7 ms·

IMO, it's not about this person. It's about the rest of the team and the message you want them to take away. Letting someone go right before they vest will like

IMO, it's not about this person. It's about the rest of the team and the message you want them to take away. Letting someone go right before they vest will likely create distrust on the rest of the team. Typically, vesting cliffs are designed to give some breathing room for new hires. If they turn out to be terrible, you can part ways with them without impacting your cap table. If this person had long term performance issues, it's kind of shitty to wait until just before they vest. I don't know what your company's situation is, but this likely doesn't have to be an "all vesting" or "no vesting" situation. By default, it sounds like you can terminate this employee and provide "no vesting". You can make it clear that you'll be offering them some/most/all of their anticipated vested stock despite you terminating their employment prior to the vesting cliff. This lets you terminate the relationship right now while saving face with the rest of the team.

spoonjim 4y ago
This is the best solution. Shows you’re “extra generous” instead of just letting someone walk with their equity. Shows “the company will take care of me.”
- FernandoMax 4y ago
  I also like it.
- harindirand 4y ago
  Agree with above points. It sounds like it should have been dealt with a long time ago. Being this close to vesting is the cost of inaction. The equity issue feels like a sunk cost at this point. Would initiate a conversation around performance to set expectations that performance needs to improve or their position is at risk. Be the hero of the story: treat the employee fairly and raise performance expectations. Hopefully, the equity is a small price to pay.
staticassertion 4y ago
> Letting someone go right before they vest will likely create distrust on the rest of the team. I kind of doubt it'll even occur to the rest of the team, but even if it did I can't imagine that they wouldn't feel it's justifiable given this employee has been such a consistent issue. IMO the time to fire someone is as soon as you've decided you're going to fire them. That said, offering nice severance perks is a nice thing to do.
- socialismisok 4y ago
  It will absolutely come up. And people will remember it. It will absolutely be perceived as "cheap ass founder didn't want to pay worker for their time."
  - 8note 4y ago
    And effectively they didn't, if that vest is a good portion of the pay
  - knorker 4y ago
    However paying them will be remembered too. It will be perceived as "why are you giving away profitability of the company (and thus my equity and/or end of year bonus) to someone you should have fired a long time ago?".
    - sokoloff 4y ago
      The answer to that is “they worked 50 out of the 52 weeks; it was a leadership mistake earlier to not hold everyone to the high bar we expect, but we still act ethically towards all of our stakeholders, even when doing so is inconvenient.”
      - knorker 4y ago
        Yeah, sounds best. I'd still run it past the lawyers to make sure it's fine to "badmouth" a former employee in your jurisdiction. It means taking ownership of the mistake, even if it does mean that you're effectively apologizing for devaluing the company to the other stockholders and other stakeholders. Still, there's a little bit of "oh, so when I leave I can expect management to talk shit about my performance", which wouldn't do wonders for my impostor syndrome.
    - deleted 4y ago
      [deleted]
- setr 4y ago
  The problem is the onlookers don’t know why you’ve fired someone; they’re free to assume whatever they want. And anyone remotely suspicious of your good will should be mighty suspicious that anything you’ve said was just justification to deny compensation — when is my vesting date again..?
fsociety 4y ago
This here. If someone, even a bad teammate or poor performer, was let go a month before vesting and got nothing I would strongly consider applying to a new place.
- VSerge 4y ago
  It depends how the decision is made. If: a) other employees did not think the fired person performed poorly b) the decision of firing without compensation just before the vesting period is made by the founder only then this will be a nightmare for the founder. If however the contrary is true, ie that most people think the performance of the person being fired was poor, and if the founder discusses compensation options with others who will also be vesting at some point, then it signals that the founder actually cares about and trusts their employees enough to associate them meaningfully to the decision process. It also shows not just a wish but an active effort to ensure fairness for all, both the person being fired, and the others staying on who would be that bit more diluted in the cap table if somebody who shouldn't have vested is allowed to. Good on you, dear founder, to be seeking advice and to be trying to do the right thing. You don't have to be alone thinking about that decision or making it, and you don't have to be alone living with it afterwards. Allowing your employees to be stakeholders in this is really key.
  - arcticbull 4y ago
    There’s both a logical and an emotional component to this. Logically the team would understand why the employee was terminated right before vest. Emotionally however it will gnaw at them, wondering if that could happen to them. In my opinion I’d make it clear that the termination and the equity decisions are separate, that it was a bad fit but that you are building a culture of doing right by people. That doesn’t mean eliminating vesting, it means that you approach these exceptions on a case by case basis. I’d say 6 months vest would be fair, given the performance management issues - and it strikes the right balance showing you won’t be pushed around and that low performers will not be treated the same way as high performers.
  - marcinzm 4y ago
    Making the rest of the employees complicit in getting someone fired a month before vesting is a pretty shitty thing to do. A manager should be able to take responsibility for their decisions and not foist them onto the team. It works, as the Romans would attest to, but it sets a pretty crappy culture imho.
knorker 4y ago
On the flip side i bet the team knows this person is terrible. And letting them vest means you're telling them slacking off is fine, and you'll give them a piece of the company that could have gone to the people who actually work. Sure, they'll be fired, so the others will see it's not acceptable. But still. It'll be resentment either way.
- Arn_Thor 4y ago
  IMO it does not send that message. The vesting is compensation for work done and time spent in the role. That is in the past. The "punishment" is losing the job, and that message is clear enough.
  - knorker 4y ago
