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Firing top guns: why CEOs hate axing their execs -- and often foul it up. (Management).

Ask CEOs which part of their job they dread most and the answer isn't making their numbers or keeping Wall Street happy. It's firing their top executives, or even just mulling the idea.

Of course, there are some Chainsaw Als out there for whom slashing high-level bodies is an article of faith. But, more commonly, chief executives fare poorly at it. "If I got a yearly written evaluation, I would get failing marks in firing; I am just terrible at it," concedes Ron Shaw, president and CEO of Pilot Pen in Trumbull, Conn. "The pressure of struggling with sales or profits is nothing compared to having to let a person go."

Firing senior staff isn't a skill executives learn in business school, and it isn't one they have to master to move up the ranks. Many, therefore, Find that even though they may have terminated dozens, if not hundreds, of people by they time they reach the corner office, they still haven't perfected the art.

In many ways, the skill is counterintuitive, suggests Stephen G. Payne, president and CEO of Leadership Strategies, an executive coaching firm based in Princeton, N.J. Most people view it as the end of a relationship, but it should be seen as a transformation. "The relationship will survive, just in a different way," says Payne, author of Greater by Far: The Journey of a Total Leader. "In firing the person, your mission is to ensure that the future relationship is a good one."

A key mistake many CEOs say they make is putting off the inevitable. At one company Payne worked with, the COO was performing so poorly that it greatly hurt the company's finances, yet the CEO gave him nine months to improve. "Many CEOs harbor this unfounded belief that miracles can happen-- that people not endowed with certain capabilities will somehow spontaneously acquire them," says Payne.

Shaw of Pilot Pen says he began warning one high-ranking vice president that his work was under par four years before he finally gave him the ax, and subsequently discovered many costly errors made during that time. "I always think the person can be turned around," says Shaw, who concedes that rarely happens.

Shaw's reluctance to pink-slip executives is understandable, given his personal history. Earlier in his career, at Bic Corp., he fired a salesman who had written anti-Semitic letters to top management. Several days later, the man shot himself. Shaw agonized for months before he finally stopped blaming himself for the suicide.

Several years later, Shaw himself was fired. While serving as national sales manager at Bic, he was abruptly replaced by the founder's son, even though, he says, the company's sales were at an all-time high. Nearly 30 years later, he still recalls his feelings that day: anger, despair and a sense that his whole identity and ability to provide for his wife and three children had been stripped away.

But postponing the inevitable can drag down an entire senior management team. "It is like having an enormous dead moose rotting on the table but nobody can talk about it," says Payne. Executives may start to question their CEO's judgment if they feel he or she can't make a decision that seems obvious.

Of course, it's easier to determine that a person must go when business performance is the yardstick. The decision is much tougher when the problem is the executive's personal style or fit with the company. Gary Giles, CEO of Solution Builders, an information-technology consulting firm in Atlanta, recalls a case in which a vice president with a proven track record joined a company and immediately began to irritate other, more team-oriented executives with his lone-cowboy style. Although the decision to fire him agonized Giles, eventually he realized he would never be able to turn the vice president into a team player.

First of all, hire well

Savvy executives say the first step to getting better at firing is hiring the right people in the first place. "Years ago, I had more of an attitude of let's give this person a shot when hiring them, and every third or fourth time I would get someone who did not really have the capacity to do the job," says Tom Rotherham, CEO of RSM McGladrey in Minneapolis, the nation's seventh largest accounting firm.

Now, Rotherham is much more careful in his hiring, and his need to fire people is greatly reduced. (His firm has retained a business psychologist to evaluate each prospect's ability to do the job. The psychologist also works with managers on their own issues, including conflict avoidance, so they will be better able to fire people.)

Rotherham's firm also has instituted a formal process for getting an underperforming executive up to snuff: The person is told exactly how he needs to change and is given four to six months to do it. Improvement is reviewed on a monthly basis. Only one in 10 such executives changes enough to keep his or her job (and about 60 percent never even start to change).

