Let’s face it.  No one ever wants to terminate an employee, whether it’s a reduction in force, termination for cause or the employee’s skills have not kept pace with the needs of the organization.  In fact, in my experience, most managers put off the termination process till their back is against a wall and they have no choice.  

What leaders often do is talk themselves into believing that not terminating someone is the right thing to do.  The person’s been with you for years and is only a few years from retirement so it’s okay to let them hang out till then.  Even if they are underperforming don’t we owe them loyalty for their years of service?

We easily talk ourselves into thinking a certain way, especially when we don’t want to deal with a situation anyhow. 

Yet, there is a cost to you, whether you realize it or not, of keeping an employee that needs to go.

Here’s a list of things to think about.

Lost opportunity cost.  There is someone on the team that is performing subpar, but you aren’t paying them below market so you figure it all washes out.  Not true.  If you paid the market rate, what could you get in terms of performance, and what could you expect?  Increased productivity alone could exceed the additional compensation you had to pay.

More than simply increased productivity.  When someone is allowed to continually perform at a lower level, over time their level of performance drops even more.  Complacency sets in.  There have been no consequences to their performance so it becomes easier to do even less.

Sets an expectation for others.  Everyone knows when you have someone on the team who isn’t holding up their end. They assume you know also and ask themselves, why is it acceptable for them, and not for you?  It becomes a slippery slope of others stepping back and not giving it their all anymore.

Time spent gossiping rather than working.  Others will always gossip about the underperforming team member that seems to have been giving a pass.  So instead of focusing on their work, they take time to complain and gossip about the situation to other colleagues.  Now instead of just your underperformer, you’re losing time with two, three or more employees congregating to discuss the situation. And it won’t just be once or twice.  It will happen repeatedly.

The message you unwittingly give to other staff.  Whether you are letting someone run out their time till retirement, keeping an employee who the company has outgrown but you feel loyal to them or any other reason (other than a RIF), the message you give everyone else is poor performance is tolerated and even accepted.  They don’t know the circumstances (nor should they), but they do know that you are allowing someone to stay on board that should likely go.

Morale issues.  All of the above turn into a morale issue, even if you don’t realize it. Morale issues can lead to lower productivity, turnover, increased stress, and health issues. 

Potential talent missed.  Top talent does not come around just because you are ready.  You may miss interviewing and hiring someone that is a rock star or brings a variety of skills to your organization.  But because you are letting the situation unfold in its own time frame you don’t consider interviewing others.

I know many leaders believe they are doing right by the person they don’t terminate but I promise you most often this is not the case.  The cost of keeping someone that needs to go has rippling effects across the organization.  Before you choose to not terminate someone out of loyalty, or some other reason you justify to yourself, ask yourself how others will feel and react.  Will you lose top performers out of frustration?  Will work get delayed or not done at all and someone else has to pick up the slack? Is the risk of keeping them worth the potential costs?  

Having the right people on the team can make or break your company.  Find out what this means by downloading Functioning Together:  Having the Right People on the Team.