    If I worked at a place where a coworker has clearly been underperforming, but getting stocks on their way out, then that would demotivate me. > The vesting is compensation for work done and time spent in the role. We don't know all the facts, and definitely not both sides, but it sounds like it could be overcompensating for work done. OP said this employee "has been an issue for quite a while". Especially since I have worked for startups that gave me the "we've set the bonus/salary bump/stock budget for this year, so who do you think should get less if you get more?". This guy! This guy should get less! (is what I'd want to say in this situation) Employers, especially startups, commonly present comp as a zero sum game. Even if this company doesn't, don't expect all employees to believe you if you say it's not the case here. Because they've been lied to before when it comes to money. And frankly company leadership has an eventual profitability requirement, and even if they say it's not zero sum, it's not totally independent either. Having spoken to corp lawyers a lot I also recognize this as a legal liability. It sets a precedent, and opens you up to discrimination suits for future firings.
    - Arn_Thor 4y ago
      If the company wants to encourage "above and beyond" performance, they should do that through a bonus. In all scenarios I'm familiar with, shares vesting are tied to duration at the firm, i.e. loyalty and "toughing it out". The employee forfeits the right to those shares either by leaving the firm early, or being bad enough at their job that they get fired. This is of course the latter, but the timing is the problem. Had they fired this employee five months ago, it would have appeared less like yanking the rug from under them. But as you show, perceptions differ
bjornsing 4y ago
> I don't know what your company's situation is, but this likely doesn't have to be an "all vesting" or "no vesting" situation. Anything else may be hard to communicate to the team though (depending on the country/culture you are operating in of course).
_vbnz 4y ago
To be honest, it's probably best to just wait it out a few months. One poor-performing employee isn't worth the risk of destroying the morale and trust of all the others.
- knorker 4y ago
  Every day a poor performer gets the same salary as you is morale-destroying. There's no perfect solution to this problem. 10 employees doing the work and wondering "why is this guy getting paid the same as me?" hurts the company too. Every action has downsides. Every day they're still there demotivates others, possibly making them look for "better" jobs, since clearly their own can be done by a slacker. But every firing, even of someone clearly underperforming, will cause a bit of fear in even the best performer.
  - ianai 4y ago
    The perfect solution is to let them vest then terminate. Agree that slackers ruin morale though. Currently going through this at my place. It’s especially difficult when merely being on the same team as slackers makes the external opinion of everyone on that team horrible. Some might know the better members but on average the reputation can be stained.
    - knorker 4y ago
      How do you mean that it is "the perfect solution" if the action has negative morale implications for every other employee? I'll go with your opinion being that it may be the best solution, but perfect it is not. The mere fact that I don't even think it's the best solution means that there may very well be employees here who also don't, which means it's not perfect. There will be employees who will hear "this fired person's stock was taken out of your end of year bonus". Because it kinda was. Especially at a small company where one employee-month plus their stock can be a significant portion of company yearly profits.
      - ianai 4y ago
duxup 4y ago
Depends on the dynamics of the team too. If the rest of the team also thinks “this guy sucks” and trusts the leadership there could be no impact to trust. We’re talking about a team of 10 here rather than 1000. It is possible there is a closer than usual relationship/ fair amount of trust compared to random HNers talking about a company they don’t know.
bborud 4y ago
I agree. You have to focus on the company, not those who are NOT going to be a part of it. It might seem like a dick move, but it is far less of a dick move than not making an effort. I'm sure that there will be negative consequences. And you will feel bad. Nothing I/we can say will change that. But I think you'll just have to accept that and do what's right for the company and the people who will continue on. (Of course, there will be two sides to any story, but you are asking what we would do in your stead, so I think it is okay to base this on your subjective point of view)
sshine 4y ago
> Letting someone go right before they vest will likely create distrust on the rest of the team. Conversely, letting them vest will send a message that this behavior is tolerated. And yes, firing + giving some percentage of what they would get from vesting corresponding to the time they made an effort sounds not unreasonable.
- Balero 4y ago
  > Conversely, letting them vest will send a message that this behavior is tolerated. These are colleagues not children. Using threats will not have a good effect. Also OP seems to have been tolerating their behavior, which sends the message that behavior will be tolerated. This is the right message to send as well. We (and possible OP) don't know what the employee was going through, giving them lots of slack and support shows to the other employees that they will be supported. As well as just being a good thing to do, it will improve employee retention, effort, buy in to the company etc.
  - sshine 4y ago
    > These are colleagues not children. Using threats will not have a good effect. It's not a threat to fire someone when you pay them money and they don't work as expected. It's setting a standard. > We (and possible OP) don't know what the employee was going through That's a very fair point. But is it unreasonable to request insight into why the person shifted? Accountability comes at a cost.
maerF0x0 4y ago
Lots of people giving you advice vest or not to send a message of generosity or "no slackers". I'd encourage you to take the high road, good leadership is more about showing everyone you take care of everyone you're responsible for, more than you're a tyrant who sends hard messages. Plus if this person is really all over the place, I wonder if they'll actually exercise anyways. (Unless they're RSUs in which case you're probably public, in which case your shares outstanding is likely way too large for the dilution to matter...)
Aqueous 4y ago
Is the opposite also maybe true? Allowing someone who has contributed so little to the team to have an equal share in the company may make people feel like their comparative effort isn’t recognized.

