
On Severance - dbloomfield
http://rrwhite.com/on-severance
======
gyardley
Severance doesn't reward the incompetent employee, it penalizes the
incompetent employer.

Writing too many severance checks? Figure out how to improve your hiring
process.

~~~
jamesaguilar
It's not an either or thing. It does both.

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jcampbell1
The author might as well be a sociopath. The only reason he pays severance is
because if he doesn't, then society will realize he is a dick. Most people
have empathy for the people they fire, and that is reason enough to provide
severance.

~~~
underwater
Not necessarily. He says "the thought of paying someone I was forced to fire
because he (or she) is incompetent burns me up inside."

It's more the thought of paying someone more than you're legally required too
when you know they don't deserve it.

~~~
rhizome
He does not even hint that the firing could be due to management and hiring
process failures. Does he fire the people who approved the hire of a person
who winds up not working out? They failed, too, and you don't want a company
built upon the wood of a poisoned tree.

~~~
rrwhite
I did not mean to imply that all firings are the result of employee
incompetence or poor performance. Because that's clearly not true. There are
often other factors that lead to a bad "fit".

And yes, the first thing you should do post-firing is examine your hiring
process to see if it could have been foreseen and prevented. But in some cases
it does come down to someone just not having the experience, the talent or the
work ethic to meet the performance required. It's those cases, especially with
tech workers, where founders are apt to ask "do I really need to provide
severance to HIM (or her)". Writing at $20K check to someone to walk out the
door is never an easy thing to do especially at a startup where that $20K
could go a long way. That's what I was addressing here.

~~~
rhizome
_But in some cases it does come down to someone just not having the
experience, the talent or the work ethic to meet the performance required_

This is all predictated on "some" cases? "On Severance (in some cases)?" From
the way you describe it, _some cases_ are those in which the employee was able
to rook the entire hiring process despite their inability to do the job, but
how did they get an offer in the first place?

This brings up a secondary point: is "the performance required" something that
changed between hiring and the decision to fire, i.e. a leadership issue?

Without having illustrated these scenarios, it sounds more like "Ready, Fire,
Aim," sweeping employees to the side when it turns out a little-informed guess
was wrong.

------
beat
The flip side of severance is the two week notice. Quitting is often the moral
equivalent of "firing your employer". Giving another two weeks to an employer
who drives you out the door with their own poor performance is frustrating,
but again necessary for your reputation.

~~~
catilac
I think that's tough on everyone involved. The soon to be gone employee won't
want to stay. Especially after hearing - "hey you're a poor performer so leave
in 2 weeks."

Employers should give formal warnings. Employees need hard metrics on where
they are flailing.

~~~
sukuriant
2-weeks notice is a system where an employee tells their employer "I am going
to be leaving your company in 2 weeks." It's not the employer telling the
employee "I want you gone in 2 weeks." Usually when someone is fired, they're
swiftly removed from a company to keep sabotage at a minimum (I presume).

~~~
protomyth
I know a couple of companies that have a policy with IT employees, that
regardless of the 2 week notice[1], the IT employee is escorted out of the
building upon giving notice. They worry more about security than hand-over.
Doesn't matter if the company loves the employee or not.

1) they do pay for the two weeks

~~~
sukuriant
Oh is that how that works? That makes more sense.

~~~
protomyth
It is not universally true. Some companies even do the same thing if an
employee is going to go work for a competitor regardless of job function.

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jeffchuber
As a company you always have to temper playing the long term game vs the short
term game. The temptation will always to play the short game, so you will
probably want to over-emphasize the long term game.

If you have $15k left - and that employee needs $15k in severance - it may be
a good idea to explain to them that you really want to help them out but cant.

If you are still at $1M and the employee needs $15k in severance - then that
it is obvious that you should give it to them.

Anywhere in between - use your gut, but lean on the long term game.

~~~
rhizome
$15K left? That's well short of even a "short game." The company is less than
one pay period from bankruptcy at all but the tiniest ramen startups. You
should give up the $15K as an apology for failing the entire company if things
are that dire.

~~~
jeffchuber
15k left is obviously hyperbolic. It is an extreme used to make a point.

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tomkarlo
Not every employee who loses their job does because they performed poorly.
There are lots of situations (especially at startups that are evolving
rapidly) where you might hire someone to do a job that is no longer necessary,
or has been made obsolete as your operation evolves.

Also, paying severance isn't just about doing the right thing for the
departing employee. It's also about ensuring that your other employees feel
good about their own jobs and don't have to worry that one day, they might be
left in the cold with no cushion to help cover the search for a job (which
will likely take far longer than the severance covers.)

~~~
rrwhite
In this context the original discussion revolved around someone being fired
for cause (extremely poor performance). That someone was a knowledge worker
and fairly well compensated. There was also little reason to believe that
person wouldn't have a new job by the time they walked out the door (job
market being what it is).

Thus my goal was to argue for a reason why you should always pay severance
even when none of those conditions you mentioned apply. Otherwise I agree with
everything you wrote.

