Recently an entrepreneur I’ve been mentoring asked me to have dinner with him instead of meeting in the office for our regular monthly update. And instead of the usual outgoing, gregarious CEO I’ve come to enjoy very much over the last few years, I was confronted with a frustrated, almost desperately unhappy man.

It seems that one of the key hires he’d made was the kind of toxic personality that can kill a start-up company. His negativity and poor performance was making it hard for other people to do their jobs, and he was costing the company money it couldn’t afford to lose and time it couldn’t afford to waste.

This employee was an example of someone hired for their talent, but fired for their behavior. It’s a common problem that small business owners face, but it’s never easy. In a small business or a growing start-up, getting rid of toxic personalities is absolutely essential. I learned that lesson the hard way some years ago, when I hired a friend who nearly killed my business.

Like most managers, my friend the CEO had hesitated for several months before deciding to fire the toxic employee. He knew instinctively that the most toxic people are the ones who sue. Toxic employees will also pull every string they can to try to keep their job — no matter how much they appear to hate their job.

He was also worried that since the man had access to the company’s servers and source code, he’d do something truly damaging on his way out. So he scheduled our meeting to discuss ways to turn around the toxic personality traits that were keeping a talented person from performing and causing chaos in the company.

I told him that the only thing to do with a toxic person is to fire them. Sure, there are times when a simple redirect, or a direct confrontation about their bad behavior, will convince someone to fall into line. So, in general, trying to correct the behavior should be your first step. But sometimes an employee can be so toxic that they can poison your whole team. In those cases, getting rid of them as quickly as possible can mean success or failure for a small business.

This start-up had an employee who consistently missed deadlines, caused problems with vendors and co-workers, and was mercurial and unpredictable. There were delays in every project this key hire touched, and it seemed that he lacked some of the skills touted in his resume. He had to go if the struggling company had a chance to survive.

We put together a plan that would protect the company. It involved securing the servers and corporate data, bringing in legal counsel to draft the relevant documents, and planning the termination in meticulous steps. The fired employee did attempt to sue, but got nowhere because we had been careful. It wasn’t fast, but it (literally) saved the company.

Spotting Toxic Employees

You’d think that it should be relatively easy to identify people who need to be replaced. But it isn’t always obvious, especially to the CEO of a start-up, or an entrepreneur who is struggling to grow a business.

For one thing, the people most likely to spot a toxic personality are co-workers (peers) or subordinates, not the top boss. And those who report to a toxic person or work with that person usually do not report it to the boss out of fear, and a deep-seated reluctance to “snitch”.

In a start-up, it’s easy for managers to avoid dealing with toxic behavior because:

• They’re too busy dealing with more urgent matters.
• They’re not trained in the management skills required to deal with the behavior effectively.
• They’re afraid of costly litigation that could hamstring their growth.

But there’s an even more important reason that it can take months or even years before a toxic employer is identified. It’s because employee “behavior” is often not included in the performance review system (if there is such a system). The message for most employees is that technical competence is what matters, and “behavior” or “personality” is not part of the “real job”.

Some younger employees, especially those who attended “safe” universities and grew up coddled and protected by “helicopter parents” will assert that any attempt to curb their “personality” or “self-expression” is just plain wrong. And a surprising number of entrepreneurs have bought into that attitude, or rightly fear that this belief will lead to litigation or even dangerous confrontations with an armed employee (or their parents). Another start-up I mentor had to call the police last year after the angry mother of an employee who’d been “written up” for consistent problems completing tasks on time waved her (legal) handgun in the face of the supervisor who had “mistreated and emotionally abused” her little snowflake. (Said snowflake was the graduate of an Ivy League university and, stood 6’3″ and was 25 years old. He didn’t really look like someone who needed his mom to “protect” him from a mediocre performance review.)

So how does a busy manager spot a toxic employee if co-workers won’t talk about the problem openly? The key to spotting a toxic employee is to pay attention to workplace behaviors like team dynamics. One thing I’ve seen often is an employee who believes they are invaluable, so they use their position to bully others or get preferential treatment.

I once worked with a Silicon Valley start-up that had a very volatile coder on staff.  Everybody agreed the guy was an absolute genius. He was the founder’s protegé, and over time, the founder relinquished so much control to this individual that he was afraid to do anything about his erratic behavior.

The turnover rate among other technical employees — who were essential to the company’s future even if they weren’t geniuses — was mind-boggling. Finally, it became clear that the company had to get rid of the genius if it wanted to grow. But it was a hard choice for the founder, and if several key employees and board members hadn’t made an issue of it, he probably wouldn’t have taken action in time to save his company.