spoonjim 4y ago

This is the best solution. Shows you’re “extra generous” instead of just letting someone walk with their equity. Shows “the company will take care of me.”

FernandoMax 4y ago
I also like it.
harindirand 4y ago
Agree with above points. It sounds like it should have been dealt with a long time ago. Being this close to vesting is the cost of inaction. The equity issue feels like a sunk cost at this point. Would initiate a conversation around performance to set expectations that performance needs to improve or their position is at risk. Be the hero of the story: treat the employee fairly and raise performance expectations. Hopefully, the equity is a small price to pay.

staticassertion 4y ago

> Letting someone go right before they vest will likely create distrust on the rest of the team. I kind of doubt it'll even occur to the rest of the team, but even if it did I can't imagine that they wouldn't feel it's justifiable given this employee has been such a consistent issue. IMO the time to fire someone is as soon as you've decided you're going to fire them. That said, offering nice severance perks is a nice thing to do.

socialismisok 4y ago
It will absolutely come up. And people will remember it. It will absolutely be perceived as "cheap ass founder didn't want to pay worker for their time."
- 8note 4y ago
  And effectively they didn't, if that vest is a good portion of the pay
- knorker 4y ago
  However paying them will be remembered too. It will be perceived as "why are you giving away profitability of the company (and thus my equity and/or end of year bonus) to someone you should have fired a long time ago?".
  - sokoloff 4y ago
    The answer to that is “they worked 50 out of the 52 weeks; it was a leadership mistake earlier to not hold everyone to the high bar we expect, but we still act ethically towards all of our stakeholders, even when doing so is inconvenient.”
    - knorker 4y ago
      Yeah, sounds best. I'd still run it past the lawyers to make sure it's fine to "badmouth" a former employee in your jurisdiction. It means taking ownership of the mistake, even if it does mean that you're effectively apologizing for devaluing the company to the other stockholders and other stakeholders. Still, there's a little bit of "oh, so when I leave I can expect management to talk shit about my performance", which wouldn't do wonders for my impostor syndrome.
  - deleted 4y ago
    [deleted]
setr 4y ago
The problem is the onlookers don’t know why you’ve fired someone; they’re free to assume whatever they want. And anyone remotely suspicious of your good will should be mighty suspicious that anything you’ve said was just justification to deny compensation — when is my vesting date again..?

