You're Fired: Managing Gray-Area Decisions

An unfortunate part of a manager’s job is having to let underperforming employees go. Knowing when and how to take that step with the best interests of all parties in mind—the company, the employee, and your own—is a difficult task. Professor Joe Badaracco discusses the best ways to make hard decisions and deliver bad news, pulling from his case “Two Tough Calls” and his new book, Managing in the Gray.

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Transcript edited for length and clarity.

Brian Kenny: You're fired. These are two words no one ever wants to hear. With the exception of reality TV, it's not usually how the message is delivered nowadays. Today, in an effort to be fair, most organizations have a process that involves personal improvement plans, mentoring and monitoring, even counseling before taking such a drastic step of severing employment. Yet still, the decision to fire an employee is rarely clear cut, and for the person being "transitioned," the rationale used by their manager for that decision is most assuredly questionable. What exactly does or should go on in the mind of a manager deciding the fate of an employee? Today we'll hear from Professor Joe Badaracco about his case entitled Two Tough Calls. I'm your host Brian Kenny, and you're listening to Cold Call.

Joe Badaracco is the John Shad professor of Business Ethics at Harvard Business School. His research focuses on what counts as sound reflection for busy men and women who have serious responsibilities and face hard, practical problems. He's the author of many cases, articles and books on the topic including the recently published Managing in the Gray. Joe, thanks for joining me.

Joe Badaracco: Glad to be here Brian.

Kenny: I think anybody who has managed a team can relate to the challenge that you're going to talk about in this case. Maybe you could start by setting the case up.

Badaracco: The case is an unusual case. It's written in the first person, so you've got to give the protagonist a name. Let's call her Susan, but you're really hearing Susan's voice and you're hearing Susan tell her story. She was a computer science graduate and this is her first, full-time job. She had a couple of internships at Microsoft. She was a very talented programmer. She also had a lot of management potential, so she was spotted early as somebody who could move up pretty quickly at this online retailer. She got two promotions pretty fast. She found herself managing a team of 14 people, some of them were about her age, they were techies like her, some of them were older than her and some of them were not performing anywhere near the standard she expected. It came time for her to give reviews. She wanted to give reviews to several people that would have basically triggered lots of problems. I'll talk in particular about a guy named Terry. He had been brought into the company because he was a scuba diving pal of some of the executives.

Kenny: We've all encountered a Terry.

Badaracco: From Susan's point of view, he was basically contributing nothing to the team. She had worked with him, she had tried to find some things for him to do but her view was his contribution was basically zero. Under the performance evaluation system it was 1 to 5, and he'd been getting 3.5 for a number of years, and that was fine. She thought he deserved a 2.5. In this company, 2.5 meant that you were basically on a greased chute out of the company. It was accompanied by what's called a PIP, a performance improvement plan, which a lot of companies have. This was really a trip wire. Once you were on a PIP, as soon as you came in late or something like that, you got a box and you were out. She wanted to give him what he deserved, the 2.5. She floated this idea among the people she worked for and they said, "You know, you're kind of young in the job, you've been doing well so far, why make waves? Are you sure you’ve got enough experience to judge him? Doesn't he deserve another chance given that he's had 3s and 3.5s?"

Kenny: He's a good scuba diver.

Badaracco: Apparently an excellent scuba diver, yes.

Kenny: Let me stop you here because I want to pull the reins in a bit. I guess one of the things that I'm curious about is why you decided to write this case, and why you chose to write it in the way you did?

Badaracco: After the incidents described in the case, the young woman came here to HBS to get an MBA, so I had her as a student. I don't recall how we got to talking about this case possibility but it seemed really promising. As you pointed out, so many of our MBA students have already been in positions where they've had to let somebody go. Many of them in the last few years have had family members that have been fired or laid off, and some of them will actually admit in class that they personally have been laid off. It's a very real subject, and this was somebody who's a contemporary of our MBA students facing one of these tough calls.

Kenny: Tell me a little bit more about Susan. Is she a millennial? Does that factor into this?

Badaracco: I think she was kind of a millennial but she was basically herself. She prided herself on being very direct, to the point of being blunt. She thought that in organizations people were rarely treated honestly, that there are lots of games played, that people told you you were doing well when you weren't doing so well, and so forth. She said she was going to be blunt, she wanted people to be blunt with her. She was also, as I mentioned, younger than some of the people she was managing and some of the people she was considering letting go. As you read her first person narrative in the case, some students like her, they see her as a practitioner of what's called extreme transparency. Others say this is a kind of arrogant, aggressive individual who's a little bit too full of herself. What's interesting in class is some students, often women, will say, "You wouldn't say the same thing about a male protagonist in this situation." That's another issue that comes up in the case.