~~~
tomkarlo
Even poor performance is the fault of both the company and the employee to
some degree... unless something changed, the company hired them for something
they weren't suited to do, or failed to develop them properly. And generally,
other employees don't know exactly how much someone underperformed, so it's
moot from their standpoint.

The fact they were "fairly well compensated" is irrelevant, by the way.
Severance isn't paid because people were underpaid.

------
a-priori
Severance serves an important purpose for senior-level employees and
executives: it makes it more painful to fire them. This frees a good employee
to take more risks, hopefully for the employer's long-term best interest,
because they have greater job security.

~~~
gohrt
Would it not also free them to stop caring about their job performance?

~~~
tomkarlo
No, because even a relatively large severance package is still worth far less
than the expected value of ongoing employment. Especially for senior
executives, who will generally have to spend longer searching for the next job
than a more junior employee. Getting 3 months severance then being out of work
for 6 months is not a good trade.

------
northwoods
Severance is NOT generally paid for sacking incompetent employees, that
process is called Termination For Cause.

Consider the following:

1\. A company lays off a thousand employees as it outsources a division, or
combines with another firm (management decision).

2\. A company decides that a product isn't cutting it and lays off the entire
product team.

3\. My own experience: I was asked to leave a senior position to join a brand
new division of a >billion revenue organization - with the expectation that a
new business unit would be formed. Four months in, the parent organization was
facing external pressures and decided to stop the whole venture - and yes I
had pre-negotiated a severance deal for just this eventuality. According to
the author, that decision by the parent company was somehow my fault? Was I
incompetent? Should I have skulked away in shame, with no payment at all for
the risk I took?

This article is business advice as dispensed by a grade schooler.

~~~
jfarmer
First, the author is talking about startups, not companies which might have
reason to lay off thousands of workers or whole teams.

Second, in a startup, it's probably worth getting an employee to sign a
separation agreement even if they were terminated for cause. Part of that
separation agreement will include a release of claims, making it impossible
for the former employee to return after the fact and dispute the cause of his
termination.

This makes it possible to say "There are no former employees who might come
out of the woodwork a sue us for wrongful termination.", e.g., while
fundraising.

------
georgemcbay
"The thought of paying someone I was forced to fire because he (or she) is
incompetent burns me up inside."

I think we all hate working with incompetents, but if someone working for you
is just simply not competent for the job they were hired for, that's more your
fault for hiring them in the first place than their fault, IMO.

And if you're running a company and you hire enough incompetents for this to
be an ongoing issue of frustration for you, that would seem to point to you
being incompetent yourself.

~~~
rrwhite
My assertion is that you should provide severance in all cases. I chose to
attack the most contentious case (poor performance) where one might think not
to provide it to prove that point.

I didn't mean this to imply that it's a regular issue I have to deal with :)

PS Priority #1 post any firing is a careful review of the hiring process that
got you there.

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Yhippa
Is severance essentially the expected value of firing an employee? The way
I've seen it used is what you pay an employee in exchange for them not suing
you for wrongful dismissal. Once it hits a certain threshold an employee will
take the money and shut up. If it's not enough or they believe they can get
more they will retain a lawyer and sue.

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ianb
I'm curious if anyone's had experience negotiating a severance package up
front? The kind we all bitch about executives having. I've never relocated for
a job, or made a particularly sacrifice to start a job, but I always thought
that if I did I'd want some agreement, as I'd be investing a great deal in
that job change, and I've seen a few people get really hosed. Usually when
they jump into a position that is more political than they realized.

~~~
fnordfnordfnord
>I'm curious if anyone's had experience negotiating a severance package up
front?

Nope, it isn't popular here in Texas. I tried to negotiate for severance when
working with a company who had previously surprise-fired me. They were
determined not to agree to any future severance or anything named severance. I
ended up baking it into a higher hourly rate. In the end they paid my
severance wishes many times over, in advance.

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pawrvx
They generally pay you severance and ask you to sign an agreement not to poach
people for 1 year.

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baddox
> I always require a departing employee sign separation agreements.

How is it possible to require that?

~~~
genericresponse
Because they don't get the money if they don't sign. It's not absolutely
literal, but I can almost guarantee everyone will sign.

~~~
baddox
Oh, I see. The severance is conditional on signing the termination agreement.

~~~
jfarmer
It's more than that. A contract isn't binding unless both parties offer
consideration. In the case of a separation agreement the employer's
consideration is the severance pay.

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leed25d
Ok. I get it. You hate paying severance, and I understand how unpleasant it
must feel. Tell me, how do you feel about staff members leaving your employ
without notice?

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phamilton
What's normal severance at a startup?