fsociety 4y ago

This here. If someone, even a bad teammate or poor performer, was let go a month before vesting and got nothing I would strongly consider applying to a new place.

VSerge 4y ago
It depends how the decision is made. If: a) other employees did not think the fired person performed poorly b) the decision of firing without compensation just before the vesting period is made by the founder only then this will be a nightmare for the founder. If however the contrary is true, ie that most people think the performance of the person being fired was poor, and if the founder discusses compensation options with others who will also be vesting at some point, then it signals that the founder actually cares about and trusts their employees enough to associate them meaningfully to the decision process. It also shows not just a wish but an active effort to ensure fairness for all, both the person being fired, and the others staying on who would be that bit more diluted in the cap table if somebody who shouldn't have vested is allowed to. Good on you, dear founder, to be seeking advice and to be trying to do the right thing. You don't have to be alone thinking about that decision or making it, and you don't have to be alone living with it afterwards. Allowing your employees to be stakeholders in this is really key.
- arcticbull 4y ago
  There’s both a logical and an emotional component to this. Logically the team would understand why the employee was terminated right before vest. Emotionally however it will gnaw at them, wondering if that could happen to them. In my opinion I’d make it clear that the termination and the equity decisions are separate, that it was a bad fit but that you are building a culture of doing right by people. That doesn’t mean eliminating vesting, it means that you approach these exceptions on a case by case basis. I’d say 6 months vest would be fair, given the performance management issues - and it strikes the right balance showing you won’t be pushed around and that low performers will not be treated the same way as high performers.
- marcinzm 4y ago
  Making the rest of the employees complicit in getting someone fired a month before vesting is a pretty shitty thing to do. A manager should be able to take responsibility for their decisions and not foist them onto the team. It works, as the Romans would attest to, but it sets a pretty crappy culture imho.

knorker 4y ago

On the flip side i bet the team knows this person is terrible. And letting them vest means you're telling them slacking off is fine, and you'll give them a piece of the company that could have gone to the people who actually work. Sure, they'll be fired, so the others will see it's not acceptable. But still. It'll be resentment either way.

Arn_Thor 4y ago
IMO it does not send that message. The vesting is compensation for work done and time spent in the role. That is in the past. The "punishment" is losing the job, and that message is clear enough.
- knorker 4y ago
  If I worked at a place where a coworker has clearly been underperforming, but getting stocks on their way out, then that would demotivate me. > The vesting is compensation for work done and time spent in the role. We don't know all the facts, and definitely not both sides, but it sounds like it could be overcompensating for work done. OP said this employee "has been an issue for quite a while". Especially since I have worked for startups that gave me the "we've set the bonus/salary bump/stock budget for this year, so who do you think should get less if you get more?". This guy! This guy should get less! (is what I'd want to say in this situation) Employers, especially startups, commonly present comp as a zero sum game. Even if this company doesn't, don't expect all employees to believe you if you say it's not the case here. Because they've been lied to before when it comes to money. And frankly company leadership has an eventual profitability requirement, and even if they say it's not zero sum, it's not totally independent either. Having spoken to corp lawyers a lot I also recognize this as a legal liability. It sets a precedent, and opens you up to discrimination suits for future firings.
  - Arn_Thor 4y ago
    If the company wants to encourage "above and beyond" performance, they should do that through a bonus. In all scenarios I'm familiar with, shares vesting are tied to duration at the firm, i.e. loyalty and "toughing it out". The employee forfeits the right to those shares either by leaving the firm early, or being bad enough at their job that they get fired. This is of course the latter, but the timing is the problem. Had they fired this employee five months ago, it would have appeared less like yanking the rug from under them. But as you show, perceptions differ

bjornsing 4y ago

> I don't know what your company's situation is, but this likely doesn't have to be an "all vesting" or "no vesting" situation. Anything else may be hard to communicate to the team though (depending on the country/culture you are operating in of course).

