How to fire an employee in your small business the right way.

Henry Lopez - Small Business Coach

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Episode Description: How to fire an employee in your small business the right way. 

How to fire an employee in your small business the right way with Henry Lopez. Henry shares a recommended process and approach for firing or terminating a poor performing employee. The process should include a verbal documented warning, one or more written warnings with specific guidance, a possible suspension without pay, and then a firing the employee. Keeping a bad employee too long usually has a detrimental impact on our small business culture. Be sure to get the advice of an employment attorney before applying any of these practices. Henry also offers a free down of a sample Corrective Counseling Form you can use.

NOTE: It’s important that you consult with an Employment Attorney, familiar with the laws of your state, before applying any of the advice or tactics Henry shares on this episode. Every state, and every situation is different. Depending on your situation, there may be laws or rules that apply to how you fire an employee.

In this episode of The How of Business podcast for small business owners, Henry Lopez shares practical tips and advice on how to effectively manage employee performance and how to fire an employee. Topics include:

  • Developing and executing on a documented process for how to provide performance feedback and how to fire an under-performing employee in your small business.
  • What are the basic components of a effective performance and firing process? It should include a verbal warning (documented internally), one or more written warnings, followed by a possible suspensions without pay, and then finally a termination of employee.
  • When conducting the firing, it’s important to remain calm. You must be professional but compassionate.
  • Henry recommends using a Corrective Counseling Form to document every meeting with the employee, including the firing.
  • During the firing meeting, which should be conducted in person and in private, be calm, professional, to the point, and compassionate.
  • Keeping a bad employee destroys your small business moral and culture.
  • After you fire an employee in your small business, be sure to review your process and procedures for hiring and training employee. What could you have done differently with this employee so that it did not have to end in a firing?

Henry Lopez - Small Business Podcast Host

[Learn more about Henry Lopez]

Henry is a serial entrepreneur and business coach with over 34 years of diverse business experience, including successful careers in information technology, sales, sales training, real estate, and business ownership. He is currently the co-founder of Levante Business Group (helping you start, run and grow a small business), co-founder of iTopIt (a self-serve frozen desserts restaurant in Colorado Springs), co-owner of Wild Blue Car Wash (an exterior-express car wash in Colorado), co-founder of Mojave Systems (offering the Carwash Operating System – the Task & Maintenance Management software solutions for the car wash industry), and co-founder of L3 Destinations (a Travel Consulting business co-founded with his wife).

You can find other small business employment episodes in our episode Archives or use the link below:

Small Business Employment Episodes

Rough Draft Transcript of this episode (Note: Please excuse any typos as this transcript was created by an automated service):

How to fire an employee in your small business the right way.

Welcome to The How of Business with Henry Lopez and David began the podcast that helps you start to run and grow your small business. And now here are your hosts:

This is Henry Lopez and welcome to this episode of The How of Business. This will be a short topic episode. And it’s on the topic of firing an employee. It’s a topic that we have not discussed specifically on this show yet, and I thought it was overdue to discuss this, just about everybody, every business owner, I talked to whether it’s someone I know or one of my business coaching clients, or even ourselves and owning our businesses, firing an employee is never an easy thing, or usually not an easy thing. And what I find and observe is that we all tend to sometimes get hung up with the emotional side of it, the wanting not to have to do that, we get hung up wanting to save that person, maybe or give them another chance. And all the time, what it’s really doing is it’s hurting our business if, if nothing else, it’s probably greatly impacting in a very negative way, the culture of your business. So how do we go about it, I’m going to share with you how I go about it and how my partner David begin. And I go about it in all the different businesses that I own and that I’ve owned in the past. And I don’t have a perfect formula for it. But these are things that have worked well for me, and that I’ve learned from others.

I will say right off the top of that you should always have consulted with an attorney and employment attorney specifically in your state, every state has slightly different rules and laws. And then of course, there are federal rules and laws. And so you want to make sure that whatever process you follow, and that you develop and follow for your business, that it’s in line legally, so that you don’t create a bigger problem by terminating someone incorrectly. And of course, the type of employee that they are whether their hourly or they’re under an employment contract of some sort, or there are salaried, different rules can come into play. So be sure that you consult with an attorney, and then you know how to do it properly.

