What If You Could Never Fire Another Employee?

Last Updated Apr 6, 2010 11:07 AM EDT

Until 2007, the oldest continuously operating business in the world was Kongo Gumi in Japan. A construction firm founded in 578 A.D., it began building Buddhist temples, and that's what it was still doing when it was absorbed by Takamatsu. The last president was a member of the founding Kongo family, members of which still work as carpenters today. It shouldn't surprise us that this is a family firm.

Two-thirds of all businesses are family owned: think Samsung, Fiat, Nieman-Marcus, Bacardi, Seagram and Ikea. We tend to think of family businesses as the stuff of soap opera -- Dynasty, Dallas, even the Sopranos -- and there's no doubt that they are highly emotional. But that could be the secret of their success. Why? Because the salient characteristic of family firms is that you can't fire your family. The fight may be between siblings, between parents and kids -- but they have to work it out. Neither party wants to walk away from a successful company that they own a big stake in, and it can be hard to avoid the family dinner where grievances leak out. Which means that the best of these firms become quite expert at resolving conflict.

Often these companies have one person -- usually female -- who is the chief diplomat and bridge mender. Some consultants even call this person the Chief Emotion Officer. She does all the interstitial work to repair hurt feelings and communicate detail, often fixing problems before they blow up. She's in touch with the emotions inherent in every business, and her chief aim is to keep the peace.

I think there's a great lesson here. As a CEO, it can be highly tempting to imagine that the solution to most problems is to fire one person and hire another. Sales director not delivering? Off with his head. Engineering team behind schedule? Find a new project manager. Employment conditions in the U.S. in particular give managers exceptional latitude in picking people up and throwing them out. Most managers love that because it means they don't get stuck with their bad choices.

But I have to wonder how much better we'd all be at hiring if, like family firms, we couldn't fire our failures. For all that we make our hiring practices lengthy and laborious, we still apply plenty of bias, instinct and wishful thinking -- in part because we know we can get away with it. What if you couldn't? What if you were stuck with that employee for life? How would that change your decisions? Here are five hiring practices we can learn from family firms:

  1. Choose carefully at the start. Knowing this is a lifetime relationship, not a one-night stand should make you very thoughtful about your own biases.
  2. When there are signs of failure, intervene early. Don't let things fester, and don't leave a struggling employee to fail.
  3. Stop hoping they'll be so unhappy that they quit. Your employee may meanwhile be hanging on in the hopes that you'll pay them to leave. And that's the worst of all possible worlds for everyone.
  4. Ask whether the employee is in the right spot. Many companies hire great people but don't put them in positions where they flourish.
  5. Check that the problem doesn't lie with the line manager. Employees often fail because they're being mismanaged.
I'm not proud of the times I've had to fire employees. It's a ghastly experience, and it ought to be. If the day ever comes that you don't mind it, quit: you've lost the plot. But before you take this easy exit next time, imagine you're running a family firm. You'll see that errant employee for Sunday supper. How does that feel? Isn't there an alternative to termination?

Image courtesy Flickr user jm3, CC 2.0

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.