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Vigilante

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Employees suck.

I've tried every theory of management under the sun. My most costly lesson came at the hands of my own theory. When I was a worker, I always thought that if the management would just pay the workers more, they would get more.

So I built a retail concept, and paid the people a fortune. We started out overstaffed, and each of the staff members was paid roughly 40% over market price for a clerical retail sales worker. My longheld theory was that the more you paid, the more you would get.

What I got was the same level of performance as average employees, and I paid 40% more than the market mandated.

My miscalculation was this : no matter whom you hire, an employee will NEVER (without exception... NEVER) treat the business with the same degree of concern, investment, and financial protection that you as an owner will. Even in the cases where the employees are blood relatives, and in some instances that can be even worse. The single exception I have found to this rule is in immediate family members, but I caution you that hiring immediate family members can bring on completely different problems of it's own.

Anyway, employees suck. You can train them to do specific tasks, but the one skill you will never be able to teach is how every single decision regarding your business affects your net profit. Quite simply, there is no incentive for them to really care. You can incentivize on profit, but then they may make decisions for the wrong reasons therein.

As it pertains to hiring people, your job as a business owner is to get the best possible employees for the best possible value to your business. Burger flippers will never be worth $15 an hour, but the right personnel can (and should) grow your business. Choose carefully.

So what happens when you make a mistake? I've hired, laid off, and fired a lot of people over the years. Laying people off is tough. Firing people is never tough. If you have to fire someone, there's a reason, and they caused it. The old bullshit is a bad employee is a reflection of bad management is non-tenable. Especially in this generation, where work ethic is not a life skill many millennials aspire to, firing people is part of hiring people.

So, how do you fire people? First, the state of Minnesota (still) requires me to tell you I am not an attorney. So, firstly, if you have any legal questions about firing people, seek an attorney's opinion and counsel.

In situations ranging from mundane to egregious, you'll likely need to fire someone. So, I am going to throw down a little checklist to make sure when you fire someone, you get to walk away without it becoming a residual problem for you or your business. This is not an exhaustive list, so feel free to contribute from your own experiences. However, the guts of this are taken from world class retailers like Best Buy and Walmarts hiring and firing practices. So, here's an outline of how to not get sued when you fire someone.

Start from the beginning:
  • Your new employee gets an employee handbook on the first day, outlining every possible situation from attire to ethics. They sign an acknowledgment that they got the handbook, and agree to everything in it. I don't care if you have one employee or one hundred... they all get the handbook. I don't care if it is a burger flipper or a Vice President of Sales, they all sign the receipt and acknowledgment. Then, a copy of that goes into their employee file. You can find a lot of employee handbooks online, including creating a customized one during a free one week trial on Legal Zoom.
  • Your new employee gets a specific, detailed job description. The job description covers everything from daily and weekly expectations to broad, generic sweeping generalizations that you can use later for what ever additional direction you may add that is not specifically outlined in the job description.
  • Every employee has a 90 day performance evaluation and trial period. After 90 days, let them know there will be a review at that point of how they are doing, and how they move forward past the 90 day preliminary evaluation window.
  • Every employee signs an "at-will" employment statement as part of their initial hire paperwork. If you are issuing a formal offer letter, there should also be an at will paragraph within your initial offer letter that talks about how both the employee and the employer are entering into at-will employment. If you don't know what that means, study it. All states recognize "at-will" employment relationships, but some states have restrictions on it. Study that before you hire anyone. Here's a brief overview : What States Are At-Will? List of At-Will Employment States
During employment :
  • Keep an employee file, specifically including any additional written direction, specific job task requests, and measurable performance data
  • Have regular, formal performance reviews
  • Make sure it is clear from the beginning that the performance reviews are NOT tied in any way to salary increases. If you decide to give someone a raise, don't do it at the same time as you give them a performance review. Keep it separate so the employee isn't expecting a business practice of "every six months (or year) we have a review and a raise). Raises are earned, not programatic.
  • Document infractions to specific directions, integrity breaches, or more mundane issues like punctuality.
Time to fire 'em:
  • Keep it simple
  • Keep it ALL documented, including every point you cover in the termination meeting
  • Have someone attend the firing meeting with you. It doesn't matter how awkward that is, do it.
  • The last one I did, I recorded the whole (4 minute) discussion with an iPhone, letting the person know I was recording it. 100% eliminates the "she said" part of any followup to the termination discussion itself.
  • Keep it succinct, professional, and direct.
  • Do not use emotional, apologetic, or sympathetic language
  • Outline the specific reasons for termination
  • If possible, pay them ON THE SPOT for their final payroll
  • Keep this meeting short, and don't allow for counter points, negotiation, or further discussion. This is not a bargaining session, nor time for you to demonstrate how this is a two way street. It's not. You're there to fire them.
  • Wish them well, and roll on.
  • Even in "at-will" employment where you can fire people for any reason or no reason, you're always better off to have several reasons (real ones).
  • In the employee file, you should have discussed the reasons with the employee beforehand and documented them
  • Employees fired for "cause" are not entitled in most cases to unemployment benefits, so if there is a real, specific reason (or ten) for their termination, most likely that also will be a defense against unemployment claims. Most hourly employees will never even go that route, especially if your termination meeting is handed with specificity and documentation.
Hiring and firing sucks, because people suck. Automate and outsource as much as you can. Treat people with respect, and look for people who you can help along the way. Be a great employer, and you will find some great employees. Don't take failure of an employee personally if you have done everything you could along the way to equip them and help them succeed at their jobs. Face it, there are just some milkers out there who are taking advantage of a paycheck.

