Retention

The Costs of Firing Too Quickly

Feature image for The Costs of Firing Too Quickly

Last week we talked about the costs of firing too slowly. This week, let’s talk about the opposite: the costs of firing too quickly.

See if you can spot yourself in the following picture: as a manager, you have high standards for performance and you expect a lot from the people you hire. (This is often a natural extension of having high standards for yourself). You may have developed this perspective after working in a high performance organisation; perhaps you came from finance, management consulting, or sales. Or perhaps that’s the way that you naturally are.

After hiring a few duds, you realise that it’s really difficult to hire good people. Your solution — as is the case for many in your shoes — is to conclude that the best way to improve a leaky funnel is to increase the input into the top of the funnel.

In other words, you think that the best approach to finding good people is to adopt the philosophy of ‘hire fast, fire fast’. By increasing the number of people who pass through your hiring pipeline, you think that you might have a shot at finding one or two who sticks around.

Of course, there may be other reasons for arriving at the ‘hire fast fire fast’ philosophy — I’m merely relaying these observations from personal experience. My current theory is that a desire for performance and a familiarity with the concept of a sales conversion funnel leads startup founders and managers to adopt a hiring approach that sounds good in theory but is frankly quite terrible in practice.

Training? What Training?

Why is ‘hire fast, fire fast’ such a bad idea?

Think about the implications of such a policy. One major implication is that you assume people can ‘hit the ground running’. This in turn diminishes the role that training has in a hiring process. Your model of hiring people is: find people, interview people, hire people, have people hit the ground running, and then fire those who don’t.

There are two problems here. The first problem is that the speed at which a new hire becomes productive (‘may hit the ground running’, as you might put it) depends on both their capabilities as well as your ability to train them. In early stage startups, training is often ad-hoc because what you do today may be drastically different three months from now. So not having a good training process in place pretty much means that you’re not able to evaluate new hires on an even keel.

In fact, one of the key things I argue in the Starter Manager Guide is that you need to come up with a systematised training program as soon as it is feasible, so that you may amortise the costs of designing your training. Doing so allows you to evaluate the capabilities of any given new hire, because you have a common base of comparison to evaluate them with. But the implication here is that you need at least a few hires before you know you have a working on-boarding training process.

Trial and error takes time — and it’s no different here than anywhere else.

The second problem is that if you practice ‘hire fast fire fast’, your team will basically be inundated with too many new hires! This means that you’re pretty much guaranteed to not be able to train them properly, since training takes attention and time. If you’re not willing to properly train them, you are setting up your new hires for failure. Worse, you are reducing the output of the team, because they aren’t able to delegate to people who they’re not able to train properly.

There is a third reason firing fast often backfires. That reason has to do with the nature of a startup’s hiring resources. When you were in a high-performance organisation in a large company, it was highly likely that the corporation could pay for people at above market rates.

As a startup, you don’t have these resources. As a general rule, good people never come cheaply, and so it’s unreasonable to expect that you would be able to hire ‘people who may hit the ground running’ at typical startup salaries. To put this another way, by opting to neglect training, you are also opting to go after a segment of the market that you cannot afford.

The Costs of Firing People Too Quickly

Let’s take a moment to discuss the costs of firing people itself.

The first major cost of firing is that you aren’t building up a store of operational knowledge. The longer someone works at your company, the more his or her store of organisational tacit knowledge grows — that is, not just task-related knowledge, but also company-specific know-how that can be used to get things done.

This is the sort of knowledge like “talk to Bill if you want this expedited on engineering”, or “tell Jane this is going to affect her next month, so that she can prepare her team”. This sort of knowledge really only emerges the longer someone works at your startup — which is why retention is such a big part of the manager’s job.

The net effect of giving up ‘organisational tacit knowledge’ is that your ability to execute on business strategy would be significantly hampered. Trigger-happy organisations tend not to be very effective organisations. In fact, one of the quickest ways I gauge the effectiveness of an organisation would be to discretely ask about their employee churn rate. Of course, a large chunk of employees leaving is never good news. But if the response I get is that of pride, and the explanation is no deeper than ‘hire fast, fire fast’, then a very specific set of alarm bells go off in my head.

In fact, this point leads us to the second major cost of firing fast: that of lost productivity. Any organisation that treats its hiring as a function of throughput — “oh! let’s throw as many people at the company and see who sticks!” — is going to take up a lot of time managing the influx of new people.

Someone is going to have to deal with all these new hires. Someone is going to have to evaluate which candidates deserve to stay and which don’t. Someone is going to have to train these new hires — and if your organisation isn’t big on training, someone is going to have to micro-manage the output of their work. And it’s highly likely that the people who have to deal with your new hires are people who aren’t able to spend their time executing on your business’s given tasks.

New hires aren’t free. They incur an organisational cost before they make you a return on productivity. ‘Hire fast fire fast’ as a policy neglects these costs; they are often implemented by people don’t realise that these costs are very real.

Now, before you say: “I read on the interwebs that startups need not care about efficiency at the beginning!” And I agree with that sentiment. But there is some nuance to that aphorism that we need to remember. In the beginning, startups are a race to viability. Therefore, if something affects your startup’s execution speed towards those goals, then you better fix that thing.

Conclusion

So what is one to do when adopting a hiring policy? I’m not going to tackle that topic in this blog post, since that’s a huge post of its own. But I will say this: ‘hire fast, fire fast’ often implies evaluating people as they are. It implies not putting any amount of work into training.

This is only acceptable if you’re hiring someone senior that you expect would be able to hit the ground running. It’s also acceptable if the person you hire is clearly a terrible fit. In nearly every other situation, firing fast is a bad idea. It’s a bad idea because hiring always incurs an organisational cost. It’s a bad idea because successful execution of a business strategy depends on building a store of tacit operational knowledge, which means taking retention very seriously. And it’s a bad idea because it is, frankly speaking, very tiring on everyone involved.

If you enjoyed this, you might like The Manager Ugh Field. I've recorded a related podcast episode that you may find here. Sign up for the MFS Newsletter to get new posts delivered to your inbox.