How We Accidentally Fired All of Our Top Performers

Some lessons I’ve learned from growing a company

A couple of years ago, we sold our startup to a larger company. I joined the parent organization for a few months to aid with the transition and to see if there was a mutual fit for a longer-term opportunity. While I ultimately decided to leave and do another startup, I learned a lot from the experience about what the challenges of growing a company.

Our acquirer had about 400 employees and was growing rapidly.

The challenge that they found themselves in months earlier was the need to bridge the gap between a senior executive team and a young and ambitious workforce. Most members of the senior team had been with the organization for ten or more years. The average employee otherwise was in their early 20s; for many, this was their first job after college. A few experienced hires were made to fill in the director and VP levels, but the gap was still felt.

For this millennial workforce, job-hopping was considered a norm and the executive team wanted to continue to reward and encourage the top performers. One very effective mechanism that they used was to offer functional rotations within the firm so that over the course of a few years, a high-performer would have the ability to get exposure to different areas in the product and sales organizations.

The next idea was to promote the high performers. With 400 people in the company and about twenty people in the levels of director and above, more managers weren’t needed to solve any particular growth or span of control issue; the idea was to simply promote the highest performers within each working team into a formal team leader role to help retain them.

When I was pulled into the organization, there were a collection of three- or four-person working teams with a manager in each one. Those managers reported up to a director who themselves only had ten or fifteen total employees under them.

A few months later, the leadership team began to consider adjustments to the organizational model to better reflect the new structure of the company following a few acquisitions. Looking at the org chart, anyone would have raised the question about how efficient the company was being with its use of middle managers. While I’m personally an advocate for middle managers as frontline leaders, whenever you have a plethora of managers with less than seven direct reports each, the org chart tells a story of inefficiency. Before the manager promotions, these high performers were playing the role of player/coach; they were informal leaders on their teams who also were generative contributors as well. Now, from a payroll and org chart perspective, they looked like inefficiencies. So, in one fell swoop, the company made a choice that was the right one given the situation: between ten and fifteen of these formerly-top performing managers were fired.

Could this event have been anticipated? Could it have been avoided? And how can you reward young, ambitious employees, while acknowledging that promoting them prematurely is not the right path?

There have been a lot of surveys and reports in the past couple of years about how to engage and retain the millennial workforce and I have found a few principles from them to be helpful:

  • If you have a larger organization, then relocation opportunities, especially ones that provide international experience are valued. Rotational leadership programs are valued.
  • If you are a smaller organization, engaging deeply on culture, mission, and vision is valued. How many of your employees are just showing up for a paycheck? How many are truly invested in the goal of your organization? How many can even articulate your mission?
  • According to a recent Gallup poll, millennials are looking for a coach, a purpose, and ongoing interactions about their role and their future with an organization. Millennials are pushing the migration from annual performance reviews to real-time discussions, sometimes occurring via text, for example. In another example, the free food and gifts that were valued by employees twenty years ago are more likely to be considered patronizing by employees today; there is no shortcut to engaging an employee on their purpose and their role in your organization’s mission.

Acknowledge that sometimes losing an employee after a few months is a good thing, if they were not truly invested in being an exceptional member and leader of your organization. I’ve met people who joined IBM in the 1970s and showed up for work every day for thirty years; they never quit, but they also never lived up to their potential.

But what could we have done differently? The organization prematurely made managers of high performers as a retention tool. At the time it was easy to do; in the long run, it was very difficult and costly for all who were involved.

The fact that the move was relatively easy and fast to implement - from conception to execution - is the main clue that it was not a long-term solution. The commonality between all of the insights above is that they require long-term thinking and fundamental changes in perspective.
We should have pushed ourselves to move more quickly and more deliberately down a path of working with each individual team member on their own leadership journey. The organization did a great job, I believe, of setting an aspirational mission. But it takes a real change in priorities of the leadership team to work with each employee individually to understand their own career goals, to map those goals to the organization’s mission, to recognize and reward individually month-by-month as the team members contributed to that shared journey, and to articulate the set of criteria that would allow each person to take the next major step in their journey (such as a relocation, rotation, informal leadership, or promotional opportunity).

Making those changes in norms and behaviors to just avoid turnover may not prove worth it. But it is worth doing so because it pushes all leaders to be the best they can be. And for the incentive to change, we can thank a new generation of employees who are unwilling to settle for anything less.

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All books and other resources referenced in this article