When to Fire an Employee: A Business Coach’s Guide for Small Businesses

As a business coach, one of the things that stresses my clients out the most is making the decision to fire an employee. The impact extends beyond the individual to your entire team and can affect your business’s performance and culture. However, knowing when it’s time to let an employee go is crucial for maintaining a healthy and productive work environment.

This guide will help you identify key situations where firing an employee might be necessary, drawing from our practical experiences of coaching 1,400 businesses globally, from Minnesota USA to Birmingham, UK and a few places in between1

1. Consistent Underperformance

In small businesses, every employee’s contribution is crucial. When an employee consistently underperforms, despite clear feedback, coaching, and support, it may be time to consider termination. For example, consider a Minneapolis based DEI consultancy firm where a consultant repeatedly fails to deliver on client expectations, resulting in negative feedback and lost contracts. Despite additional training and support, if there’s no improvement, retaining this employee could harm your firm’s reputation and client relationships.

Kaizen Tip: Always document your performance improvement efforts. This not only tracks progress but also ensures you have a clear record if termination becomes necessary.

2. Violation of Company Policies

Small businesses often operate on trust and a strong sense of integrity, making it critical to address any policy violations swiftly. Imagine a New York based financial advisory firm where an advisor breaches client confidentiality by sharing sensitive financial information. Such a violation could have severe legal and reputational consequences, necessitating immediate termination to protect the firm’s integrity and client trust.

Kaizen Tip: Ensure that your company policies are clearly communicated and understood by all employees. Regularly review these policies with your team to reinforce their importance.

3. Negative Impact on Team Morale

In small teams, one person’s negativity can quickly affect the entire group. Consider a Birmingham based law firm where a senior associate constantly undermines colleagues, creating a hostile work environment. This behavior can lead to decreased morale, increased stress, and even the loss of other valuable team members. If attempts to address these issues through mediation fail, it might be necessary to let the individual go to maintain a positive and productive work environment.

Kaizen Tip: Conduct regular one-on-one meetings and team check-ins to stay attuned to the team’s dynamics and address issues before they escalate.

4. Lack of Alignment with Company Values

For small businesses, aligning with company values is essential to maintaining a cohesive culture. Suppose you own a law firm that prides itself on inclusivity and respect, but you have an employee who regularly dismisses these values during client engagements. This misalignment can damage both your team’s cohesion and your company’s reputation. In such cases, termination may be necessary to uphold your core values and ensure your team remains aligned.

Kaizen Tip: During the hiring process, emphasize your company’s values and assess candidates on how well they align with those values. This proactive approach can help prevent misalignments later. For more hiring tips read our blog on how to create a winning team here.

5. Inability to Adapt to Change

In a small business, the ability to adapt to change is critical. Imagine you’re a tech startup in Edina, and you’ve recently implemented new software to improve efficiency. If an employee is unable or unwilling to learn the new system, despite training and support, their resistance can hinder the progress of your entire team. In such cases, it might be time to part ways.

Kaizen Tip: Foster a culture of continuous learning by offering regular training opportunities. Encouraging adaptability from the outset can help mitigate resistance to change.

Conclusion: Firing as a Last Resort

Firing an employee should always be the last resort after exhausting other options like coaching, training, and reassignment. When termination becomes necessary, it’s crucial to handle the process with professionalism and empathy, ensuring that the decision is well-documented and justified. 

The goal is to build a team that is aligned, motivated, and capable of driving your business forward. See our guide on creating a high performing team here. By making thoughtful decisions, even when they’re tough, you can maintain a positive workplace culture and protect the future of your small business.

Elevate Your Business with Expert Coaching

Looking for tailored advice on managing your small business? Business coaching can equip you with the tools and strategies to make informed decisions, including when to let go of an employee. Whether you’re in Minnesota or elsewhere, I’m here to help you build a thriving, resilient business. Contact me today to learn how business coaching can take your business to the next level.