03.13.201610 min read

How to Fire an Employee or Client

We need to talk.

Those must be the four most foreboding words in the English language—surely you also heard the rumbling thunder in the distance. Don’t worry—I don’t have any news of ill portent to tell you, but in your capacity as a leader of your small business, the day will come when you will be the bearer of news that’s bad for someone else.

I’m sorry to get a little dark on you, but everything in life—and especially business—is temporary, which means that eventually, people who are your employees or clients now won’t be at some point in the future.

That’s just the way life—and running a business—goes. And while it’s never fun to fire an employee or end a client relationship (unless you’re really into that sort of thing), there are ways to make it better for you and for them.

Accept the duties of being a leader

You’re a leader, and while that means your job focuses mostly on creating other great leaders, it means you also have to be the one to cut someone loose when, for whatever reason, it’s just not working. 

It can be a big emotional burden to take on, and despite the existence of the platitude, “It’s not personal, it’s just business,” it’s hard not to feel at least a little bit bad about what you’re doing, even if you know it’s the right decision for you and your business.

So before you do the deed, bolster yourself. Remember: it will probably be an uncomfortable meeting, but no matter how emotional the business break-up is for you, you have to do your best to keep your emotions in check during the meeting. The last thing you want is to have the person you’re laying off have to comfort you because you’re so distraught that you have to let them go. That’s not fair to them and just adds insult to injury.

Instead, line up a confidant, whether it’s a partner, spouse or friend, to be an outlet to any feelings you might have afterward. 

How to fire a client

It’s incredibly difficult to end a relationship with a client, but sometimes it just has to be done. For insight into when and how to fire a client, I spoke to Aly Saxe, founder of Ubiquity PR.

When it’s time to let a client go

Saxe explained that you know it’s time to let a client go if they’re costing you too much. They could be costing you money, they could require so much servicing that they cut into profit margins, or they could cost you significantly more time than what was originally allocated. Worst-case scenario: they’re costing you people and morale.

Sometimes these cost issues can be solved with a conversation (or three), so that’s always worth a try. Saxe says that these conversations can actually be a good opportunity to grow an account as sometimes a client doesn’t realize they’re asking for more that what’s reasonable or for things outside the scope of your work. But if you’ve already had a talk with them and they’re still being difficult, you’ll be better off filling your time finding a new client who will respect your team and your process.

What to consider before you let your client go

Of course, the biggest consideration is loss of revenue. You have to think about what it will mean for your company—will you have to let someone go, or tighten the budget to avoid letting someone go? Saxe says the best way to prepare for that is to assume that 20 percent of your revenue could walk out the door at any given time, and to prepare for that, she keeps cash on hand. 

“It’s a real luxury to be able to remove a toxic client and not have it destroy your financial statement,” says Saxe. “[But] employees will also respect you for it because it tells them that you value them and their happiness at work.”

You should also consider whether the client you’re letting go will try to damage your reputation in the community. Saxe was only in that position once, and she got around it by calling all of their mutual colleagues. “I didn’t tell them what happened, I just let them know that this person may be saying some unkind things about me and my business, and to please not take what they say at face value. Turns out this person had a really bad reputation and no one was surprised,” Saxe recounts.

How to break the news

Saxe shares the news over the phone and is careful to phrase her words as professionally, honestly, and kindly as possible; it doesn’t help you, them, or your partners to lie. Saxe will usually follow up the phone call with an email recap to have a written record of the end of the relationship, which you should hang on to for legal purposes just in case.

Why you should do it

If you’ve got a truly toxic client, they can kill your morale and that negativity can seep into other areas of the business, and that alone will cost you far more than revenue loss. Saxe has also found that “the most painful clients are the most time-consuming. This means that all the time you’re spending with them you’re not spending on good clients and new business development.”

How to fire an employee

Letting an employee go can be much more difficult to do than letting a client go. This is someone you picked from a pool of applicants, someone you brought into your business and trained and spent time with, and letting them go can still have ramifications for your business.

When it’s time to fire an employee

There are a lot of reasons you might need to fire an employee: maybe their productivity is noticeably and consistently down; maybe their behavior drains the morale of those around them, or you’re getting complaints from other employees or even clients. 

Unless you’re firing for budgetary reasons, you should already have a record of an employee’s poor performance or behavioral issues and documented ways you’ve tried to work with them to improve. Remember, a talk about behavior or performance can be a chance for you to help them grow professionally. But if you were diligent in working with that employee and you don’t see improvement, or you’re met with disinterest, denial or defensiveness without any change in behavior after a few types of these conversations, it’s probably time to let that person go. 

What to consider before you fire your employee

There are always legal considerations in ending an employee’s tenure, and since I’m not a lawyer and neither are my bosses, I can’t give you any legal advice. But you should definitely research employment law in your area and consult a local employment lawyer.

You should certainly make sure you have all your aforementioned records on the employee’s performance and behavior in order so that you have a paper trail. This should include performance reviews, any warnings you may have delivered to them and any other coaching details. Before the meeting, you should also draw up a termination letter (reviewed by that aforementioned lawyer) to deliver to the employee once you’ve delivered the news.

You’ll also want to think out all the logistics ahead of time: How are you going to collect any company property in their possession, like keys or computers? How and when will you give them their last paycheck? What are you going to tell them when they ask why they’ve been fired? Especially if you don’t have a dedicated person who handles HR, you need to be ready to tackle all the issues.

And for after the fact, you’ll need to know how you’re going to handle any remaining emails their address receives and changing your company passwords. Make sure you have your plan in place ahead of the meeting so you don’t overlook anything.

How to break the news

As much as logistics and your safety permit, you should fire an employee in person. Find a place away from other employees (a place with a door and walls—I once worked for a photographer who couldn’t afford to keep me on and he delivered the news in his home kitchen with the other employees listening in—it was doubly uncomfortable) to allow that person a bit of privacy in a sensitive discussion. 

It’s a good idea to have a neutral third person in the room with you when you do the firing, and it if at all possible, try to have that third party be a man if you’re a woman, and a woman if you’re a man, since dynamics can get complicated and unexpected allegations of discrimination or harassment may arise. 

If you don’t have another employee to have in the room with you, make sure that immediately after the meeting, you draw up an outline of what happened in the meeting and who said what. 

During the discussion, it should go without saying to be respectful, but I’ll say it anyway. Be honest—again, no good can come from lying—but also don’t plan to talk a whole lot. Saying much beyond, “We’re going to have to let you go because …” isn’t necessary. 

Don’t say, “I’m sorry.” Instead, try something along the lines of: “As you know, we’ve had several conversations about your performance. We have not seen the improvement needed. Therefore, we’re terminating your employment, effective immediately.” Then you can give them the information about last pay and benefits, if applicable.

If they have questions, answer them respectfully and briefly, but the conversation shouldn’t take much longer than 10 or 15 minutes.

Why you should do it

You’ve put immense amounts of resources into your business, and you have to protect it, whether it’s through a budget or through keeping up morale. Yes, it will take you time and cost you money to search for and hire someone new, but it’s more important that you get the right fit than just a warm body, otherwise you’ll just end up in the same situation, which will cost you exponentially more.

No doubt firing is one perhaps one of the most desirable parts of your job description as leader, but as they say in "Spider-Man," “With great power comes great responsibility.” You might not be an actual superhero (though you really could be), but you’ve still got the responsibility to accept. Just remember: you’re doing what you need to, and you’re getting stronger with every challenge you meet.

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