But let’s talk about it. So other than legal concerns, the big thing is that I find is that most small business owners don’t have a process, a documented process that they always follow when they have a problem with an employee. So at a high level, what I’ve always implemented and what I help my clients with, and I recommend that you have in writing is that process and that should be ideally part of your employee manual or Handbook, or documented somewhere, perhaps even you’ve gone over this process, when you’ve done initial training or onboarding of an employee. So that everybody, he’s clear on how we will deal with any performance issues in your work environment. So when we have an issue with an employee, usually what our process is, is we have a verbal discussion, what we call a verbal warning about that performance issue. Now, while it’s a verbal warning to the employee, we always document that internally. So it’s, we usually have a form, and you can create your own form, it doesn’t have to be that complicated. It just could be your handwritten notes, which should include obviously, the date and time. And the topic of the conversation where the areas of performance specifically that this employee has an issue with and what did you tell that employee a specifically that they needed to do to improve that? Did they need more training? Are you going to work with them one on one coaching or they’re gonna have them shadow someone for longer do they need to get a certain level of service vacation, whatever it is, make sure that you document and it’s the right thing to do anyway, have you hope to improve the performance of that employee, you have to give them specific guidance on what you want to see from them in the way of performance to improve the situation. And then you’re going to include that in all of your notes that go into the employee file. So you have a good record of what happened. The other part of that is having very specific measures on when you’re going to reevaluate. So it might be 30 days from now or 90 days from now, whatever is appropriate, 90 days is a little long, but whatever is appropriate, you need to have some kind of time measure as well on when you’re going to follow up with that employee. And then if you’re doing it well, and whether it’s you or your manager, right, so I’m just saying you generally, that needs to be a process of follow up here. So that then you can let the employee know, okay, he Well, you’re making some progress. And here’s where you’re still not performing at the level that we expect. So that verbal warning happens first, again, you documented for your own purposes, and so that you can follow up accurately and address these issues. After that verbal warning, what really needs to happen is some level of coaching, whether that’s from you, or your manager, or whomever they’ve been assigned to work with, you need to provide that employee some coaching so that you can help them through learning or figuring out how to do what it is that they’re not doing. Well, if it happens again. Or if I’m that next visit, there still has not been significant improvement, then what we do is we give them a written warning. So this is now we’ve put it on paper. And again, we have a forum for this. And it just highlights here, the things you’re not doing well, very specifically, without any emotions, it’s very clear and to the point specific to what they’re not doing their job. What are the duties that they’re not performing? What are the skills that they’re not exhibiting at a high enough level yet, examples are great, so you had this poor interaction with the customer on this date. This is what happened, even though we’ve trained you on this, or you didn’t perform this task to the level that we’ve told you need to perform it to, even though we’ve given you the training and the time to develop that particular skill. So be very specific and provide examples. Wherever possible. That written notice now you’re giving an ideally, you’re having the employee sign and acknowledge that you had that meeting. And you’re giving them a copy. And of course, a copy of that goes into the file.

The most important component of that, though, again, is what are their repercussions, what is what’s going to happen, if these things don’t get fixed by a certain date, you have to have that definitive action, what’s going to happen by a specific date. If these issues don’t get resolved. Typically, what we do here is we say something along the lines of these actions need to be corrected, you need to exhibit these behaviors, you need to correct these things within 15 days, or you’re subject to termination, or, you know, suspension or up to termination. But it needs to be very specific. And it’s the first time that you’ve documented that you are going to terminate them if they don’t improve. Now, again, this doesn’t always work in all environments. If you’re an environment where you have a union situation or some other type of, of jurisdiction, then of course, you have to follow very specific rules. And that’s why I said at the outset, that you have to get this process once you’ve developed it reviewed by an attorney, so you make sure that you’re following the laws that apply to you specifically in your state.

This is your host Henry Lopez briefly interrupting this episode, to invite you to schedule a free business coaching consultation with me, I welcome the opportunity to chat with you about your business goals, and offer the guidance and accountability that we all need to achieve success. As an experienced small business owner, I understand the challenges you’re experiencing. And often, it’s about helping you ask the right questions, and keep you accountable, so that you make progress towards achieving your goals. Whether it’s getting started with your first business, or growing your existing small business, I can help you get there. To find out more about my coaching services, and to schedule your free coaching session, please visit the how business com or simply text the keyword bizcoach all together to 31996. And I’ll send you a reply with the link to the information page where you can find out more about my coaching services, and also schedule your free consultation. Now back to this episode…

