my context here, you know, probably not as many situations as you've had, but they've they've tend to be this situational thing where now I'm not saying there haven't been scenarios where there it's a skill set kind of thing or a culture match, but, we as a start up as we were growing had multiple cases where, even in in some situations a kind of previous advisor type friend joins in an operating role. And the situation that we have as a, you know, at the time, I don't know, 40, 50 person company Yeah. Is totally different
Corey Ferengul:Yeah.
Mike Shannon:Than if, let's say, they came from a larger company. And maybe we thought the industry is matching up, maybe we thought the type of sale was matching up, but the company size was different. Yeah. Or company size is similar, but the industry is different. Right.
Mike Shannon:So I think at the startup level, one of the biggest challenges is that it's so hard to go out and find really top notch talent that can come add to your mission in part because their compensation is gonna come from a future award.
Corey Ferengul:Yeah.
Mike Shannon:It's not yet proven out.
Corey Ferengul:Yep.
Mike Shannon:Right? Because you're not gonna pay market rates on cash No. To have this equity comp. So, so you end up finding somebody who's so excited about it and situationally, maybe it's just not a match. Yeah.
Mike Shannon:What was driving their success to get to a really high level in another market or another company size? Yeah. So the identification, I mean, the data points come from a variety, you know, if it's a culture thing, I mean, it's coming from the team.
Corey Ferengul:Right.
Mike Shannon:Certainly if it's, you know, results oriented that's coming from from the bottom line. But I find it's really hard to identify it.
Corey Ferengul:Yep.
Mike Shannon:At least early enough. Like every time I thought if I could have seen this, you know, 2, 3 months ago. Sometimes it was like, you know, so obviously we have to move, but really difficult then to move forward on, because in some cases you're you're kind of isolated as
Corey Ferengul:the CEO.
Mike Shannon:I know I had co founders and and so maybe I had a smaller tight knit group. But this is one of your senior executives and that's your tight knit group as a CEO. It's not like you're having an exec team meeting
Corey Ferengul:about this.
Mike Shannon:Right? So how how have you gone about once you identified it, now the execution of your decision.
Corey Ferengul:Yeah. And I had a, a CEO I worked with, made a statement to me. Never fired someone too soon. Yeah. Typically too late.
Corey Ferengul:Or for
Mike Shannon:them too, by the way, because if it's the wrong situation
Corey Ferengul:That's right.
Mike Shannon:They're a successful individual. They wanna move on to
Corey Ferengul:the next Their job is to hold on. Our job is to hold on. We don't wanna think we hired wrong. They don't want you doing a bad job. Right?
Corey Ferengul:So it it it everyone's coming at it from the best best angle. You know, reaching that decision really hard, a lot of tossing and turning. It's never a perfect decision. But if you really think it may not be the right person, in all the years, I've seen only one executive turn around and suddenly be a great exec in that company. So usually, if the thought is there, start thinking about the the plan.
Corey Ferengul:Yeah. And so you asked about the plan. You know, 1st and foremost, why I see people not actually let an executive go is they worry it's gonna be on their shoulders now. Mhmm. Oh, if I get rid of my head of blank, I'm gonna have to do everything she does to and I don't oh, man.
Corey Ferengul:How am I gonna do that?
Mike Shannon:And in part because you used to be the one doing it. Yeah. From a start up standpoint.
Corey Ferengul:Right.
Mike Shannon:So I I can relate with
Corey Ferengul:that. Yeah. So so the question one is, is this a let them go and replace them afterward? Is this search for the person, the replacement, and bring them in? Is this an internal promotion?
Corey Ferengul:Is this a reorg? Right? It it it there are some times when letting a person go and the executive team is an opportunity to restructure an executive team. There is times where you have a good person at the next level down, and it's time to move them up. You know, I had a situation where I'd let an executive go, And we had a person who was level or so down in the org, wasn't ready for the top job, but really raised their hand for kind of that next so we reordered the structure of the team
Mike Shannon:Yeah. To
Corey Ferengul:give that person a little bit more of a role even though they got a new boss. Right? So, you know, don't let a crisis go unused. Yeah. It's an opportunity to rethink things.
Corey Ferengul:It doesn't have to be just a swap. I am a fan of having the new person figured out before you let the other person go. Yeah. But that assumes it's not a dire situation. They're not doing damage to the organization.
Corey Ferengul:You're not causing other people to leave the organization. Right? It's it's all of those things in place.
