Managing senior executive terminations: A guide to best practice
Ted Davies - Right Management Consultants
 
Rod Anderson (L) and Ted Davies
Rod Anderson (L) and Ted Davies
If CEOs were polled as to what part of their job they like the least, terminating employees would almost certainly top the list. The demands of business today mean, however, that most CEOs will not be able to escape the task: a recent US survey found that, of the average five career moves senior executives make, two of them are involuntary. Ensuring terminations are done in a manner that causes the least damage both to the person being terminated and the organisation as a whole becomes an important CEO skill to master.

In this interview with Right Management Consultants Executive Vice President - Asia Pacific, Ted Davies and consultant and managing director of Rod Anderson and Associates Rod Anderson, we examine both the specifics of how a termination should be planned and conducted, and what the broader issues are for both the individuals concerned and the organisation.

ceoforum.com.au: Ted, could you describe the most important things to consider when a CEO is planning a termination?

TD: Obviously you should try to retain the dignity of the individual and recognise their contribution. It is a difficult job, but act as if it were you in the hot seat. As a general rule a clean break is probably best for all parties. Trying to extend notice periods is painful and difficult for the individual affected and very awkward for the rest of the organisation. The principle is to try and give the individual as much control over their departure as possible, but the needs of the business must ultimately prevail. The main thing you want to do is to begin to focus the individual away from the past and towards the future.

It's most important to be aware of how a poorly-handled termination can damage the reputation of the person being terminated. When someone senior is terminated, word quickly gets around industries and clients. It is vital that the individual does not suffer for the rest of their career because of this occurrence, but this issue is invariably not taken enough account of.

It is about helping people who are leaving the organisation, but also those who are staying because the way that these activities are handled will be remembered. The manner in which a termination is communicated will have a major impact on how the affected executive will react, and also more broadly on how the organisation will respond afterwards.

ceoforum.com.au: What are the typical reactions of someone being terminated that a CEO needs to plan for?

"You want to begin to focus the individual away from the past and towards the future."

TD: One of the first questions is how much money they will have, so you need to provide them with clear details about what the financial aspect of their termination will be. There may be negotiations involved, but have something to give them containing hard information, because this will be top of mind. When we work with individuals who have been terminated, one of the first things we do is get them into financial counseling with a firm of independent accountants. This is not about what to do with the money, but more about ensuring that nitty-gritty details have been properly handled from a tax point of view, or that stock options have been properly treated. People also need to do basic family budgeting quickly, because they may not have an income for the next several months.

It's difficult to predict a reaction. Even if the news is not a complete surprise, it will still be a shock for the person because it is a tough message to take on. I would suggest that you don't try and anticipate the reaction because the people that you think will take it badly may not, and vice versa, and although uncontrolled rage doesn't happen very often, it is possible.

ceoforum.com.au: What are some of the most common mistakes CEOs make in handling terminations?

TD: Don't take a well-regarded person, frog-march them out of the building immediately after the termination, and treat them like an outlaw! You also want to avoid terminating somebody on a key date such as their service anniversary or their birthday. Friday afternoon is a bad time to tell people, because they have the whole weekend to mull things over. It is best to do it early in the week, late in the day.

Obviously the meeting should take place in private, without phone calls or other interruptions. Don't do it in your office because, if the meeting becomes contentious, you have nowhere to go. It is better to be in a neutral location where you can move in and out.

You also need to be clear about the termination. You don't want somebody coming out of a termination meeting and scratching their head because they are not sure whether they have just been fired or not! You do nobody any favours by being ambiguous, and you should keep it brief. We get concerned if a termination meeting goes on for more than fifteen minutes - this is not the point to get into detailed discussions or negotiations. That can be done later.

Although it is a tough job to do, definitely don't try and elicit sympathy from the individual because your position is not as bad as theirs!

ceoforum.com.au: After the termination has been announced, how does the CEO manage the impact on the broader organisation?

TD: Terminations can massively affect morale, particularly when they are handled badly. People start huddling around closed doors or the coffee machine talking in lowered voices - it can be very undermining. People can become so internally focused that they forget all about customer service and just disengage from their jobs.

"Even if the news is not a complete surprise, it will still be a shock."

This is a real, but manageable, danger. First of all, acknowledge the impact of the changes on everyone. Help the people who are left to clarify their goals and objectives and allow them to rely on themselves. It is useful to allow people to vent, but they should then be helped to direct their energies towards the future rather than the past. The communication flow should be increased as much as possible, but it is important to be open if you can't answer a question. Once the job is done, its very important as a CEO you don't simply go underground; you need to be highly visible and available.

ceoforum.com.au: Rod, what are some of the psychological issues that come into play that a CEO needs to be aware of?

RAnderson: It is hardly astonishing that an interaction between two people, where one of them is in a state of moderate to extreme anxiety and the other in a state of shock and rejection, might not go superbly well! All our research in the area of termination suggests the reactions people being terminated go through are very similar to a bereavement. This is probably the single biggest thing to remember when you try to understand the psychology of this process. It is something which requires preparation, and will have reasonably predictable results in the person being notified, although obviously people will differ in the strength of their individual reactions.

Briefly, those stages are as follows: the first is denial, then regret and looking back onto what is being left, then an emotional reaction of some sort such as anger, hurt, disappointment. These are followed by passive acceptance, which is a form of clinical depression, and afterwards a stage of exploration which is a beginning of being able to imagine what the future might hold, and finally there is positive acceptance.

ceoforum.com.au: Can the CEO help the person progress through those stages in any way?

RA: As the person giving the person the bad news, I would think it would be spectacularly inappropriate for the CEO to be the one to manage a person through the process. It is far better to have an internal department do that, or hire someone in from outside to provide that support.

Initially the person might be in denial or in a state of shock, so you can make appropriate comments, but that is about it. A person will go through all the stages of reaction at different times, and sometimes you can see it clearly, but often not. Individuals who are prone to depression need particular support to help them to refocus on the future.

ceoforum.com.au: What are some of the things that a CEO can say that would be useful at this point?

"The reactions people being terminated go through are very similar to a bereavement."

RA: I agree with Ted - the first things that a person thinks about here are Maslow's lowest levels of safety and survival. Being able to say immediately how much pay they will get, and how their share options will be managed, definitely helps. The question of reputation very quickly comes up as well. This is basically a feeling of rejection because the person feels that they are being told that they are no good, and they worry about how they will look both professionally and to their family and friends. That also needs to be managed through reassurance and appropriate support, but in my view the person to do that is not the person doing the termination.

ceoforum.com.au: Is there anything a CEO can do to prepare themselves for the termination?

RA: Naturally an executive will feel anxiety when they have to fire someone, or even have a very negative disciplining session. Anxiety is a healthy reaction because it lets us know when things are dangerous and keeps us sharp and alert to make proper judgments. But it is an unconsciously driven reaction, and it causes us to behave in certain ways, not all of which are appropriate.

You need to reflect and understand how you behave in situations where you have this sort of anxiety so you can make the best use of it. If you are finding it embarrassing to see the person or their team after the event, for instance, it can help to just face them and pay attention to them. Not all of the organisation will need the same direct and personal attention, but the team or colleagues who have worked regularly with the person being terminated will definitely be a group that will. It is virtually always appropriate to have direct contact with this group, so that you maintain a healthy connection with them and they stay on track.

When coping with anxiety, it is important to bring it into the present rather than worrying about the past or a future outcome. You should accept your anxiety rather than trying to suppress it, and try to slow down and be clear about your thought processes. Be short and to the point, but compassionate, and then hand over to someone else to manage the grieving process.


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