This topic is unpleasant, but it's equally unavoidable. Sometimes, you have to fire people. On the worst days, you have to lay them off.

No One Should Ever Be Surprised to Be Fired

One of our most important management training mantras is “No one should ever be surprised to be fired.” As hard as it might be to actually fire someone, the really hard conversation should have taken place weeks or months prior. Here are some stages that should always precede firing someone:

1. Alert the employee that his or her job is at risk. Every employee you or one of your managers fires needs to have heard the following sentence weeks earlier: “Things aren't working and here's what you have to do to fix them – or you will be fired.” That last phrase needs to be explicitly stated and repeated in writing. I can't stress this enough. No euphemisms. Don't say “part ways,” or “move on.” Say “or you will be fired.”

   Note: There is one exception to this rule: if someone commits an egregious violation – for example, theft or assault – there are no intermediate steps. Fire them immediately.

2. Institute a performance improvement plan (PIP). PIPs should be as specific and quantitative as possible. Sometimes, the criteria you have to set will be impossible to meet: an underperforming salesperson just won't be able to close X dollars in 30 days. Nonetheless, PIPs make it clear that firings aren't random and if they really do seem out of reach, employees will often quit of their own volition.
3. Radically increase supervision of at‐risk employees. If you meet with your direct reports for weekly check‐ins, meet with at‐risk reports twice or three times a week. This sends an important message: you're trying very hard not to fire this person. The onus is on them to improve.

The first time I ever had to fire a person while I was at MovieFone was one of the most awkward and awful experiences of my professional life. I think it was harder on me than it was on her. I'm not being glib: she told me that. It was a lay‐up: she was being fired for cause!

It's hard for an empathic person to look people in the eye and tell them they don't have a job anymore, whatever the reason. I also think that people are generally well served, even if they don't think about it that way at the time, if they can understand why they're being let go. That allows them to constructively develop their careers going forward and seek out jobs in which they might be a better fit.

Layoffs

Short of declaring failure and shutting down your company, there is nothing worse you will ever have to do as a startup CEO than lay employees off. This isn't firing for cause – employees aren't being asked to leave because of their own failings. They're being asked to leave because the company can no longer afford to keep them. It's not their fault. It's yours.

I had to lay people off on three separate occasions early on in the life of the company. They were the worst days of my professional life and probably in my top 10 worst days, period. You don't want to do it any more than is absolutely necessary, so follow these guidelines to get it right the first time:

• Cut earlier than you have to. Things are always worse than they look, even when things look this bad. Financing will take longer to come through, receivables will dry up, and so on. Assume you have less runway than expected and cut early.
• Cut deeper than you have to. You really, really don't want to go through this a second time. Cut more employees than you think you have to and reduce the risk of a second round.
• Use the occasion to remove all poor performers. You have no choice but to remove people if their positions are being cut altogether. However, you can also take this as an opportunity for some major housecleaning. Just be sure to work with someone who can help you navigate the legalities.
• Plan talking points in advance. A round of layoffs is likely to be one of the most emotional moments of your career. Don't wing it. Plan everything you're going to say in advance, both to the individuals being let go and to your team as a whole.
• Follow layoffs with an all‐hands meeting. Layoffs are emotional for the entire team. Follow them by an all‐hands meeting explaining why they happened – preferably an explanation backed by metrics – what's next, and whether people who weren't laid off are at risk. (Be honest!) Ideally, the people you're laying off will be there, too. You want to honor and thank them in as public a forum as possible.

In the end, the only positive thing that came from having to lay people off (other than saving the company!) is that the mere thought of ever having to do layoffs again drives my thinking about everything from business model to profitability.