Why Firing Doesn't Always Help

Replacing key staff members can take a serious toll on your business. Instead of switching employees like cogs, study and nurture their skills

by Keith McFarland

Some private equity investors and venture capitalists talk about replacing people in companies like replacing parts in a car. Sales dipping? Drop in a new vice-president of sales & marketing. Quality problems? Try a new head of manufacturing. When all else fails, replace the chief executive officer.

Clearly there are times when people need to be replaced. And the ability to identify problem employees early and act decisively is a mark of a great leader. But seasoned managers know that when it comes to building a management team, it's not just a matter of plug and play.

Several years back, Harvard Business School researchers discovered this fact inadvertently, while they were studying how knowledge-workers learn. They studied data from a hospital that was trying to help surgical teams learn a new non-invasive heart procedure. The procedure is performed by threading a tiny piece of surgical equipment through a blood vessel in the leg up to the heart. Since the procedure could be performed without opening the chest cavity, it was far less traumatic than traditional heart surgery.

Team Stability

But there was a drawback: Until a surgical team became adept at the procedure, it could take three times as long as traditional heart surgery—and that added time on the operating table often negated the advantages of the less invasive procedure for the patient. The hospital figured if it could get a surgical team to learn more quickly, the new procedure could save both lives and money.

When the researchers compared the surgical team that learned the fastest with the one that learned the slowest, the findings surprised them. The worst performing team was headed by a highly experienced surgeon, while the best performing team was headed by a relative neophyte—the opposite of what they expected.

In looking for what might explain the differences in performance they hit on a surprising fact: The head of the best performing surgical team made sure to pick people he thought would work well together, and he kept the same team together for 15 surgeries. The lead surgeon of the worst performing team allowed members to be assigned to his team at random, and had at least one different team member each time for the first seven surgeries. The difference in performance levels was striking: The best performing team on average completed surgery more than twice as fast as the worst performing team.

Cost of Replacement

Though this research was conducted on people working in an operating room, its implications for business are clear. With all of the recent focus on "getting the right people on the bus," we may lose sight of the fact that even the most experienced and qualified people may not perform at their best if their efforts aren't successfully integrated into the work of a team. Conversely, it's possible for less experienced people to outperform their more experienced peers when their efforts are magnified by an effective team process.

Of course, experienced leaders of businesses don't need a Harvard Business School case study to tell them this. Most know instinctively that the costs of replacing members of their team are far greater than what most investors would realize. When a key team member walks out the door, he takes with him years of accumulated knowledge about the business. More important, he takes an understanding of each member of the team, as well as how the team itself gets things done.

So what's the answer on whether or not to replace a key employee? It's certainly not to hold onto people if they're no longer up to the task. A leader's most vital means for sustaining effective team dynamics may be his ability to anticipate the kinds of skills, perspectives, and qualities his direct reports are likely to need to develop—and to encourage (even cajole, if necessary) their growth in those areas.

The cost of not doing whatever it takes to keep a team performing at its best may not be immediately clear on the income statement, but it will be significant over the long term.

Keith McFarland, a two-time technology CEO, is the founder of McFarland Strategy Partners in Sandy, Utah.