Mike Shannon:One one thing I'll interject on that is so there's there's 2 scenarios, right, of by which somebody became a senior executive. Yep. 1 is the upward growth and and the next is, you know, the outside hire. When you ask the question, the outside hire is what came to my mind. And part of the challenge here is, yes, there's the question of, well, am I now having to do all of the the work of that role?
Mike Shannon:Yeah. There's also, you know, I can remember for me remembering the celebratory announcements, internally and sometimes public facing of this, you know, senior type person having joined the team. So when when the hire is made, it's this credibility adding Yep. You know, staff and milestone. Okay.
Mike Shannon:We're we're getting to be legit. And then if it's not working, well all of a sudden well
Corey Ferengul:Yeah.
Mike Shannon:All of that past messaging kind of come you're you're at least thinking in your head is that gonna come crashing down on me? And I think to your point of, you know, you've only seen it, you know, not Turn around. I've seen it turn around one time. So you never felt like, you made the wrong termination decision. I've always felt better and had the team, you know, come and say, okay.
Mike Shannon:Yeah. We're we're kinda seeing to love the individual, but it wasn't working out. And so, like, those fears of everything's gonna crash down, you know, end up being kinda empty voices in your head, but that can stall you Yes. Weeks or months. And if it's a senior executive, it's also an expensive cost on the model.
Mike Shannon:Well and so you can't really wait too long.
Corey Ferengul:And you and it's not the financial cost is very real, but the the reason you're thinking about letting them go is they're doing something you don't like in the organization. Yeah. Right. So there is some organizational cost. I have typically found, if I held on to an executive too long, you lost credibility with people on the team.
Corey Ferengul:You know, I I had one person one time directly say, why did you leave so and so in that position so long? Yeah. Didn't you see it? Yeah. And and by the way, sometimes you don't see it.
Corey Ferengul:It's it's really hard to see, and it's really hard to go behind an executive's back when you wanna let them run their teams and learn. So you have to do a lot of organizational I'll I'll use the term interrogation, but it's really a lot of organization listening
Mike Shannon:Yeah.
Corey Ferengul:To get information to come to the conclusion to make the change. But so often, everybody goes, yeah. That makes sense. Saw it coming. Yeah.
Corey Ferengul:And and and by the way, there are other situations where the person is blindsided. They never saw it coming. Those are hard to get through, but you get through them just to
Mike Shannon:say. Right. Right.
Corey Ferengul:But, you know, so step 1, come to the conclusion. If you're having doubts, spend some time figuring do that old list, like, what's good, what's bad, what's right, what's wrong. Right? But once you then conclude, I'm gonna make a change in this executive. The next thing to figure out is, so how are we gonna do this?
Corey Ferengul:Yeah. Are we gonna reorg? We gonna promote somebody? We gonna go outside? And every time I've chosen to swap out an executive, I begin to talk to the board.
Corey Ferengul:Not from a board meeting, an informal conversations, but let them know we're gonna make this change. Yeah. 1st question they're gonna ask you, how are you gonna do it? What does it mean? Yeah.
Corey Ferengul:And they should typically ask, and what's their severance? What's it gonna cost? What's the hit on the model?
Mike Shannon:Yeah. Right.
Corey Ferengul:Financial model of the organization. Right? So know those thing going in, but you want to preview it with them. And then you gotta go through those steps of either getting a recruiter or going out and finding people.
Mike Shannon:Yeah. And Let let me ask you this even before the the steps afterwards. So, you know, an ordinary employee, you may expect a a period of, you know, performance improvement plan or something like that. Does a senior executive get the same expectations?
Corey Ferengul:I've never done it.
Mike Shannon:Okay. Never no. There's no senior exec PIP?
Corey Ferengul:Not in a PIP. I would have had a hard conversation with them. Yeah. Hey. This isn't going well.
Corey Ferengul:Don't like how this is going. This is really bugging me. You know, I've gotten feedback from the team a, b, and c. Yeah. Those conversations.
Corey Ferengul:Is it ever a formal bring an HR and document the PIP? I've never done that.
Mike Shannon:Just different set of expectations.
Corey Ferengul:Different set of expectations. And the reality is when I am having those hard conversations, I probably could do a PIP at that point, but you just treat an executive slightly differently. You know? You're not
Mike Shannon:Well, it's not the impact of one individual. The impact, like you said, of of now this whole umbrella.
Corey Ferengul:That's right.
Mike Shannon:And, you know, again, like yeah. Maybe in some cases, it's that there's a cultural problem. But in many cases, like, it's a good individual, but it's whatever is happening is negatively impacting
Corey Ferengul:That's right.