Who to Fire First

There are many kinds of toxic employees, but the three kinds to fire as soon as you identify them are the untouchable (like the genius mentioned above), the troublemaker who uses gossip, innuendo and bullying to keep everyone else in turmoil, and the renegade who insists on doing things their own way, no matter how many times they are warned or counseled.

Why do I pick on these three kinds of toxic employees? Because all three can put you out of business if you don’t stop their behavior fast. They’ll cost you talented employees, customers, and vendors.

Untouchables are people who hitch their wagon to a rising star. (I hope you didn’t hire a family member who is thought to untouchable by the rest of the team!) Instead of using their unique position to help the company, they use it to demand special treatment. The more special perks they get — whether it’s being chronically late or not following the dress code — the more resentful other workers become. Nobody is irreplaceable. So replace untouchables as soon as you identify their bad behavior.

To me, the troublemaker is the easiest to spot. This is the gal or guy who uses gossip, rumor, bad humor, harassment, and innuendo to pit people against each other. You’ll find the troublemaker at the center of any office drama — but they often have an alibi that makes them seem like a spectator. Beware of those who always try to position themselves as an intermediary, or want to confide in you about various events around the office — usually in ways that make other people look bad while painting themselves in the best possible light.

Once you spot a troublemaker, have a frank, clear discussion with them about your expectations on their behavior. Put it in writing, and ask them to sign an agreement not to engage in the behaviors that are causing problems. Tell them they will be fired — no third chance — if they misbehave again. And fire them immediately if you do catch them after they agree to make changes. Consult your legal counsel before you fire them, but don’t back down.

Renegades can be harder to handle, especially in technology companies where individual contributors or superstars are highly prized. But a renegade and a superstar aren’t the same thing. A superstar works with others to deliver outstanding work, but a renegade is a loner who doesn’t delegate well and can’t work within a team. Whether it’s not following security procedures or “winging it” in customer or vendor situations and making decisions they aren’t authorized to make, renegades are determined to do it their way.

Worse, when other employees see that not everyone has to follow the rules, you’ll quickly find yourself with more renegades. Lay down the law, and make sure they follow the rules, or fire them. There’s no room for a renegade in a start-up, where teamwork is essential.

Five Toxic Behaviors Start-ups Can’t Tolerate

In a large organization, there may be room for a wide range of employee personalities and behavioral differences. The human resources department can work with employees to mitigate or correct behaviors, and it may be possible to retrain or transfer someone instead of firing them.

In a small business or a start-up there are fewer options, and less time to spend on solving behavioral problems.  Some kinds of toxic behaviors simply can’t be tolerated in a small business or start-up.  Here is my list of the five toxic behaviors that start-ups can’t tolerate.

1. Aggressiveness. Aggressive employees who treat coworkers (and managers) with disrespect, or even exhibit the classic traits of bullying or verbal threats, can’t be tolerated. A small business or start-up can’t afford the potential legal liability of an aggressive employee, and even if it could, the lost productivity from other workers who have to be on the defensive all the time is too costly.
2. Narcissism. In a start-up or a growing small business, the culture has to remain flexible. You need give and take compromises in order to grow – and narcissists don’t do what’s best for the company or the team. They are always looking out for their own self-interest. If that costs the company money or time or a valuable co-worker, it’s not viewed as a problem by the narcissist as long as he gets what he wants.
3. Passivity. This is the opposite of the initiative and ownership shown by top performers. I’m not talking about shy, introverted people here. I’m talking about people who always have an excuse for everything, and can explain in excruciating detail why no new idea will work. They’ll sit and do nothing if all of the information, material, or permissions aren’t handed to them in a precise fashion – and it’s never their fault when something isn’t done.
4. Unbelievability. My mentor used to say it was time to run for the hills when confronted with a boss whose words and actions didn’t match. I’ve learned that it’s time to take action as a manager when an employee’s words and actions don’t match. When people don’t do what they say they will do, it doesn’t take long for their lack of credibility to poison the team. No start-up or small business can afford to work around someone. Everyone has to pull their weight.
5. Rigidity. The world is always changing, especially in the fast-paced world of entrepreneurial companies. People who are resistant to change, and those with rigid behaviors, don’t belong in this kind of environment. They’ll be miserable, and they’ll make everyone around them miserable, too.

Disclaimer: I am neither an attorney nor a human resources expert, simply an experienced serial entrepreneur and manager who has encountered these behaviors over a long period of time. Please seek legal counsel before firing any employee, especially in a start-up where stock grants or options are involved.