As Jim Collins underscored in his famous book, Good to Great, people are not a company’s most important asset – the right people are. Great companies, as he explained, were rigorous in making people decisions. “When you know you need to make a people change, act”, said Collins. The moment a business owner feels he or she needs to tightly manage someone, then the business has made a hiring mistake because the best people don’t need to be managed. Keep in mind, however, guiding, teaching and leading someone is not the same as tightly managing someone. And, letting the wrong people hang around for too long is unfair to all the right people because the right people inevitably find themselves compensating for the inadequacies of the wrong people.

Here is a simple procedure your company can use to determine if it needs to make a people change and how to execute on that change:


Determine if someone is in the wrong position.

Here are a few key considerations for someone not performing well:

  1. Does the person have a strong work ethic, basic intelligence, a dedication to fulfilling commitments, self-discipline with disciplined thought, and is passionate about your company’s core values?
  2. Does this person need to be tightly managed or can this person perform better with more guidance, teaching and leading?
  3. Is there another position within the company where the person might blossom?

Determine if someone needs to be terminated.

How do you know when you know? Here are two key questions that can help:

  1. If it were a hiring decision, would you hire the person again?
  2. If the person came to tell you he or she is leaving to pursue an exciting new opportunity, would you feel terribly disappointed or secretly relieved?

If you have decided to make a people change, then follow these general guidelines during the exit interview (to avoid legal liability):

  • Have one other person present during the exit interview (to observe, take notes and act as a witness), preferably a human resources or management representative.
  • Keep any statements (written or oral) focused on performance issues (and DO NOT make references to age, sex, etc.).
  • Remain professional and courteous and be concise (you might even consider preparing and rehearsing the message in advance).
  • Importantly, ask this question: “Do you understand why you are being terminated? Can you tell me why? The answer to this question will be important in documenting the company’s legitimate business interests in making the termination.
  • Inform the employee when he or she will receive his or her last paycheck, when benefits will terminate and if applicable, that he or she should expect to receive a COBRA notice.
  • Remind the employee of any post-employee restricted activities and request the return of any company property and deletion or return of any company information.
  • Document everything.

After the exit interview, consider these immediate steps:

  • Consider sending the employee a post-termination letter, especially if the employee agreed to any restrictive covenants.
  • Consider a separation agreement if you are willing to provide some additional benefit (in addition to COBRA, accrued vacation, etc.) and would like a release of claims.
  • Change passcodes and access codes immediately and take all other security measures to deter any misappropriation of company secrets immediately.
  • Determine how to respond to future requests for employment references. For example, you might institute a policy of confirming only the former employee’s job title, dates of employment and compensation in response to a reference request.