Kenny: You talked about her technical proficiency, which has given her some affinity with the technical team, which is pretty important. It allows her maybe to get things done a little faster because she understands what she's asking people to do. She's a double “A,” hardworking-type person and she makes her hiring decisions pretty specifically based on her own personality type.

Badaracco: Exactly. She wants people who, she said, come out of college hungry. They love to have goals, they're willing to work 80 hours a week, and she is, too. She says to them, "Look, all you need to do to be successful here is to tell me what I need to do to help you be successful and complete the mission that our team has." It's a complicated picture. In many ways there are things that are admirable about her, but there are other things that put people off.

Kenny: What are some of the things as a manager that Susan needs to think about? I mean she obviously doesn't seem like she's in a place where she can just sever that relationship and have Terry move along. There's a process that she has to go through both intellectually as well as managerially.

Badaracco: Yes. Let me mention first of all what's the central idea in my book that's just come out, and it can be summarized essentially in a single sentence. It says: when you face one of these difficult decisions, a gray-area decision, first of all you want to work through it as a manager. That means you get the best information you can, you look at things in a couple of different ways. If there's expert judgment (in this case HR) they can be brought to bear, talk to the senior people, which she did. You get the best information and judgment you can. That's what it means to work through it as a manager. In the end, it's a judgment call, and you've got to approach it as a human being. You're going to make that call, you're going to live with the consequences.

It's in that context that some of the questions in the book are really quite relevant. These questions aren't mine, they're not Harvard Business School’s. They come from a multiyear effort to try to look at how great thinkers over the millennia have advised us to look at really hard problems. You look hard at the consequences, full consequences as objectively as you can. You think about what you believe your core human duties are. What does she owe Terry? What does she owe the people in her team? You think about the values of your organization, you think clearly about what you can live with, because you will live with it and you're also going to be held accountable in your organization.

A lot of people think if you've got one of these difficult decisions you should just trust your judgment, trust your gut, look at your moral compass. What I emphasize in the book is the first thing you've got to do is the best analysis you can as a manager. If you can use big data, analytics, whatever it is, wring everything you can out of what you can learn, then you make a judgment as a human being. Again, that's not gut feel, that's after you think through consequences, your duties, what will work. Only at the very end do you finally trust your judgment after it's been tempered and shaped and guided by the preliminary steps.

Kenny: You mentioned before the obligation that Susan, as a manager, has to Terry. Does Terry have an obligation back to Susan to do the job well?

Badaracco: He certainly had an obligation to the company and the team to pull his oar, and he wasn't doing it.

Kenny: A part of my question was, and what's at the core of it too, is that I mentioned in the introduction how most organizations have an extreme set of processes that one needs to go through. Have companies gone too far in trying to make sure that they're giving every opportunity for the employee to perform?

Badaracco: That's a tough one; I don't have any basis for generalizing on that. At the end of the day, even when there are elaborate systems and lots of steps and checklists, a lot comes down to the judgment of managers. When do you start putting notes in a file about someone's performance? Certainly you need to inform them if they're on thin ice or if they're about to go on probation. What do you tell them? How candidly do you inform them? How helpful are you? A lot of these things come down to one-on-one judgment calls, sort of the character and experience of the person who's making the decision.

Kenny: In the book you talk about this concept of moral imagination. Can you describe what that is and how it factors in to these kinds of decisions?

Badaracco: It has a lot to do with how you actually deliver the bad news and how you follow up after that. You've really got to put yourself as best you can in their shoes as if you were the person being fired, or let's say it was one of your kids, or your parent, sibling, how would you want to be treated? That's a way of bringing to the foreground a lot of these basic human considerations that can be lost if you're simply angry at the person for not performing or you're just going through the company's checklist on how to process people out.

Kenny: I don't want you to give away too much, but what kind of reactions (in the classroom) do you get?

Badaracco: First, students really do engage in this. I'm talking here about MBA students. They either have been or expect soon to be in situations like this. Secondly they have, as I mentioned earlier, a variety of responses to Susan, so that pulls them further into the case. Some of them make very sound comments, and I think one we’re thinking about is this. It says, "Look, you're managing a team. You’ve got a company, whatever. Should you really expect that everybody on that team is going to be an A player? Or after coaching from you is going to be an A player?" The point they make is that good managers learn to work with—they want A's, they have some B's, they live with some C's, and that's what managing in the real world is like. There's a really good set of discussions about not just what she should do, but whether she should do anything.