Mike Shannon:The company in that umbrella. And so to say, well, it's fair to the individual to do, you know, whatever, 30, 60, 90 day improvement plan is one lens.
Corey Ferengul:Yep.
Mike Shannon:But then what's the impact, like you're saying, of the 30, 60, 90 individuals maybe under that umbrella.
Corey Ferengul:That's right.
Mike Shannon:Those are the the decisions I think you're weighing as a CEO.
Corey Ferengul:I've also found every executive has that confidant in their team. Right? They all have that person they're really close to. And when you tell them they're on a PIP, they're gonna tell their confidant. Problem is they're confidant tends to have a confidant.
Mike Shannon:Yeah. Right.
Corey Ferengul:Right. Right. Right. People hear this in the organization. Right?
Corey Ferengul:So that's why you just you're a bit more definitive. It's not that you don't deliver them hard feedback. It's not that you don't tell them that there's a problem. Yeah. When you do let them go, it shouldn't be a surprise.
Corey Ferengul:Sometimes it is, but it shouldn't because you had those conversations if it's performance led. In which case, you know, they should go, well, we've been talking about this.
Mike Shannon:Yeah. Sure.
Corey Ferengul:They might be upset with but talking. Yeah. The times it is a surprise is when it's, like, a cost cutting or a big restructuring. Yeah. In which case, that just is what it is.
Corey Ferengul:It's a you know, and maybe you've chosen to get out of that line of business and don't need that executive anymore or something like that. Right. So that's when I would expect the surprise. But if it's performance driven, you need to have been a good leader for that person and given them that feedback, so it's not a surprise.
Mike Shannon:Now are there any most common themes that you've experienced of why it's not working out with a senior most executive?
Corey Ferengul:Some, are too much the doers and not the leaders.
Mike Shannon:Okay. That's like an internal promotion path, probably.
Corey Ferengul:And sometimes they've come from the outside, they held the role at another company, and they had that problem at that company, but, you know, doesn't show up nicely in the resume or an interview
Mike Shannon:because Right. Right.
Corey Ferengul:They can tell you all the things to do, and they can tell you the programs that were implemented. And when you get there, you're like, oh, they're not leading people.
Mike Shannon:Which just again, to pause on that, that's another scenario. They're more of a doer than the manager or delegator. Again, it goes to, like, a lot of times, this is gonna be a good person who's working hard.
Corey Ferengul:That's right.
Mike Shannon:Just adds to the degree of challenge that you're gonna have then as a CEO of coming to the conclusion because you're gonna add, well, so and so's working so hard to do it all. How could I let them go when they're doing all this? But what you're saying is you're negatively impacting the whole department by manually doing those things
Corey Ferengul:that you're
Mike Shannon:not managing. So it's a different way to look at it.
Corey Ferengul:Or negatively impacting by just managing and not the doing. That's the other side of it. Right? So I have I have found situations where the person is not evolved into a leader Yeah. Or they've evolved so much in the leader they no longer do.
Corey Ferengul:Yeah. And they kinda lack the practical understanding. They lack the ability to do. They they yeah. So, you know, situation I've I've, run into with a company I've been involved with where really good executive, put good processes in place, did really good stuff, but just kinda separate from the team now.
Corey Ferengul:Kinda doesn't understand what's going on on the day to day. But you go, wow. But these processes didn't exist before. I feel really good about that. But I see these problem, but I don't wanna lose those.
Corey Ferengul:Right? You could talk yourself out of making a hard change.
Mike Shannon:Yeah.
Corey Ferengul:So, I mean, those are kinda 2 big categories. They're either they're really still a doer. They don't they're not really a group leader, or they've moved so high Yeah. That they've lost track of the details, and all of a sudden, 2 or 3 people in the org are doing the work. I was when I was at a public company, our our CEO had talked about how he had fired a previous CFO.
Corey Ferengul:Okay. And he said, I realized that every time I wanted information, I didn't go to the CFO's office. I went to somebody else.
Mike Shannon:Yeah. Interesting.
Corey Ferengul:And he's, like, after about 2 months of this, I'm, like, why why am I not going to that office? I'm going to this office every time.
Mike Shannon:Yeah.
Corey Ferengul:He's like and that was just the trigger like do I need this person? He he's not a bad guy but he doesn't have what I need.
Mike Shannon:Yeah. It wasn't worth so so in that case I was curious another question. You mentioned that example of 2 months or
Corey Ferengul:so.
Mike Shannon:In the scenario of somebody who's been hired into the role or could be promoted, there's obviously going to be a range of time that goes by to make your observation as CEO.
Corey Ferengul:Yep. But
Mike Shannon:how early is too early? Like, I mean, can you know on day 1?
