Who Can Fire Who?
An excerpt from Will Work for Pie
People often ask me who can fire who in a start-up. It is a source of much consternation and people often want to boil it down to a question of control.
Slicing Pie simply keeps track of the equity split. It is not intended to specify or dictate organizational structure or replace managerial responsibilities. Slices in the Pie do not carry voting rights per se; those rights are generally outlined in the organizational structure of the company. At a basic level, slices convert to equity, which usually does have voting rights, so the person with the most slices tends to consider themself as “in control.”
The number of slices each person has in the Pie represents their risk relative to others. It is reasonable to respect the interests of those who have the most to lose. But, in theory, in a Slicing Pie company anyone can technically fire anybody else.
It may be difficult to understand why this is fair. As a solo founder taking on a cofounder it can be disconcerting to think your new partner could terminate you from your own company!
The Slicing Pie model’s recovery framework always keeps things fair even when a person has more slices than the other.
Here are how things would play out in the event that a person who has most of the slices were to separate from the company. We will call this person the “Big Slice” person and the person or people with fewer slices the “Little Slice” people.
Firing a Big Slice Person
Slicing Pie does not favor one person over the other; it favors the survival of the business. When a team member is not pulling their weight or is engaged in gross negligence, Little Slice people should be able to hold the Big Slice people accountable. The Little Slice people need to provide two warnings before termination.
If you have an organized plan with goals and milestones it will be obvious when there is a problem with any individual—they will start to miss goals and milestones. So, this isn’t a subjective “feeling.” The performance problem will not be ambiguous.
Many Big Slice people are dismayed by the prospect of getting fired by people with fewer slices. But just because a person has a big slice does not mean he or she can slack off and miss milestones or goals. Other people depend on the Big Slice people.
If the Big Slice person does not care enough to get back on track, he or she will take the whole organization down. With Slicing Pie, the two-warning protocol will give ample time for discussion and corrective actions.
If the Big Slice person does not correct the behavior a second warning would be issued and termination should follow if the second warning does not work. This should probably be okay with the Big Slice person who did not care enough to remedy the situation.
Big Slice Resigns
If there is a problem with the Big Slice person and the Little Slice people think he or she would be better suited in a different role, the team can adjust the Big Slice person’s responsibilities. For example, the Big Slice person may have been the founder and CEO but does not have enough time to dedicate to the business. The Little Slice people can fire Big Slice for good reason or Big Slice can resign for no good reason with the same consequences.
Or, if the Little Slice people want Big Slice to stick around, they can ask Big Slice to stay on as an advisor. This new position is a change the Big Slice person can either accept or reject. By accepting the new role, he or she would keep slices and carry on in the business. He or she can also reject the new role and keep the original position but with the expectation to improve performance or risk termination.
If the Little Slice people insist the Big Slice person changes roles, this would provide good reason for Big Slice to resign and retain slices subject to future dilution as more slices are added. It is still fair.
Pulling Rank
Yes, a Big Slice person could “pull rank” on the Little Slice people and stay in the business despite the performance problems. But now the Little Slice people would have good reason to resign because the Big Slice person, who promised to work hard and treat them fairly, did not keep the promise. The Little Slice people can resign for good reason, keep their slices, and start a competing firm.
This is logical. It would not be fair for the Little Slice people to be taken down by the Big Slice person.
Of course, if the Big Slice person is not doing the job, the Little Slice people can step up and fill in. In this case they may contribute enough slices to become Big Slice people themselves.
The benefit of the Slicing Pie recovery logic is that the right conversations can take place and logical consequences apply. Instead of jumping into a fight, participants can apply the logic of the model to determine the right course of action.
No matter what happens, people will be treated fairly based on the decisions they make. Nobody has to feel bad about their choices and nobody has to accept an unfair outcome.