When It's Time to Replace a Legacy Employee

One of the most difficult decisions a business owner has to make at some point is when to terminate a “legacy” employee.  Many of the firms we have encountered have employees that have been with the firm since its infancy and have helped the firm get to where it is today.  For many reasons, some employees can go from being a productive member of the team to barely able to keep up or disengaged.  This can happen quickly, but it is much more common for the transition to happen over a number of months or years.  It frequently happens when the firm goes from being a one or two person office to a much bigger entity.  When this happens, the owner of the firm is faced with the difficult decision of what to do with an employee who is no longer stacking up. 

The first thing that should be done is to have an honest conversation with the employee and provide them with an improvement plan to get back on track.  Many times this will come as a surprise to the person and they will correct their behavior.  Sometimes, we are not so lucky.  When you are faced with an employee who does not meet the improvement metrics set for them, another option is to move them to another position that might be better suited to them.  This may include some short-term pain of retraining the employee, but it is better to have someone you know and trust on your team in a new role in which they can succeed rather than starting from scratch with a new person.  We have worked with several firms that have moved people around within the organization and have found a more natural and productive fit for all their employees.  However, a word of caution - do NOT give in to the temptation of creating a position for them.  This will lead to resentment by the other staff members and ultimately, you, as the business owner as well.  If there is an open position for which they are more qualified, then it makes sense.  If not, then don’t do it. 

If retraining does not result in a positive outcome, or is simply impossible in your firm, you must begin to objectively analyze whether the employee can continue to add value to your team.  After all, an underproductive employee is costing your firm more than just the employee’s salary – it is costing you increased productivity and leverage that your firm could be using to achieve bigger goals by hiring a new staff member.  Underproductive employees will hold a firm back from achieving its potential.   Additionally, in most cases, if the employee can no longer keep up or you are not happy with the productivity of that employee, they know it.  Trust us, they know it.  They are under a tremendous amount of stress from this.

Loyalty to employees that have been with your firm for years is admirable, but if you are unhappy with an employee’s performance over a long period of time, the employee is almost always unhappy in the position as well.  You are not doing them any favors by keeping them in a job where they are underperforming, and most likely unhappy.  In this situation, you are most likely holding the employee back from another opportunity that they will be more successful in. 

When letting any employee go, we recommend providing them with a termination letter, which describes any benefits they will have, and states resources that may be helpful.  We also recommend you provide them with a letter of recommendation and provide a severance – the rule of thumb is one week’s pay for every year of service.  This will soften the blow to you and the employee and ensure that they will find a new job without too much stress. 

When we work with firms that make the tough decision to move on a long-time employee and find a new person, most commonly, there is a sense of relief on the part of the Advisor and eventually on the part of the former staff person.  The awareness of their shortcomings creeps up on you over years and when you replace them with a new A Player, it is often an eye-opening experience when you now have someone in that position to help you get to the next level in your business.  If you are struggling with a legacy or any employee and you are considering replacing them, feel free to set up a call on our website (Click Here to Schedule a Call) to discuss how we might be able to help you transition the current employee and find your next great team member.

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