When it's time to fire someone, there's a reason. As such, it's part of what you signed up for when you decided to hire someone.
 

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Waspy

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Excellent post, thank you.

Employing people has always been a dread of mine. Never needed to hire anyone yet, but I will be avoiding it if at all possible. Would much rather outsource than deal with the headache of employees and their "rights" and red tape. Urgh.
 

MidwestLandlord

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Excellent post.

I've fired hundreds of people.

1) As you said, always have a witness. If you don't have a witness, delay the firing until you do. This is especially important if you are male and you are firing a female (for obvious reasons)

2) If the firing is for performance issues, then the employee should not be surprised by it. If they are, you have failed in your communication of expectations, policies, job duties, and/or follow-up.

3) Never hang on to an employee that harms your business for any reason. Like leaving a bad relationship, cut your loses early and move on.

4) Never argue or debate at the firing. There is nothing they can say to change your mind. I say exactly that to them "There is nothing you can say that will change my mind, this is not a negotiation." If they start to get under your skin and you feel like losing your cool, just repeat that and ask them to leave. Some retail employees get quite belligerent at their firing. Practice the firing in your head first, especially if you're hot tempered.

5) Never say anything to them that you would not want to repeat to a judge.

6) Make sure there is a chain of command, and that your employees know how to use it. Meaning, make sure each employee knows how to bypass their immediate supervisor (if that's not you) to get issues resolved. This saved my a$$ when I had a male store manager sexually harassing a female employee and she was able to bypass him and complain to my regional manager.

7) As stated in the OP, make sure to have an employee manual. I not only give out my employee manual at hiring, with a signed receipt that they received it, but I also give it out again yearly, and have them sign another receipt.

8) Make sure all your employment posters are up to date. The local department of labor gives these out for free. Especially check that the minimum wage is correct on the poster. They will check this if you get a department of labor audit, even if you pay above minimum wage. Firings always have the potential to come back and haunt you, so make sure all your ducks are in a row.

9) Make sure you are aware of discrimination laws. This is the most common way a firing will come back to harm you later. If you have a high risk firing, don't be afraid to consult an attorney for advice on this before the termination.
 

Duane

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Great post. I have a few employees as well, one being a close friend. I thought if I paid him $14 an hour over the industry standard which is $10 an hour, I'd get better work out of him as well. Turned out he was skipping jobs and cutting corners everywhere and almost lost me a chunk of my business. I fired him as well as another guy before I actually lost those customers. The relationship has never been the same. I've had family members and close friends beg me for work, but I'll never hire one EVER again.

After that experience, I can't trust any employees anymore and I'm constantly checking over their work and keeping tabs on what they do without telling them beforehand so I know everything is operating smoothly and they're doing their job.
 

MidwestLandlord

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Another thing...

I consider background checks to be high risk now. LOTS of discrimination complaints in the country (United States) concerning background checks and hiring/firing.

If you currently run checks, I would consult an attorney to make sure you are on firm footing.

Edit:

Never hire family.
Never hire friends.
Never dip your pen in the company ink.
 

Scot

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Extremely valuable post. Great information from both Vig and Midwest. Rep+ for both of you guys. I may need this resource in the future when I get to this point.
 

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Excellent thread for anyone with employees or thinking about hiring.

I am copying and printing this, as there are some points that I need to utilize, as there are a few times in the past that I have learned the hard way on firing.

Friends are friends and business is business. Try to keep your friends out of your business and you'll always have them.

Rep++ to Vig and Midwestlandlord
 

G-Man

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My longheld theory was that the more you paid, the more you would get.

Sadly, all paying lower level people more accomplishes is that, after about a year when they inevitably start to feel entitled to more money for their mediocre work, their demands are higher than if you were paying them less to begin with. They're going to think they're underpaid no matter what you pay them.

Never say anything to them that you would not want to repeat to a judge.

I would add to that: Never say anything in front of them you wouldn't say to a competitor or customer,... because when you have to fire them a year from now, you'll be surprised at how good their memory is. Need to know and compartmentalized information are the name of the game.