Kenny: You can find “Two Tough Calls,” along with thousands of other cases, in the HBS case collection at hbr.org. You can also find professor's Joe Badaracco new book Managing in the Gray on amazon.com, it's also available on hbr.org. I'm Brian Kenny, and you've been listening to Cold Call, the official podcast of Harvard Business School.

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Transcript edited for length and clarity.

Brian Kenny: You're fired. These are two words no one ever wants to hear. With the exception of reality TV, it's not usually how the message is delivered nowadays. Today, in an effort to be fair, most organizations have a process that involves personal improvement plans, mentoring and monitoring, even counseling before taking such a drastic step of severing employment. Yet still, the decision to fire an employee is rarely clear cut, and for the person being "transitioned," the rationale used by their manager for that decision is most assuredly questionable. What exactly does or should go on in the mind of a manager deciding the fate of an employee? Today we'll hear from Professor Joe Badaracco about his case entitled Two Tough Calls. I'm your host Brian Kenny, and you're listening to Cold Call.

Joe Badaracco is the John Shad professor of Business Ethics at Harvard Business School. His research focuses on what counts as sound reflection for busy men and women who have serious responsibilities and face hard, practical problems. He's the author of many cases, articles and books on the topic including the recently published Managing in the Gray. Joe, thanks for joining me.

Joe Badaracco: Glad to be here Brian.

Kenny: I think anybody who has managed a team can relate to the challenge that you're going to talk about in this case. Maybe you could start by setting the case up.

Badaracco: The case is an unusual case. It's written in the first person, so you've got to give the protagonist a name. Let's call her Susan, but you're really hearing Susan's voice and you're hearing Susan tell her story. She was a computer science graduate and this is her first, full-time job. She had a couple of internships at Microsoft. She was a very talented programmer. She also had a lot of management potential, so she was spotted early as somebody who could move up pretty quickly at this online retailer. She got two promotions pretty fast. She found herself managing a team of 14 people, some of them were about her age, they were techies like her, some of them were older than her and some of them were not performing anywhere near the standard she expected. It came time for her to give reviews. She wanted to give reviews to several people that would have basically triggered lots of problems. I'll talk in particular about a guy named Terry. He had been brought into the company because he was a scuba diving pal of some of the executives.

Kenny: We've all encountered a Terry.

Badaracco: From Susan's point of view, he was basically contributing nothing to the team. She had worked with him, she had tried to find some things for him to do but her view was his contribution was basically zero. Under the performance evaluation system it was 1 to 5, and he'd been getting 3.5 for a number of years, and that was fine. She thought he deserved a 2.5. In this company, 2.5 meant that you were basically on a greased chute out of the company. It was accompanied by what's called a PIP, a performance improvement plan, which a lot of companies have. This was really a trip wire. Once you were on a PIP, as soon as you came in late or something like that, you got a box and you were out. She wanted to give him what he deserved, the 2.5. She floated this idea among the people she worked for and they said, "You know, you're kind of young in the job, you've been doing well so far, why make waves? Are you sure you’ve got enough experience to judge him? Doesn't he deserve another chance given that he's had 3s and 3.5s?"

Kenny: He's a good scuba diver.

Badaracco: Apparently an excellent scuba diver, yes.

Kenny: Let me stop you here because I want to pull the reins in a bit. I guess one of the things that I'm curious about is why you decided to write this case, and why you chose to write it in the way you did?

Badaracco: After the incidents described in the case, the young woman came here to HBS to get an MBA, so I had her as a student. I don't recall how we got to talking about this case possibility but it seemed really promising. As you pointed out, so many of our MBA students have already been in positions where they've had to let somebody go. Many of them in the last few years have had family members that have been fired or laid off, and some of them will actually admit in class that they personally have been laid off. It's a very real subject, and this was somebody who's a contemporary of our MBA students facing one of these tough calls.

Kenny: Tell me a little bit more about Susan. Is she a millennial? Does that factor into this?

Badaracco: I think she was kind of a millennial but she was basically herself. She prided herself on being very direct, to the point of being blunt. She thought that in organizations people were rarely treated honestly, that there are lots of games played, that people told you you were doing well when you weren't doing so well, and so forth. She said she was going to be blunt, she wanted people to be blunt with her. She was also, as I mentioned, younger than some of the people she was managing and some of the people she was considering letting go. As you read her first person narrative in the case, some students like her, they see her as a practitioner of what's called extreme transparency. Others say this is a kind of arrogant, aggressive individual who's a little bit too full of herself. What's interesting in class is some students, often women, will say, "You wouldn't say the same thing about a male protagonist in this situation." That's another issue that comes up in the case.

