In my first business, I hired a young and ambitious guy as a project manager. Super enthusiastic, fun to be around.
In his first year he made two mistakes that cost the business 10k EUR each.
I didn’t fire him. Not because I think these were one-time lapses that wouldn’t happen again. No I was sure there was something wrong with his diligence and care.
But because he’d been there early and I wanted to be loyal, and I didn’t want to have the hard conversations.
Where loyalty comes from
Why are we even loyal to our early employees?
The level of commitment and ownership you get from your first employees, you’ll never get again with later staff members.
You go through the early stages of setting up the business, figuring things out together and late nights of hard work.
This leads to a feeling of debt. In a sense, you’re feeling you need to pay back that energy and time your early employee invested.
Because different from you, this employee will in likely not have the long term upside of equity.
Benefits of Loyalty
Loyalty also is a very beneficial trait in many areas of business. Also and especially for employees.
From the 70+ businesses I’ve worked with, many of them went through some form of hardship during their existence. Some had issues making payroll.
The ones that had been loyal to their team, received that loyalty in return.
The client I worked with when Covid started did everything in his power to keep the team around. There were pay cuts, but nobody lost their job.
Years later, when we worked together again, many of the team were still with him and had been so during difficult times.
Loyalty gives you some slack during difficult times. Your team will keep up with more inconvenience when you’ve been loyal to them.
How loyalty becomes a problem in business growth
But there are scenarios where loyalty becomes a problem.
And it’s not loyalty per se, but loyalty to the wrong individuals.
“Wrong” here means: Not right for the business’ stage of growth.
This is a common and serious problem. In a 2002 HBR article, John Hamm outlined how false loyalty to the founding team is one of four dominant reasons why entrepreneurs don’t scale.
In general, loyalty becomes a problem when the employee you’re loyal to doesn’t serve your business well anymore. This can have many reasons:
For one, the business might have evolved in terms of level of professionalism or skill required.
Secondly, it could be that the early employee you’re loyal to has been promoted into a leadership position they can’t fill.
Lastly, it could be that something changed in that person, be it motivation or commitment or just their life circumstances.
Regardless of what changed, there are a couple of negative outcomes:
- The position this person sits on (often a management position) is not executed well, so you lose performance in that function.
- Others in the team who perform well/are a good fit with where the company’s headed, observe the under performing colleague and get frustrated.
- The team member is actively harming your business, willingly or accidentally (as in my case).
In any case, this one person has the power to trap your business at the growth and performance stage it’s at. Unless you do something about it.
How to overcome loyalty to employees that don’t serve the business anymoe
I could give expansive explanations about performance improvement, coaching and other methods to improve performance.
But this is not the point here.
In the scenario I’m describing you already know that the employee is not a good fit anymore. And won’t be.
So there are two options, both start the same way:
Sit your employee down and have an honest and human conversation. It’s a matter of decency.
Show them your appreciation and gratitude for their contribution to your journey so far.
But also tell them that you want the business to move forward, and they might not be the best fit for that future. It’s typically a mutual feeling.
Now Option 1 is to find another role in the business. Wether that’s a realistic option really depends on your company. If there is a role that’s valuable and would be a good fit, offer it.
But also weigh the risk of your employee viewing this as a demotion. In most cases it will be.
In my experience, this option only works rarely. You likely won’t have a viable position that’s both attractive enough, and yet moves your employee out of a position where they’re the bottleneck for growth.
Option 2 is what you think it is: Part ways. In my experience, this is often for the better for both parties mid-term. There’s plenty of ways to do this well and with dignity.
I always have found it helpful to add time into the mix: and tell your team member “This isn’t working, but I want to give you 3/6 months to find something new that works for you.”
Regardless, it’s painful.
But in the end, it’s the painful decision you need to make when you want to grow your business further.