Corey Ferengul:I mean Do
Mike Shannon:you need 3 months?
Corey Ferengul:If you know on day 1, some people do. Really early. Some
Mike Shannon:are going
Corey Ferengul:on the hiring process. Right? 6 to 9 months is when you start having that feeling. Usually by a year, you should have a really good feel. And and maybe you got a few things off, but you see the coaching and the person can get there.
Corey Ferengul:Right? But if if you kinda get through that 1st year with the person, probably doing a lot of the right stuff. It's not to say they're gonna be there forever.
Mike Shannon:Yeah. Right.
Corey Ferengul:And you may not get to a different point or run into a different challenge as the company changes and grows. But, you know, that 6 to 9 months is when you should start saying,
Mike Shannon:oh long period of time if it was the wrong
Corey Ferengul:Which is why the hiring decision matters so much.
Mike Shannon:6 to 9 months of, you know, just take a sample, you know, 50 people in that department.
Corey Ferengul:Yeah.
Mike Shannon:You know, something and not to say it's like black and white of it's all wrong or it's all right.
Corey Ferengul:That's right.
Mike Shannon:But, you know, 6 to 9 months of some major department not operating at what you believe its optimal state should be. Yeah. You know, that's such a high cost.
Corey Ferengul:That's right.
Mike Shannon:Which brings you know why you have to move fast
Corey Ferengul:Yes. When
Mike Shannon:you've got the data points. Now how do you help this individual then afterward if if it's something worth, you know, that type of post, the the role at your company partnership? Like, how do you keep everybody, like, remain in good face publicly?
Corey Ferengul:A lot of it is you you you first off, you when you announce to the company, you announce it in an appropriate way. Meaning, we've you know, so and so is no longer with us because of these changes. We've decided to make this an organization. Keep it more generic. I've seen some harsh.
Corey Ferengul:You could burn the bridge. I'm not gonna say you can't.
Mike Shannon:Of inappropriate behavior or something.
Corey Ferengul:Totally different story.
Mike Shannon:That's a different scenario.
Corey Ferengul:Totally different scenario. This is, you know, you know, we've outgrown our, you know, executive x. Yeah. And, you know, I would never put into print we've outgrown that executive. What I would say is we've determined that the, you know, organization now requires these skill sets, and therefore, we found this leader.
Mike Shannon:Yeah.
Corey Ferengul:So the really important part of that is knowing what your plan is next.
Mike Shannon:Yeah. Okay.
Corey Ferengul:You don't let a person go and not have a plan. Yeah. Right? Because you then contextualize why they're let go by what changes you've made.
Mike Shannon:Yep.
Corey Ferengul:But if you're just letting them go, then it clearly is performance driven. It clearly is a problem with that person.
Mike Shannon:Right.
Corey Ferengul:And by the way, if it is something nefarious, if it is something illegal, then do it. Like, they're gone. Don't worry about it. You know, that's that's okay.
Mike Shannon:Yeah.
Corey Ferengul:And if it sullies the reputation, it's okay also because that's why it's going on. Yeah. But, yeah, it's it that's part of the reason you have to have that what next figured out because it helps with the announcement. Yeah. And it helps move the organization to the next phase.
Corey Ferengul:You want them you want it to be 48, 72 hours while people are going, wow. What just happened Right. To okay. What are we doing now?
Mike Shannon:Right.
Corey Ferengul:You don't want it to be months of waiting for a new executive temporary. Yeah. And unfortunately, I've had that. You sometimes you can't avoid it. Right.
Corey Ferengul:Right. But you try to minimize it.
Mike Shannon:Yeah. So interesting to cover this topic and that's all that's how we have for this one, but the topic of when a senior executive does not work out. Because a later episode we'll cover is now how to make the decision of internal promotion versus external hire. But for now, that's,
Corey Ferengul:one last thing to touch on is the there's also the announcing of it. You really not just wanna preview with the board. You wanna preview with other executives. Yeah. You don't wanna blindside them.
Corey Ferengul:And the key people in that person's organization, you should talk to in advance. And lastly, don't outsource the conversation. If you're gonna let that executive go, you have the conversation with them. It's they they deserve it. You should be doing it.
Corey Ferengul:Give them the feedback. It's not that you're gonna give a full performance review, but just give them, you know, this is the facts, this is what's happening. And I will always say treat people as best you can in that moment. It comes back in a good way and you treat people well in that whole
Mike Shannon:time. Alright. That's it. Let me go over it. See your executive.
Mike Shannon:Thanks.
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