Kenny: You talked about her technical proficiency, which has given her some affinity with the technical team, which is pretty important. It allows her maybe to get things done a little faster because she understands what she's asking people to do. She's a double “A,” hardworking-type person and she makes her hiring decisions pretty specifically based on her own personality type.

Badaracco: Exactly. She wants people who, she said, come out of college hungry. They love to have goals, they're willing to work 80 hours a week, and she is, too. She says to them, "Look, all you need to do to be successful here is to tell me what I need to do to help you be successful and complete the mission that our team has." It's a complicated picture. In many ways there are things that are admirable about her, but there are other things that put people off.

Kenny: What are some of the things as a manager that Susan needs to think about? I mean she obviously doesn't seem like she's in a place where she can just sever that relationship and have Terry move along. There's a process that she has to go through both intellectually as well as managerially.

Badaracco: Yes. Let me mention first of all what's the central idea in my book that's just come out, and it can be summarized essentially in a single sentence. It says: when you face one of these difficult decisions, a gray-area decision, first of all you want to work through it as a manager. That means you get the best information you can, you look at things in a couple of different ways. If there's expert judgment (in this case HR) they can be brought to bear, talk to the senior people, which she did. You get the best information and judgment you can. That's what it means to work through it as a manager. In the end, it's a judgment call, and you've got to approach it as a human being. You're going to make that call, you're going to live with the consequences.

It's in that context that some of the questions in the book are really quite relevant. These questions aren't mine, they're not Harvard Business School’s. They come from a multiyear effort to try to look at how great thinkers over the millennia have advised us to look at really hard problems. You look hard at the consequences, full consequences as objectively as you can. You think about what you believe your core human duties are. What does she owe Terry? What does she owe the people in her team? You think about the values of your organization, you think clearly about what you can live with, because you will live with it and you're also going to be held accountable in your organization.

A lot of people think if you've got one of these difficult decisions you should just trust your judgment, trust your gut, look at your moral compass. What I emphasize in the book is the first thing you've got to do is the best analysis you can as a manager. If you can use big data, analytics, whatever it is, wring everything you can out of what you can learn, then you make a judgment as a human being. Again, that's not gut feel, that's after you think through consequences, your duties, what will work. Only at the very end do you finally trust your judgment after it's been tempered and shaped and guided by the preliminary steps.

Kenny: You mentioned before the obligation that Susan, as a manager, has to Terry. Does Terry have an obligation back to Susan to do the job well?

Badaracco: He certainly had an obligation to the company and the team to pull his oar, and he wasn't doing it.

Kenny: A part of my question was, and what's at the core of it too, is that I mentioned in the introduction how most organizations have an extreme set of processes that one needs to go through. Have companies gone too far in trying to make sure that they're giving every opportunity for the employee to perform?

Badaracco: That's a tough one; I don't have any basis for generalizing on that. At the end of the day, even when there are elaborate systems and lots of steps and checklists, a lot comes down to the judgment of managers. When do you start putting notes in a file about someone's performance? Certainly you need to inform them if they're on thin ice or if they're about to go on probation. What do you tell them? How candidly do you inform them? How helpful are you? A lot of these things come down to one-on-one judgment calls, sort of the character and experience of the person who's making the decision.

Kenny: In the book you talk about this concept of moral imagination. Can you describe what that is and how it factors in to these kinds of decisions?

Badaracco: It has a lot to do with how you actually deliver the bad news and how you follow up after that. You've really got to put yourself as best you can in their shoes as if you were the person being fired, or let's say it was one of your kids, or your parent, sibling, how would you want to be treated? That's a way of bringing to the foreground a lot of these basic human considerations that can be lost if you're simply angry at the person for not performing or you're just going through the company's checklist on how to process people out.

Kenny: I don't want you to give away too much, but what kind of reactions (in the classroom) do you get?

Badaracco: First, students really do engage in this. I'm talking here about MBA students. They either have been or expect soon to be in situations like this. Secondly they have, as I mentioned earlier, a variety of responses to Susan, so that pulls them further into the case. Some of them make very sound comments, and I think one we’re thinking about is this. It says, "Look, you're managing a team. You’ve got a company, whatever. Should you really expect that everybody on that team is going to be an A player? Or after coaching from you is going to be an A player?" The point they make is that good managers learn to work with—they want A's, they have some B's, they live with some C's, and that's what managing in the real world is like. There's a really good set of discussions about not just what she should do, but whether she should do anything.

Kenny: You can find “Two Tough Calls,” along with thousands of other cases, in the HBS case collection at hbr.org. You can also find professor's Joe Badaracco new book Managing in the Gray on amazon.com, it's also available on hbr.org. I'm Brian Kenny, and you've been listening to Cold Call, the official podcast of Harvard Business School.

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