Then comes the hard part. If that employee still continues not to perform, then we have to let them go. And this is where people fail. This is where the really, I see people undermining their business, because they either don’t have the heart to or they feel bad about it or they like the person but they just not performing. And so they’ve become friendly with that person or they don’t want to put them out they know they have a family to support whatever the scenario might be. The point is that we feel bad about letting them go. And sometimes I think that maybe perhaps the reason we feel bad about them is maybe we know we’ve put them in a situation, that wasn’t the best situation. And so we have to reflect on that. Nonetheless, what you’re going to find, and I’m sure those of you listening have done it before, it doesn’t make it any easier. But what you’re going to find afterwards, you know, a couple weeks after the shock and the emotions of letting someone go, especially if it gets ugly, you’re going to always are almost always say, I’m glad I did it, I should have done it sooner. But again, we let our emotions get into it. But this is something we have to do as business owners, we have to be able to do this I there’s the old saying, which I think is still very appropriate of hire slow, fire fast. Now I get it in this day and age where we have such a tight labor market. Sometimes we’re hiring anybody that breathes, it seems. So we’re hiring people that then don’t work out or we have a tendency to put up with a lot more than we should. But those things aside, I can tell you that the worst thing you can do for a business, especially a business, it depends on any kind of customer service or customer facing, or where you require people to work together as a team. The worst thing you can do to your work environment to your culture, is to allow a bad employee to continue to be part of the business. Everybody else feeds off of that everybody else is looking to see what you’re going to do about this employee that does not fit that is not performing. That’s making it harder for everybody else, they’re going to look for things, and you have to check yourself have you become too friendly with this person? Are they a friend to begin with. And maybe that’s why maybe they’re a family member, which makes it even harder and trickier I get it. This whole topic of becoming friends with our employees is a tough one, I’ve always believed in having a certain level of separation, and not getting extremely friendly with employees. I know that’s changing a lot in the workforce. I just recently interviewed a gentleman on the topic of working with millennials. That was back in Episode 263. And what Chris said is that millennials want you to become much more involved in their personal lives. But he does agree with me that there is a line that you have to draw, you need to be interested in what they’re doing and what they’re interested in. But that doesn’t mean you become so friendly, that now it’s a friendship, instead of an employer employee relationship. So you have to be very careful with that.

Nonetheless, if you’ve crossed that line, if you’ve got a favorite, if you have somebody that you really like them personally, but you know they’re not performing, then what we tend to do is we tend to let that go. And then of course, nobody believes or trust your process for remediation. Everybody will start to think it’s a joke when you tell them that they need to correct their actions, because you’ve told that Mike down the hall forever, and he’s still here. So why should I do anything different? or Why should I pick up the slack for that employee that’s not performing well. So you need to have a process, you need to have that process vetted by an attorney first. And then you always need to execute on process. But getting back to the day of firing the employee, you’ve given them their verbal, you’ve given them one or more written notices, depending on your procedure or the situation. Now it’s time to let them go. So ideally, we do that in person, not over a text message, not over the phone. And we do that in private. However, nowadays, and probably forever, I think that it is a good idea to have a second person in the room with you, your manager, the Assistant Manager, the shift leader, someone else in a position of power, or your partner, your business partner, so that there’s more than two people there. And we don’t get into, you know, a discussion about what was said or what wasn’t said. So I think that’s a good practice. But we never fire someone, of course, in front of their peers in front of everybody else. Just like we don’t give negative feedback, if we can help it in front of everybody else, or certainly in front of customers, we do that. In private, we praise in public when possible. But we give negative feedback. So going back to the warnings, the verbal and the written warnings, were doing that in private with that employee. So we call that employee we schedule a meeting, perhaps it’s the next time that they’re supposed to report to work, we keep it short and to the point and professional, it’s very easy for it to get emotional, the employee might become emotional. So if you haven’t done it before, or if this is a hard thing for you, you may want to role play it, or certainly think it through multiple times in your head, and practice staying calm. Even if the employee gets emotional, or starts getting agitated, whatever the case might be. Now certainly be safe. You know, if you feel like the situation might escalate, then stop the meeting, and leave the room and get someone else to be there. So that they can ask, you can ask the employee to leave. So don’t put yourself in danger. But you want to do these things private, you want to be firm to the point and professional. What I think is a good practice. And a lot of other people I know do this is you will have written a memo that spells out very clearly and succinctly and to the point, why they’re being terminated, you don’t get into all the details here. This is not the meeting to discuss the details, or even what can be done to correct it. It’s too late at this point, you’re stating the reasons why they have not performed and you’ve offered them opportunity to correct that. And now they are being terminated effective on this date, ideally, the day you’re talking to them, and probably give them some explanation on when they will receive their last paycheck, what you’re expecting from them, whether they have to surrender a uniform or a key or whatever else has to happen in that meeting.