Some CEOs find it helps to have an outside sounding board before they make the decision. At Solution Builders, Giles turns for advice to a group of fellow CEOs he has relied on for years. "As outsiders, maybe they can help me see some bias coloring my perception," he plains. "Several times they have gotten me to adjust my management style and give the person another chance."

If he determines the person indeed must go, Giles considers the short-term implications: Is the company exposed to legal action? And what will the perception be both internally and outside the company? When he fired his sales vice president, Giles knew he would lose some credibility with employees, but still it was a move he had to make. "I had hyped the person within the company. Now I had to step up and say, 'I was wrong. This person is not going to take us to the next level,'" he recalls.

The final act is almost never easy, but experience helps. "It is like going to the dentist: You can't tolerate it when you are a kid, but when you are older you know what to expect, so it isn't as bad," says Mitchell Gooze, president of Customer Manufacturing Group, a marketing consulting boutique in Santa Clara, Calif. For Gooze, who formerly headed several divisions of a major company, the process demands "saying your piece," which usually takes him 10 minutes.

The longest meeting he had was when he headed a software company and had to fire a vice president who had started the firm. "In his mind it was still his company, even though he was no longer the largest shareholder and the board had lost faith in the direction he wanted to go," Gooze recalls. "He was shocked and really, really mad, as if I was telling the king we were taking over his country." The founder's indignation spewed forth for half an hour. Finally, Gooze walked out.

By contrast, Giles says he tries to turn the meeting into a counseling session, to help the person see how he can move on and avoid having it happen again. Giles typically spends an hour or more with someone when firing them. Experts believe either a short or long meeting can work, as long as the discussion steers clear of why the person is being fired, which by that point they should clearly know and only begs for an argument.

"Once they accept that there is no room to change your mind, most executives just want to hear what kind of severance and references they will be getting," says Shaw. Human resources people can be called in to discuss details, but the CEO should have general guidelines to offer.

Don't make enemies

One goal is to make the experience as positive as possible, so the jettisoned executive will remain an ambassador of the firm if at all possible, says Tucker Mays, co-founder of OptiMarket in Stamford, Conn., which works with senior executives making career transitions. Outgoing executives who feel they were treated fairly are more likely to sign a standard release not to sue -- no small matter in an age of costly litigation.

A positive experience, explain Mays and his cofounder, Bob Sloane, includes several factors: fair severance, taking into account the state of the job market; an agreement on how the firing will be presented to the public; outplacement support; and time to say good-bye to colleagues. "Executives who are given three hours to clean out before being escorted out of the building are not going to talk well of the firm to outsiders," Mays says. A packaged-goods firm where Mays himself once worked made this mistake, and had trouble recruiting new executives as a result.

Soon after the final meeting, it's imperative that the CEO quickly inform his remaining key executives. "Make sure they understand the reasons for the action, and the steps you have taken to be considerate with the person, advises Gil Dwyer, associate dean and director of business programs at Wheeling Jesuit University in West Virginia and former CEO of the Southern Research Institute, a not-for-profit research and development group working in pharmaceutical and engineered materials.

What makes the process easier, CEOs say, is knowing the move is best not only for the company, but for the executive, too. "If you let people stay in a role that they are not going to be successful in, you are wasting their life," Rotherham says. You really are doing it with their best interest in mind; they need to move on to someplace where they can succeed."

Often, CEOs say, after a cooling-off period they can reestablish a relationship with people they fired. Some CEOs find ways to arrange consulting projects or other specific tasks that take advantage of a fired exec's real talents. Giles, for instance, went four months without talking to the vice president he fired and has since begun exchanging e-mails with him. "We are discussing having lunch together," Giles says. "Who knows, maybe in the future we will even partner on some deals."
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Author:Landau, Meryl Davids
Publication:Chief Executive (U.S.)
Geographic Code:1USA
Date:Apr 1, 2003
Words:1687
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