Keep it succinct, professional, and direct.

This. I had to fire about 20 people once with a guy that couldn't get the f*ckin words "you're fired" out. He'd dance around it. He would explain, apologize, etc. Then, the person getting fired thinks it is a negotiation.

Only other thing I would add is: Fire someone the minute they are openly insubordinate. (yelling, arguing and chesting up to you in front of other employees). Even if they are otherwise good at their work, and it would hurt to fire them, it won't hurt as much as when you've got a full blown insurrection on your hands 6 months down the road. You tell yourself "he's just got a bad temper and I need to let him calm down". What everyone else saw was someone on your payroll making you their bitch.
 

becks22

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Another thing...

I consider background checks to be high risk now. LOTS of discrimination complaints in the country (United States) concerning background checks and hiring/firing.

If you currently run checks, I would consult an attorney to make sure you are on firm footing.

Just my thought-- background checks are not high risk if they are done by a FCRA complaint company. The problem is people doing their own background checks through the non FCRA illegal instant databases... Just my opinion.

Great stuff here! Very informative
 

happybhoy

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Do you guys have 0 hour contracts in the states?
 
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Hiring and firing sucks, because people suck.

I'm no millennial, progressive, or startup culture fan and I mean no disrespect; I appreciate the post and protecting yourself is essential.

But...saying that people get fired because they caused it is implying that you're onboarding is so airtight they it had to be them. Well if it's them and not us, how did they ever hired?

The workforce is a market like any other - it can't be chased, only attracted. It needs to be measured, assessed and catered to. Culture marketing is marketing.

So this does smack a little of 'us vs. them' with handbooks, forms, 90 day reviews, etc. that could come out of an HR manual from the 70s. Forget about millennials or any other broadly-painted social construct myth that writes off swaths of people. That's just a story.

Think of why we are on this path: we understand the importance of time. And the people who work for us are spending real time on our behalf. It matters. The line between owner and worker is thin - it's not a case of enlightened doers vs. brainwashed takers, and if it feels that way then it's our fault because we created it.
 

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RHL

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Potentially GOLD writeup.

The only thing I would add to this is that it seems much better suited to employees who are, to use Peter Thiel's terminology, taking your product or service "from one to n" rather than those who take the product form "zero to 1." I have to think that the bonuses paid to lawyers, investment bankers, engineers, etc. enhance productivity; otherwise billionaires wouldn't offer them bonuses.
 
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Vigilante

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I'm no millennial, progressive, or startup culture fan and I mean no disrespect; I appreciate the post and protecting yourself is essential.

But...saying that people get fired because they caused it is implying that you're onboarding is so airtight they it had to be them. Well if it's them and not us, how did they ever hired?

The workforce is a market like any other - it can't be chased, only attracted. It needs to be measured, assessed and catered to. Culture marketing is marketing.

So this does smack a little of 'us vs. them' with handbooks, forms, 90 day reviews, etc. that could come out of an HR manual from the 70s. Forget about millennials or any other broadly-painted social construct myth that writes off swaths of people. That's just a story.

Think of why we are on this path: we understand the importance of time. And the people who work for us are spending real time on our behalf. It matters. The line between owner and worker is thin - it's not a case of enlightened doers vs. brainwashed takers, and if it feels that way then it's our fault because we created it.

I don't know a bullet proof method for hiring people.

I do know how to fire them though.

Make no mistake, I have hired my share of winners, super achievers, and losers.

Do you have employees? If so, make a thread on your hiring practices that ensures winners. (I am being serious, not facetious). That would be a good compliment to this.

There's no thin line between ownership and employee. It's a clearly defined relationship between payer and payee. They work for a paycheck. They didn't mortgage their home, sacrifice their own money for the benefit of someone else, or make an appearance in bankruptcy court should things not work out. There's a clear division of risk and reward.

Dick Schulze, founder of Best Buy, at one point had a second mortgage on his home so he could make payroll. Should his gamble have lost, the line wouldn't have been very thin between whose name was on the loans and whose wasn't.

The line cook at McDonalds is not an equal participant in the success of the franchise.

As a business owner hiring someone to perform a task that I define, I have one objective - and that's the growth and preservation of the company's customers, culture, and revenue growth. If an employee contributes to that, they win. If they detract from that, they get fired. Relatively simple.

And, to the employees benefit... if they don't like any aspect of it enough that they want to go work somewhere else, they're an at-will free agent and welcome to hit the road.
 
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G-Man

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So this does smack a little of 'us vs. them' with handbooks, forms, 90 day reviews, etc. that could come out of an HR manual from the 70s. Forget about millennials or any other broadly-painted social construct myth that writes off swaths of people. That's just a story.

There is a time I would have agreed with you (and I'm a millennial in a startup), but I think a lot of it has to do with how you do your performance reviews, etc. What I've discovered is that most people actually perform better and are happier when there's a level of "hard" accountability in their lives.

