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The Costs of Not Firing a Mediocre Employee

Great companies are not built with mediocre employees. Yet it’s astonishing how often managers postpone firing poor performers and troublesome employees.

In exploring the reasons why CEOs fail in their own jobs, an article a few years ago in Fortune magazine cited the CEOs’ chronic failure to place the right person in the right job and their repeated failure or unwillingness to fix people problems swiftly. Some of those CEOs later admitted to selective deafness – ignoring an inner voice that warned them of a problem – and refusing to listen to those around them who saw the difficulty long before they did. This failure to deal with a subordinate who exhibits sustained poor performance can deeply harm a company and produce a ripple effect that hurts morale on many levels.

The Costs of Postponing Firing

I have seen estimates of the cost of replacing a bad hire to be as high as 250% of an employee’s first-year earnings, even if the situation is recognized and rectified within the first 6 months!

Similarly, the costs associated with retaining poor performers are enormous, both in financial and intangible terms. They include:

  • Waste of management’s time and effort. Troublesome employees often demand a disproportionate share of their managers’ attention – effort that would be better spent on coaching top performers.
  • Training time and costs. Poor performers typically require more remedial training because they lack competencies.
  • Error rates and reduced customer satisfaction. Mistakes by mediocre employees cost the company sales and customers, and even impact its reputation.
  • Lost opportunity. A position on the team that might be filled by a strong contributor instead is wasted on a poor performer.
  • Negative impact on others’ productivity and attitudes. Competent employees often resent being on the same team with employees who do not pull their weight. This resentment may even lead to their own diminished performance (diminished performance which management has shown it will tolerate).
  • Sending the wrong message. In the minds of employees, potential hires, and observant competitors, awareness that the company is now tolerating mediocrity may be interpreted as a sign the organization is headed downhill.
  • Increased disciplinary and documentation costs. The longer a mediocre hire stays on, the more an organization will spend punishing his or her poor behavior and making the case for his or her termination.

To some extent, employers can minimize the need to deal with poor performers by adopting recruitment efforts and selection tools that ensure individuals hired have the competencies for the position and that they are comfortable with the company’s culture.

But instituting effective hiring practices isn’t the entire answer. For a variety of reasons, an employee’s performance may deteriorate or other work-related problems may surface.

Why Managers Turn a Blind Eye

Ask any manager why firing an employee is delayed and he or she will say doing so is one of the most stressful and difficult parts of the job. It means telling an individual, perhaps someone the manager hired, that they are not good enough to get the job done.

Few managers will admit – or even realize – that they lack the skill or emotional will to dismiss a mediocre performer. Their anxieties, which are understandable, generally manifest as one or more of the following excuses:

1. Fear that the terminated employee may sue. Anxiety over possible legal action motivates many managers to put off firing an employee who is part of a protected class. This concern is valid, although a company’s best protection against this type of legal action is documentation. Employers must practice due diligence in documenting a worker’s performance and making a case for dismissal. Prior to dismissing an employee, it’s vital to involve the organization’s HR manager and, in some cases, consult with an employment-law attorney.

2. Belief that the poor performer can be coached. Determining when an employee has been given enough time to prove he or she can do the job is not an exact science. The Golden Rule teaches us to go easy on people, to give them a second chance – and a third and a fourth. But, as Marcus Buckingham and Curt Coffman write in the book "First, Break All the Rules," people are true to their inherent natures and rarely change much. Rather than try to remold their people, the best managers seek ways to capitalize on the strengths of their employees’ natures.

3. Reluctance to tackle the task of replacing an employee. In many industries, labor shortages exist, and recruitment-weary managers may dread going back to the same shrinking pool. Yet the costs of retaining a poor-performing employee far exceed firing him or her and starting over.

4. Blind loyalty. Sometimes a manager is so enamored of a subordinate – they may have worked and socialized together for years – that they simply cannot see the employee’s faults.

The Right Way

As difficult as it may be, there is a right way to terminate an individual’s employment. It involves training managers on how to:

  • Establish and communicate well-defined employee expectations that outline company rules of conduct and performance standards.
  • Recognize early warning signs of unacceptable performance.
  • Communicate early and often with employees who are not making the grade, so they are not surprised when a performance improvement plan is instituted and if dismissal ultimately occurs.
  • Document the full details of performance discussions and reprimands.
  • Ensure the final discussion is handled with sensitivity.

It’s human nature for managers to struggle to deal with poor-performing employees. But finding a way to overcome that difficulty – and filling those positions with top performers – is essential for organizations to remain viable and competitive.

 

Thanks to Candace Walters, president of HR Works, for sharing this timely information.