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Letting Someone Go in a Start-up

Good teams increase the probability of a start-up success. The start-up team includes its co-founders, employees, investors and board members. The entrepreneur needs to make tough firing decisions from time to time. It’s like breaking a marriage that can be expensive and hurtful for both parties; the CEO’s job is to minimize the damage and protect the best interests of the company.

Why and How to let someone go?

General points on why you may need to fire someone and how to do it.

– The team member cheats or lies and hence cannot gain your trust. In such cases, better not give a second chance

– The team member does not perform close to the level as expected of him. It may be due to the lack of ability to get stuff done, or due to slowness in delivery, or lack of smartness, or lack of hard work, or any other reasons. Carrying on with too many non-performing people too long in a start-up will lead to failures.

– The team members do not fit in the organization and cause personal clashes within the groups or with individuals. Maintaining a happy team is very crucial to the success of a start-up.

– You do not feel comfortable giving them work as they will not get it done, or do it wrongly, or take forever to do it, or make excuses, etc. Such people should definitely be let go sooner rather than later.

Rule of thumb is that “If there is a doubt about a person, there is no doubt you should let them go”. Do not get emotional about this and never delay the firing process unnecessarily. The process to let people go can be challenging: You certainly cannot please everyone and people are defensive about them.

– Do ensure you review everyone’s performance as frequently as possible. That way you will be able to give them regular feedback and also hear their feedback about you or the company. And you do not need to wait for this periodic feedback session before giving them any major constructive advice if there is a major gap in their performance and your expectation. This ensures you have warned them of this gap before.

– Be polite and honest with them while giving them feedback and letting them go. Be considerate and do help them in any way you can and offer them sufficient notice period.

– If they respond aggressively, do not take it personally and try to deal with the situation diplomatically. – Request them to leave promptly and act professionally afterwards.

– Communicate yourself to rest of the team after the firing and try to make them aware of the situation (tough market conditions, or poor performance from the employee) and also try to boost their morale.

Some additional points for some senior team members where you need to manage the exit process carefully to minimize the disruption and potential losses to the start-up:

1. Management / Co-Founder

It can be tough for you to let someone in management or co-founders go. They would possibly have had a high opportunity cost and good relations with you to be in that position. It’s best not to delay it but ensure you give sufficient warning(s) to them. You may also need to carefully manage their equity / compensation in the company as well as any external relationships they may have.

2. Board member

You will need majority of shareholders and / or board members to let another board member go.

3. CEO

The Board (or maybe the Management) may decide to let the CEO go or step down if he is not performing and getting results as expected. The decision has to be approved by the Board and very carefully managed to minimize the impact on the company’s operations and its team’s morale.

Hiring is tough, Firing is tougher, but you will need to do both as an Entrepreneur.
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