You might have to do that accountability in a "you're still a special snowflake" sort of way for millennials, but it can still be there. At my current company, performance and personal development targets aren't just handed down from the manager, the employee gets input. It's a collaborative, enjoyable process, and as a manager it actually provides fantastic data points if you have the patience for it. That said, the accountability is still hard stop. When you don't do what you're supposed to do I'm sitting there saying "you helped write these targets, what possible excuse is there?"

There's no one size fits all, though. It's definitely different now that I'm managing knowledge work and not warehouse employees.
 

ActionMonth

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I remember reading a book about social interaction. I have the book somewhere, I have to remember what it's called. I'll edit my post when I figure out what the name of the book is. Nonetheless, they did an experiment on how hard people worked in correlation to how much they got paid. I can't remember too much of it in detail, but I will try the best that I can. Someone correct me if I'm wrong. I wanted to utilize this whenever my company gets big enough to where I need to hire employees so I remember the idea of it pretty well.

An experiment was conducted to see if people worked harder the more they were paid.
  • The first group was paid to figure out some mental puzzles and questions and they finished within a certain amount of time.
  • The second group was paid a little more and finished within the same amount of time.
  • The third group was paid significantly more, but they finished less faster than the other groups.
  • The fourth group wasn't paid at all, but they finished the puzzles the fastest compared to the groups that actually got paid.

As you can see here, money wasn't the motivating factor to how hard they worked. In fact, the fourth group displayed an interesting behavior that the other groups didn't. They socialized, they talked and got to know each other probably due to the fact that they saw it as a fun social experiment. Where as the other group were just there to get their money. They didn't care about what they were doing or who they were with, they just knew they were getting paid to do it regardless.

There are many other studies done regarding work ethic, but to prevent this from becoming longer than it needs to. People work harder when they feel a sense of community. When they feel like they can be proud of their hard work and see how much of an impact it has. There are so many simple things that companies can do that can dramatically increase work performance, but cease to recognize and apply these methods. By no means am I saying that they are implying you shouldn't pay your employees haha.

Now I want everyone to know that I'm no scientist or giant company owner so don't take my word for any of this haha. I'm just sharing information I read that someone may find useful.
 
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steelandchrome

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Here is a link to a video that references a study of the separation of paying extra money and getting better performance as a result. Slightly off topic but ties into a few of the replies here...

View: https://youtu.be/u6XAPnuFjJc


I would say a lot of great points made here and I have terminated more employees than I would care to count over 15 years in retail leadership that have gone from them thanking me at the end to a fist fight. The ones where I was thanked I was upfront and honest and to the point and they were already expecting the termination after multiple discipline meetings to try and correct the behaviours. The one and only that went to a fist fight I terminated him in an office immediately after he blew up out on the sales floor and I would say I should have sent him home and proceeded the next day after he cooled off.



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Denim Chicken

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Hiring is important but I think getting your money's worth out of the employee can be largely influenced by incentives with trackable metrics and culture. Our past company was a model company for this, they had great employee retention and it wasn't cause of the pay. They had ok pay, great benefits for lower tier employees but one thing that was heavily pushed was the need for trackable KPIs, not just for salespeople but everyone.

Customer Service Reps had metrics they would hit and would get bonuses on or weekly contests for # of amounts they saved, etc. Every department except for accounting and a few others had KPIs and these were planned to make the employees not just accountable but also to kind of create a friendly and open competitive environment with incentives built in. It wasn't necessarily competitive but you got noticed and recognized for doing well. Sales team of course, had this on steroids. This also makes it very clear if they are not doing their job. CSRs only have taken 5 calls when the daily average based on your metrics is 20? What's going on?

Data driven metrics plays a huge part in employee management especially if there's a leaderboard, as numbers dont lie.
 

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This is a brilliant thread, I loved all of it... except one little thing: "Quite simply, there is no incentive for [employees] to really care."

...we understand the importance of time. And the people who work for us are spending real time on our behalf. It matters. The line between owner and worker is thin - it's not a case of enlightened doers vs. brainwashed takers, and if it feels that way then it's our fault because we created it.

Every company I have ever analyzed is "like" its founder. If you, as the founder, believe that there is no incentive that will make employees really care, then they, like you... won't think they can care. I find that in the last 10 to 15 years the single most important thing to the average employee is not the pay or the status or even the stability that a job provides... the most important thing to the average employee? A sense of belonging. You want an incentive that makes employees crazy loyal, diligent and interested in company net? Have a great New Year's party. Recognize employee birthdays. Make the employees important to you (in their eyes).

But yeah, firing. This thread is great and should be made into a mini manual.

Also, watch Moneyball. If there is tutorial on firing, its Brad Pitt as Billy Beane in Moneyball. Plus its a great movie about business vs life.
 

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