From the July 2007 issue of Wealth Manager Web • Subscribe!

Time to Terminate

An advisor called me recently to discuss a problem he was having with an employee. He proceeded to talk about errors the employee was making, excessive tardiness and absenteeism, and how he needed to work around her idiosyncrasies. Despite his best efforts to explain to her the areas of her performance that were not acceptable, the ramifications of her work, and possible ways to improve her performance, it wasn't getting better. As a result, the relationship was heading downhill fast, and the advisor's animosity toward his employee was becoming insurmountable. "How long has this been going on?" I asked. "Oh, about seven years," the planner replied.

For many advisors, one of the most dreaded aspects of business management is termination of an employee--even when things clearly are not working out. Many advisors find the task so distasteful, that they avoid it at all costs and put off for years what needs to be done now.

There are any number of specious reasons why an advisor avoids a rightful termination. But in the end, these typically boil down to procrastination and rationalization:

o Anybody is better than nobody when it comes to daily work. In small offices, most employees multitask. The thought of no one to answer the phone, fill out the paperwork and so on keeps advisors from acting.

o Planners are busy. Because business development and client management are so time consuming, planners don't make time for managing human capital.

o The "I'm not a good manager" syndrome. Many advisors assume (sometimes rightfully) that they are not good managers. If an employee is not working out, they assume it's their fault. Because they are insecure about their own performance as managers, they give the poor performer an infinite number of chances to improve.

o Fear of liability. In our litigious society, employees sue employers. To avoid that possibility, some advisors simply don't act out of fear of reprisal. (Of course, rules, regulations, and laws guide rightful termination. The laws regarding the "At Will" doctrine vary from state to state.)

o Planners like harmonious relationships. The thought of the conflict arising from terminating an employee is so distasteful that advisors choose to continue working with a poor performer rather than risk confronting the employee and being the "bad guy."

On the other hand, perhaps you are terminating employees too often and for the wrong reasons. If you find you are turning over employees every year--or even more frequently--you should look at yourself before you blame the employees. You may find you are your employees' problem. But let's assume that's not the case here and that you have an employee who just isn't doing an adequate job for your company, despite your best efforts to help the employee improve.

Your HR motto should be: no surprises. Prematurely terminating an employee is asking for trouble--legal and otherwise. Instead, you should follow certain steps to address a problem situation with an employee. As these steps show, the decision to terminate doesn't happen overnight. Ultimately, if the employee does not improve, and termination is the right thing, the employee should not be surprised when you decide it's time to part ways.

So, when you are unhappy with an employee's performance:

1. Be specific and articulate about which behaviors--all documented in the employee's job description--the employee is not performing satisfactorily, and make sure the employee understands these shortcomings.

2. Offer ideas and suggestions to help the employee improve. It is a best practice to--together with the employee--create a specific plan for measurable improvements and/or results, and formulate a timeline for improvement, giving feedback along the way.

3. Document, document, document. Ideally, the employee will have signed documents acknowledging progress and problems throughout the counseling process. Preferably, one of these documents will include the employee's formal written review.

If you follow the above scenario, and the relationship still doesn't work out, the dismissal is almost a handshake deal. The relationship just didn't work out despite your mutual best efforts.

The actual termination process should be brief and to the point--five minutes. But it still requires preparation. Rehearse thoroughly what you are going to say, and emphasize ending the relationship positively.

Unfortunately, people frequently drag out the termination discussion by reviewing the whole scenario. The actual termination is not the right time for this, assuming you've followed the process above. In fact, you need only state the facts to the employee and say that you are terminating the relationship now. Do this in private. It is generally recommended to avoid termination during holidays, although the literature appears mixed on which day of the week is best or worst for the termination event.

Large companies with human resources departments sometimes use the good cop/bad cop approach. The bad cop is the manager who spends the five minutes terminating the employee. The good cop is the HR person who explains employee benefit rights, such as Cobra; listens to the employee; and, if necessary, consoles the employee.

Of course, most small offices don't have an HR department. But if you can select an employee who will stay with the terminated employee after you have had your five-minute discussion, that individual can help the person pack his or her belongings, collect company materials, and walk the terminated employee out of the office. Be sure to take care in selecting this individual and talk with him or her about the role in advance.

Of course, managers need to remind the departing employees about any confidentiality or non-compete agreements they may have signed and give them copies. Along with the final paycheck, provide employees with a documented calculation of the balance owed to them. Explain extension of benefits as appropriate. Finally, collect all company property, including keys, papers, computer discs, and any other proprietary items.

Immediately upon the termination, cancel all computer privileges and any access to client or company information. Notify regulatory bodies and vendors if appropriate.

However, even with the best-laid plans, things can go wrong. For example, if someone snaps and tensions mount during the five-minute discussion with the employee, the blame game could begin. Nothing is gained by discord at this point. Count to 10 and walk away from the conflict. If you are concerned about an employee's emotional status, consider creating a printed list of local resources where an employee may receive counseling, and provide it at the conclusion of the process along with the employee's final paycheck.

If at all possible, end the relationship on a positive note by wishing the individual the best in the future. Treat the employee with respect, and try to make sure the employee leaves with ego intact. This also helps you make a clean break and minimizes regret. Be clear with the employee that you will handle reference calls simply by confirming dates of employment.

It's a tough task, but this is a competitive industry with margin squeeze and increasing competition, so there is no room for mediocrity--let alone poor performance. Allowing a poor performer to stay on indefinitely affects the advisor, the other employees, and, ultimately, the clients by creating unnecessary stress and little or no value for the expense.

Once you've terminated a poorly performing employee, focus your energy on prevention by performing serious due diligence during the hiring process. The impact of good versus great employees is obvious in a small business. Remember that we all have talents to bring to this party. Don't all employees deserve to be great at their jobs?

Joni Youngwirth is the vice president of practice management at Commonwealth Financial Network in Waltham, Mass. You can reach her at This article is for informational purpose only and is not legal advice. You may wish to consult a legal professional.

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