MBA2057 The Cost of Firing an Employee + Free Ride Friday

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Hey O. Welcome to the $100 MBA show. No fluff, just the good stuff. Every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today is Free Riot Friday. On Free Riot Fridays, we give away a lifetime membership to one of our programs. We're giving away easy course, our 30 day course on how to build your own online course. Just leave us an Apple podcast rating and review and you enter our weekly random draw we call Free Ride Friday. Listen in on Friday just like today to see if you won. It's that simple. In today's lesson, you will learn the cost of firing an employee. In my experience as an entrepreneur for over 20 years and helping other entrepreneurs build their business, most of the time when you're considering firing an employee, it's not because of just gross negligence or insubordination. It's usually something in the gray area where they're just not carrying their weight, they're not hitting their targets, they're not meeting their KPIs. You feel like you can get somebody better and this could be true. And a lot of entrepreneurs are highly competitive. They want to win, they want the best players on their team. And that's great. But you should be aware of the costs of firing an employee. There are some heavy costs that some people do not consider. And the reason why I want to talk about this in today's lesson is that you need to weigh these costs with maybe you can turn around this situation. Maybe this team member needs a bit of training, a bit of guidance, a bit of motivation. Maybe they need somebody to tell them, hey I need you to be better. So in today's lesson, I'm going to detail all, all the costs involved when you fire somebody on your team. Some of these you might have thought of, some of these are kind of hidden. They're like what I call phantom costs. And we're going to get into them in today's lesson. So let's get into it. Let's get down to business.

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Letting go or firing somebody is never a pleasant activity. And I'm gonna just start today's lesson by saying sometimes, yes, you do have to fire somebody. Yes, it is the right move. But I want to make sure that you are aware of the costs and in that process, as well as consider or ask yourself, have you exhausted all your efforts before you pull the trigger and fire this team member? So let's get into the cost. The first one I want to bring up is maybe one you may have thought of, may have not thought of, but it probably has more of an effect than you think it does or more of a cost. And that is team morale. When you fire an employee, it has an effect on your team. This is especially true if you have a small team where everybody knows each other's name, works with each other every single day. Even in the situations I've been in where everybody on the team would probably agree with me that it was a good move, it was the right move to fire this person. It might be somebody that they know more than you, is not, you know, fulfilling their side of the bargain, not doing the job properly. Even so, even if it's totally justified and understood, people are people. And whenever you fire somebody on team or even somebody leaves the team, it does have an impact. People miss people. They got used to people. They still kind of feel better, bad that the person is out of a job. This has an impact on your team. It also has people questioning sometimes, am I next? Will I be fired? Is my job security at risk here? This is why in my team on the podcast, as well as Webinar Ninja, our software company, whenever somebody leaves our team, whether they resign, they retire, they get fired, whatever the situation may be, I have to address it publicly with the whole team. I actually talk to the whole team in our all hands meeting. And first of all, thank this team member for their contribution, but also explain that this is generally why we had to part ways. And I try to be as sensitive as possible when I explain this, but at the same time, make sure it's clear to them, hey, if you're doing a great job, you have nothing to worry about. Everything's going to be all right. This is why we decided to shift gears or change course with this team member. So that's the first cost. The second one is a financial cost, and that's the cost of hiring somebody new. Recruitment is one of the most exciting, expensive things to do in your business because it costs you a lot of time, a lot of money, a lot of resources to find somebody new. Okay, I'm just talking about hiring somebody. I'm not even getting into the training. We'll talk about that later. But we're talking about just finding somebody who signs and says, yes, I will work for your company. This process takes a lot of time, especially if it's a specialized role. It costs a lot of money, especially if you're gonna get some help from recruitment. Even you're putting up job ads. It costs money to ads these days in great job boards. Most of them range between like 300 to 800 to $1,000 a month to put up a job post. And often it's not good enough or it's not as effective. If you only post to one job board, then you got the evaluation process and the interview process and the screening process. This is very, very costly. I love growing the team. I love bringing on new people. But it's one of those things that I've been really get other team members to get involved. I have a great executive assistant, Romina, who helps us with a lot of the admin, the hr, and it's for good reason. Why we did this is because I don't enjoy this stuff. The admin side of things is a lot of work and hiring is a lot of admin. So it's costly, time wise, effort wise financially to find somebody new. Next training and ramping up time. When you bring somebody new on your team, even if they're highly qualified, they need to be trained on your business, your rules, your values, how you communicate, your tools. It's going to take them, you know, a few weeks sometimes just to start getting some momentum and maybe in a few months to be fully ramped up. So you're going to lose a bit of velocity of work in this position, when you hire somebody new because they still need to get used to how you work and the team and everything like that. Think about it. When you started a new job, right, it takes some time for you to get used to. You're not really firing on all cylinders and just doing things as efficiently and as productive as you are, or will after being on the job for a few months or a few years for that matter. So this is something you need to consider. Your productivity in that position will take a step back because of that ramp up time because of that training time. Often training an employee, a team member, will also cost money, giving them the resources, the tools, the courses they need to get the product knowledge, to get the market knowledge they need to do their job well. Remember that person you just fired, you invested all this stuff already and it's kind of out the door now, it's kind of down the drain and you got to do it all over again with somebody new. Here's another phantom cost a lot of people do not consider. Let's say you hire somebody for a position, they do all right, but after a couple of years, they're starting to perform less and less and just not doing as well as they used to. This could just be fatigue, this could just be, you know, burnout. They might need a change of pace or maybe even a redefining of the role in the company. You might just perceive it as they're just not hitting their KPIs. This person might get fired. Consider this cost when you hired this team member, okay? And this is especially important if they're in a highly sought after position like an engineer or a designer or management. When you hired them, you hired them at a price point, at a salary point. And you probably have some built in incentives and increments throughout. But there's a good chance if you tried to hire for this position today, you're going to pay much more for that position than you did two years ago. In some cases 20 to 30, sometimes even 40% more. Yes, I've seen it. This is for many reasons, like market trends and supply and demand for positions and the economy and inflation, all that kind of stuff. But the point here is that if you're going to hire somebody new, you're going to pay new higher prices. And people forget that and they don't realize that until they start putting job ads and realizing, oh, I'm not competitive with this price range. I need to up the salary to find somebody who's good. So this is a cost you got to Keep in mind when you fire hey Fidelity.

