Formal Severance Policies Are For Suckers…

Kris Dunn Kris Dunn

I was (and am) a big fan of the Flip Camera.  Easy.  Good Enough.  Handy.  Cool.

Then I heard that Cisco (that bought Flip for $590 million) was shutting down the Flip.  I was outraged.  I protested. Beastie-Boys

Then I bought an iPhone 4 and used the video camera in that smartphone, and quickly said, "Ohhhhhh.  Now I get it…."  Apple gave me the Flip with voice and data.  Boom.

Flip is a great example of an innovative company that thought differently about a standard product line.  You know what else they thought differently about?  Severance.  Here's how Jonathan Kaplan, founder and chief executive of Pure Digital, the company that made the wildly successful Flip, talked about how he dealt with the ‘bad hire’ -

“If you hire someone bad, fire them immediately and give them a big severance package so they feel good about you. We gave our workers four to six months’ severance, even if they’d worked only four months. You might think that’s crazy. But it was our mistake to hire that person. And it’s not that much money, really.”

That's a formal severance policy – it doesn't matter if it's written or not – that's the company philosophy.  It sounds great.  But formal severance policies are for suckers, and here are my top 5 reasons why:

Formal policies/approaches to severance poison organizations by:

1.  Cheapening the importance of hiring right the first time (let's just do the hire, Chuck, if it doesn't work out, we'll just go to HR and have them write the check).

2.  Letting managers who suck at onboarding, development and coaching out of jail (Susie, Billy's not making it, so I'm just going to let him go on Friday, can you draw up the severance docs?  Man, I love dealing with my HR department – you guys are great).  

3.  Pissing off the survivors (Did you see Billy just got let go?  Must be nice to not do any work for 6 months, THEN get a 6 month vacation).

4.  Removing one of the few points of leverage your HR team has to pressure managers to make better hiring decisions and develop/coach their employees (Stan, I'd love to tell Mark that he has to try and coach Billy up, but he's already got approval from his SVP to cut the severance check. I'm out).

5.  Creating a culture that rewards non-confrontation and backstabbing (Have you ever been honest with Billy, Mark?  Of course you haven't – you know you can just write the check to make it all go away.  Nice).

Without question, organizations need severance as a tool.   BUT – the leverage that must exist in any organization is the following street-smart policy statement:

"Think you need severance in an employee situation?  Let's talk about it, but you better have a good case and you better have held up your end of the bargain as a manager in any situation.  Or your career is going to be hurt".

Because Daddy isn't writing checks just so you don't have to be the bad guy.  Two Beastie Boys songs come to mind:

1. "You Gotta Fight For Your Right" (to party, and for severance)

2. "Don't Play No Game That I Can't Win"

Need severance?  Come strong or don't come at all.  

Kris Dunn
Kris Dunn is a Partner and CHRO at Kinetix, a national RPO firm for growth companies headquartered in Atlanta. He's also the founder Fistful of Talent (founded in 2008) and The HR Capitalist (2007) – and has written over 70 feature columns at Workforce Management magazine. Prior to his investment at Kinetix, Kris served in HR leadership roles at DAXKO, Charter and Cingular. In his spare time, KD hits the road as a speaker and gives the world what it needs – pop culture references linked to Human Capital street smarts.