If you employ or manage at least six people, you need to let one of them go every year or so. If you employ 30 or 40, you should be weaning three or four. Forget about those who quit. I’m talking about firing people. It may sound crazy in a business world obsessed with retention, but I believe good businesses get better by getting rid of people. And if that doesn’t shock you, try this one on for size: I believe good businesses get better by getting rid of not just bad people but also mediocre people and even, eventually, good people.
Here’s the theory in a nutshell: The bigger you become, the stiffer your competition gets. As your competition grows, so does the level of the competition. To keep pace with the market, you cannot tolerate weak links in your organization. They make mistakes, denigrate your business by imperceptible but eventually lethal degrees, and depress the general morale. If you stay competitive by getting rid of bad employees, you’ll do even better by trading in mediocre workers for good ones.
At some point, you will be at the top of the game — competing with the best. When that happens, it will no longer be possible to win with good people. You’ll need a team of superstars. Think of the obvious sports analogy: You can’t win a World Series with an OK team. You have to be stacked with all-stars and have team chemistry and leadership to boot. Business is no less competitive and no less needful of great talent.
When I think back on the few great businesses I’ve had the pleasure to own, it strikes me that they had many differences but one thing in common: great employees. When I think about the companies I’ve owned that were just — well — mediocre, they often were populated with a combination of good and mediocre people. Building a successful business is not unlike growing a prize-winning tree. It takes more than just good seed, fertilizer, and water. It takes pruning.
The trouble with good people is that they are good. Why would you get rid of someone who is good? I used to think that way. And I still find it difficult to say goodbye to an employee who’s shown up on time, worked hard, and demonstrated a supportive attitude. As much as I appreciate that kind of commitment, however, I know it is not enough. I can tell you stories . . . I can tell you, for example, about the vitamin business that got rid of three good employees while retaining only two, doubled its sales, quadrupled its profits, and reduced expenses by bringing in some of the work that used to be outsourced (when the business had five employees)!
And I can tell you about DR, a publisher in Tampa, who decided one day to downsize his staff just because he didn’t like having so many employees on the payroll. His method was simple: For every new employee he hired — and he looked for superstars — he would fire two. In a year’s time, he told me, he brought his office staff from 50 employees down to 25 and increased productivity and profitability enormously. As an unanticipated benefit, company morale improved. We talked about this in Message #120 (“The Underestimated Importance of Firing People”) — and we’ll talk more about it tomorrow.