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Costs to look out for when you decide to fire and that's intellectual property. And I'm not talking about the idea of your product or what's behind your product. I'm actually talking about the working knowled of that team member, understanding the ins and outs of the company and the way your product and service is delivered. This is a brain trust. This is actually very valuable. This is why I really, really, really drive home in a lot of my lessons. You got to have standard operating procedures. You need to document everything in your business so that if somebody leaves, somebody gets sick, somebody goes on maternity, somebody decides to move on and take on another position somewhere else. You have their workflow and what they do and how they do it documented so that when somebody new comes, they can read that and understand, okay, this is what it's all about. This is how I get around this problem. This is how I do this. Here are all the answers to all the questions I have in my head. All that kind of stuff. Most people let their team members just remember it in their head. They know how to do it and they don't actually write it down. I'm talking about even simple things like refunding a customer or updating your website or what's the SOP for? Publishing a new blog post. This is what I'm talking about. You need to document everything as much as you can so that you can have a bank of knowledge of how to run your business, regardless of who's in the positions. This is why I really encourage people when they hire somebody and they train them, you tell them to create the SOP for it first and then follow the SOP to do the task. For example, if you run a YouTube channel and you hired somebody to upload and publish your videos and put all the metadata and all the tags and the titles, get them to write down step by step how to do that and if you want to, you can walk them through with a video. This is what I do I just screen share my video, I record it and then I send it over to them. They create the SOP based on that on a document and then they follow that SOP to do the task. And now no matter who comes in that position, I. Alright, one more information documented. So that procedure is in our handbook. Well, there you have it guys. Let me recap. Number one, cost of firing is actually the cost of team morale. Number two, the cost of hiring somebody new. It's very costly to put jobs up and hire people and find the right candidate and screen for them and interview for them. It's not easy and it's costly. Number three, training and ramp up time. Number four, new talent costs, how much you're going to pay for new rates and the cost of the knowledge they might take when they leave. Make sure everything's documented. That wraps up today's lesson. But today's episode's not over. It's Free Ride Friday. Let's see who won this week's Free Ride. And the winner is. Lee Mint. And Lehman says just at the right time. As a business owner going into a difficult time, this podcast powers up my mind with new solutions and ideas. Well, thanks Lee for that great review. Your mission is to email me over at omar@100mba.net so I can hook you up with the free ride to our course, Easy Course. It retails for $500 over at EasyCourse co. Or you can just win it for free by leaving an Apple podcast rating and review. And that puts you into our weekly random draw we call Freeride Friday. Listen in on Friday to see if you won. It's that easy. Before I go, I want to leave you with this. I've been running businesses for over 20 years. I fired more people than I want to admit. It's not an easy process. It does get slightly easier because you know what to expect, but it's never pleasant. That day is kind of one of those tough days. So understand that you might get affected emotionally. That's the cost that we didn't talk about. You might get affected where your productivity today is going to go down, where you're not going to be yourself or your best self. And I want to say, give yourself that license. It's okay. It's not easy to fire somebody. It's not easy to see somebody go that contributed to your business. This is why I encourage people to exhaust all their efforts, make sure they've done everything they can to salvage that situation and that hire. If not, it's time to move on. You're going to have to do it. As the founder of your business, you have to take on that responsibility, that tough responsibility of always doing what's best for the business because no one else is going to do it but you. That's your calling. That's what you are there for, is to make those decisions, those tough decisions. On behalf of everybody on the team, thanks so much for listening and I'll check you in Monday's episode. I'll see you then. Take care.

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