One of the sad truths about building and scaling a high-growth startup is that it’s very unlikely that an existing leadership team will make it intact from inception to exit.
Studies have shown that an average turnover rate of 30% is not unusual for executives, which is much higher than any other level in the organization. And it shouldn’t be that surprising the skills and experience needed to lead teams at different stages of growth are very different and sometimes companies scale faster than leaders can.
If you’re reading this and contemplating parting ways with one of your executives, we’re sorry that things didn’t work out. But you’re not alone in having to deal with this situation.
For CEOs and founders who have to come to the difficult conclusion that an executive may no longer be a fit for your company where it is, we’ve put together some thoughts and best practices from our own experiences both for Gautam as a former founder and CEO, and Matt as a People leader who has had to drive and support many of those conversations.
To be clear, we’ve all made mistakes and even might have regrets about how we handled some past situations. Before getting too deep into the tactics, it’s important to step back and realize your role in this process. You need to ask yourself, as Jerry Colonna would say: “How have I been complicit in creating the conditions I say I don’t want?”
It’s easy to place the blame on the executive, but the reality is that firing them is your failure. It was either a failure in the hiring process (not identifying the right person for what you needed on your team) or a failure in management (not giving the executive the right coaching, guidance, and feedback to improve).
And sometimes no blame is needed. The company stage or environment may have changed, and what worked in the past is not necessarily the right match for the future. Whatever the cause, this realization will help you act with empathy and responsibility. Letting go of any person from their job is difficult and fraught with emotional tension. It’s okay to acknowledge that while still moving forward.
Assuming that you’ve already had multiple candid feedback discussions with this person and it's now time to go your separate ways, the most important thing is to be swift while keeping things dignified. A long drawn-out goodbye usually isn’t good for either side.
Step 1: Have a candid conversation with the executive
We recommend getting right to the point. Tell them that you’ve decided to make a change, why, and what are the next steps. Explain at a high level why you’re making the change, but don’t dwell on it for too long. At this point this is not an opportunity for discussion; it’s a one-way communication, not a debate.
If you’ve been honest with feedback, this shouldn’t come as a surprise. However, you need to be mentally prepared for them to be shocked at some level. Usually no one really expects to be let go. Provide the space for them to absorb the news. Take a pause, and observe their body language.
If the executive asks for detailed feedback or pushes you beyond your comfort level, say: “I’m happy to set up a time to discuss my feedback in detail, but I want to make sure we talk about where we go from here.”
Be prepared to discuss severance. Whenever possible, make that severance as generous as you can afford. Put yourself in their shoes you would want as much clarity as possible and obviously, as long of a severance period the company can afford. Most leadership searches have a long lead time and so the severance package should reflect that.
As a best practice, we recommend having consistent severance packages for all executives as part of a standard offer. This ensures that you're treating all leaders fairly and not negotiating it at an emotionally charged time.
As an additional side note, if this is someone on your executive team, you should involve your board in setting severance.
Gautam’s experience has been that sooner is better. This comes from the desire to not have the time be unnecessarily drawn out to the point where there is diminishing value and the leader can no longer be effective, aka the “lame duck” problem. This also lets the departing executive focus on their next job search.
An alternative perspective from Matt is that for most leaders, it's likely a transition period may be needed to wrap up projects, bring direct reports up to speed, and manage any handoffs. This assumes that everyone involved in the transition can manage it maturely and appropriately. You'll need to determine which approach (likely a combination of both perspectives) will work for your team and organizational culture.
Show your appreciation. Don’t forget to express your appreciation and if applicable, let the employee know whether you’ll serve as a reference in the future.
Step 2: Communicate with stakeholders
It’s important to start the broader communication process as soon as possible and ideally, immediately after the conversation above. Assuming your board is already aware, the major groups you need to communicate with, in order, are:
your exec team
the employee’s direct reports
Be careful of being too optimistic or positive. It's perfectly fine to tell your team that this will be a difficult transition, and you’ll be asking folks to step up to fill the empty shoes. This goes a long way and being real with your team will be appreciated.
In your communication with the rest of your executive team, it’s important to realize that they'll be looking at how you handled the process.
With your employee’s direct reports, it’s ideal to try to connect with them both 1:1 and as a group. In the 1:1 conversations, you want to emphasize your commitment to them individually and the team. You should also invite them to give you direct feedback throughout the transition to new leadership and if applicable, this is the right time to discuss how this change might affect their role (are you asking them to assume new responsibilities? Will they be involved in the recruitment of the new leader?).
In the team conversation, you want to outline any changes to roles and responsibilities across the rest of the team and discuss your plan for backfilling or hiring new leadership.
When speaking with the rest of the company, you should consider whether this change warrants a special all-hands or can be covered in your normal all-hands meeting.
Similar to the team meeting, you want to discuss any changes to the rest of the org chart, your plan for transition, and most importantly, what you will be looking for in the next leader. Essentially your employees need to know that you have a plan that builds off of what is currently missing, and what makes the team and the company better with the new leader in place.
Step 3: Get to a new normal
We encourage startup CEOs to assume the role of the executive after his/her departure. It will help you best understand the needs of the team and function, and give you greater insight toward identifying the right next leader. It’s also a strong motivation to fill the open role!
Step into any standing meetings the employee may have had. This includes their staff/team meeting as well as any 1:1 meetings they had with their direct reports. This will help the team get to a new normal faster and will also ensure that you minimize any flight risk within the team.
Look for ways to create stretch developmental assignments for team members. This is a great opportunity for bright stars on the team to shine on a project that the leader owned or was presenting to the executive staff or board. Consider passing those responsibilities to someone on the team to give them more visibility
Step 4: Remedy and recruit
Use your new involvement with the function to deeply and honestly reflect and understand why the last leader did not work out.
Did something go wrong?
Are there things you could've done to better recruit or manage?
Once you’ve had time to think about this, you should consider how you might change the hiring process based on your insights. Executives typically possess the skills and experience needed so you may find that the reason it didn’t work out was more a matter of work style, unclear goals/direction, or inability to flex to startup pace.
If you believe that your company is now at a different stage that warrants a new leader, think about what the next stage might look like so you can look for a leader who will be able to grow and manage through that transition as well.
Lastly, you may be wondering when you should start recruiting for the next leader. We strongly believe this process should start after termination but not before.
Consider your relationship with the rest of your management team and the mistrust that might be created by starting a search before talking with the person being let go. Many leaders are apprehensive about a gap between leaders and will start the search behind the incumbent’s back. From our experience, that rarely works out, and the hit to credibility and trust on your team is never worth the time gained.
We hope this advice helps with what is one of the hardest parts of a CEO’s job. If you’re going through a tough situation with someone on your team and need someone to chat through it, please drop us a line!