So you keep it short, to the point become passionate, because obviously for a lot of people, this is going to hurt. And so we want to be compassionate. But at the same time, we need to be firm and professional will document the results of the meeting, they can sign the memo or the piece of paper, if you want a lot of people you know are going to be so upset, they’re not going to want to but that’s fine, you document what happened in the meeting. And that becomes part of their file. Okay, a couple of the thoughts. And then I’ll summarize this topic. I mentioned suspensions, I like to use suspensions, sometimes in the process. So let’s say after the first verbal warning, maybe after the first written warning, a suspension, meaning I’m going to send you home, taking you off the schedule for the next X number of days, I want you to come back next Monday, and meet with me. And we’ll decide what needs to happen next. I think often that serves as a great wake up call for the employee because they get it that you are serious about them needing to correct their behavior, fear their action or performance. And that you’re not kidding around that you really are ready to let them go. One of the things that you don’t want to allow to happen. But again, unfortunately, for a lot of this, for a lot of us in this tight job market, it does have a tendency to happen is that we never want our employees to feel like we need them more than they need us there should be an equal or close to equal balance, we need each other. We need their efforts and their labor, and their work and their dedication, we’re going to give them a fair pay and treatment and a positive environment where we set them up to succeed. But it’s a it’s a value that’s in balance, when that gets out of balance. And an employee or a group of employees feel like you need them more than they need you, then you’re in trouble. So use a suspension to get people’s attention. And it also says this signal and this is an unpaid suspension again, as long as that’s okay, within the framework of your employment environment. In other words, you don’t have a union or a contract or something else. That spells it out differently. suspending an employee is a great way to get their attention about them getting serious about correcting their issues.

The other thing that I think is critical once we terminate an employee, once they’ve left is to do a review of that and the things that we look at our Why did we hire this person to begin with? And we don’t do it from a let’s go on a witch hunt to find out who made a mistake. It’s about learning. What can we add to the interview process? For example? What might we have been able to ask that might have uncovered something that would have kept us from hiring this person to begin with? Now, it doesn’t always work that way I get it. People will interview great, they turn out great initially, and then they change. So it’s nothing you did wrong. But it’s always important to keep asking that question. How did what did we missed her? What did we overlook maybe on purpose, because maybe we really liked something about this person. So look at that, and then look at really critically where if possible that our trading program, our training process, our ongoing coaching work, can that get better? If we had done things differently? Would we have avoided this problem with this employee? Did? Did we put them on the job before they were ready? For example, do we need to spend more time coaching and training before we put them on the job. So ask yourself those questions. And often, you can identify either a training and coaching, or the lack of standard operating procedures. As to some of the reasons why that employee didn’t perform use that and determine how you’re going to respond to that, so that you can make it better going forward. Now let’s summarize the process. So you need to have a process that you follow to terminate an employee. But that process includes the steps that lead up to a to a termination, that verbal warning, followed by however many written warnings are appropriate, you’re documenting that we have a form and you can download a free example of a form that we use at our frozen dessert restaurant, I top it, if you go to the website to the show notes page for this episode, you can download a free example. That’s just our example. Remember, you need to have your process reviewed by an attorney to make sure that you’re covered legally for your situation in your state. Then once you have a process, you have to follow the process, we you got to make sure you stick to the process so that people know that this this is how we do things around here. And you’ll be amazed at how positively that impacts your culture. You’re going to keep it professional, you’re going to try to separate the emotions from it as much as possible. I get it. This is an emotionally charged thing. None of us are most of us do not enjoy firing people. We don’t get our kicks from firing someone. It’s never a positive thing. But you want to minimize the emotions around it. Keep it professional, follow your procedure. And that makes it better for everyone. Be compassionate for that person that you’re letting go. But at the same time, it’s time for it to happen. You know it’s time often it’s overdue, and so it needs to happen quickly, swiftly, professionally and compassionately make sure that you have these procedures in place. Download the free form if you’d like we do have a whole series of other employment related episodes, including the hiring process. And you can find that at the website as well at The How of Business com.

 

Thanks for listening to this episode of The How of Business this is Henry Lopez. You can find our episodes Monday mornings on Apple podcasts, Google podcast, Spotify, or at our website The How of Business.com. You can also just text the word biz right now on your phone 31996 and you’ll get a reply back from me with the link to the show notes page. And that’s the easiest way to get to the show notes page and download the example corrective counseling form that I mentioned.

Thanks for listening to this episode.

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