_vbnz 4y ago

To be honest, it's probably best to just wait it out a few months. One poor-performing employee isn't worth the risk of destroying the morale and trust of all the others.

knorker 4y ago
Every day a poor performer gets the same salary as you is morale-destroying. There's no perfect solution to this problem. 10 employees doing the work and wondering "why is this guy getting paid the same as me?" hurts the company too. Every action has downsides. Every day they're still there demotivates others, possibly making them look for "better" jobs, since clearly their own can be done by a slacker. But every firing, even of someone clearly underperforming, will cause a bit of fear in even the best performer.
- ianai 4y ago
  The perfect solution is to let them vest then terminate. Agree that slackers ruin morale though. Currently going through this at my place. It’s especially difficult when merely being on the same team as slackers makes the external opinion of everyone on that team horrible. Some might know the better members but on average the reputation can be stained.
  - knorker 4y ago
    How do you mean that it is "the perfect solution" if the action has negative morale implications for every other employee? I'll go with your opinion being that it may be the best solution, but perfect it is not. The mere fact that I don't even think it's the best solution means that there may very well be employees here who also don't, which means it's not perfect. There will be employees who will hear "this fired person's stock was taken out of your end of year bonus". Because it kinda was. Especially at a small company where one employee-month plus their stock can be a significant portion of company yearly profits.
    - ianai 4y ago

duxup 4y ago

Depends on the dynamics of the team too. If the rest of the team also thinks “this guy sucks” and trusts the leadership there could be no impact to trust. We’re talking about a team of 10 here rather than 1000. It is possible there is a closer than usual relationship/ fair amount of trust compared to random HNers talking about a company they don’t know.

bborud 4y ago

I agree. You have to focus on the company, not those who are NOT going to be a part of it. It might seem like a dick move, but it is far less of a dick move than not making an effort. I'm sure that there will be negative consequences. And you will feel bad. Nothing I/we can say will change that. But I think you'll just have to accept that and do what's right for the company and the people who will continue on. (Of course, there will be two sides to any story, but you are asking what we would do in your stead, so I think it is okay to base this on your subjective point of view)

sshine 4y ago

> Letting someone go right before they vest will likely create distrust on the rest of the team. Conversely, letting them vest will send a message that this behavior is tolerated. And yes, firing + giving some percentage of what they would get from vesting corresponding to the time they made an effort sounds not unreasonable.

Balero 4y ago
> Conversely, letting them vest will send a message that this behavior is tolerated. These are colleagues not children. Using threats will not have a good effect. Also OP seems to have been tolerating their behavior, which sends the message that behavior will be tolerated. This is the right message to send as well. We (and possible OP) don't know what the employee was going through, giving them lots of slack and support shows to the other employees that they will be supported. As well as just being a good thing to do, it will improve employee retention, effort, buy in to the company etc.
- sshine 4y ago
  > These are colleagues not children. Using threats will not have a good effect. It's not a threat to fire someone when you pay them money and they don't work as expected. It's setting a standard. > We (and possible OP) don't know what the employee was going through That's a very fair point. But is it unreasonable to request insight into why the person shifted? Accountability comes at a cost.

maerF0x0 4y ago

Lots of people giving you advice vest or not to send a message of generosity or "no slackers". I'd encourage you to take the high road, good leadership is more about showing everyone you take care of everyone you're responsible for, more than you're a tyrant who sends hard messages. Plus if this person is really all over the place, I wonder if they'll actually exercise anyways. (Unless they're RSUs in which case you're probably public, in which case your shares outstanding is likely way too large for the dilution to matter...)

Aqueous 4y ago

Is the opposite also maybe true? Allowing someone who has contributed so little to the team to have an equal share in the company may make people feel like their comparative effort isn’t recognized.