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Terminable Offense

Would you terminate an associate who makes two significant errors within 6 months causing monetary loss as a result of "forgetting" to do something? This person has been with the company for 4 years, if that matters. As CFO, if we make mistakes of that caliber wouldn't we be expected to resign?

Answers

Anonymous
(Independent Consultant) |

Short answer no. After the first error, I would have given a written warning and ensured that desk procedures or other controls were in place to prevent and detect errors (secondary reviews, segregation of duties, etc). After the second error, I would put employee on a written performance improvement plan so employee understands consequences of further sloppy work. I usually think of terminable offenses as those that get you walked the same day (fraud, theft, etc). Top grading (a process of always rotating the bottom x% out the door) is what I've seen many organizations do and it recognizes the fact that hiring is just like every other process (not perfect), and sometimes a less than stellar applicant is hired and needs to be managed out of the company - and thus moves the median of the bell curve to the right (increased organizational capability).

As to CFO's resigning, I've only seen one CFO that I've worked with resign in 30 years working in Fortune 500 firms, and I've seen a lot of restatements, bad acquisitions, weak controls, weak strategy and under-performance relative to peers. Boards all to often have cozy relationships with CFO's from what I've seen, and someone other than the chief takes the fall.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

I see PIPs as being grossly overrated as effective employment or legal tools. And, I've been on both sides of them. ;-(

They don't "fix" performance issues. And, their legal protection value is dubious at best. One can sue anyone for anything. And since legal costs are high, even with the best "protection" most respondents are advised to settle monetarily and move on.

Even when applied appropriately, PIPs create animosity between an employee and the manager/exec/HR person that is instituting them against (and yes, I mean "against") that employee.

Even if it "works out" in the long run and the employee "improves" a level of distrust has been set up on both sides that is likely to weaken, if not harm the relationship going forward. Do you really want the person you were setting up to be terminated to be working for you down the road? What about retaliation?

For those so inclined to use the "family" anthology (which I vehemently oppose) it's like the relationship created between spouses when one cheats. It can be overcome with a lot of work, but there wall always be the memory of the damaged relationship. There will always be a weakness.

Plus, issues like this seldom go unrecognized by the rest of the staff. They have a pretty good inkling of what is going on, even if neither party owns up to it. And that damages morale in my experience. It creates too much anxiety which affects team performance.

Which is why I like clean breaks. Either fire me because it isn't working to our mutual satisfaction, or drop this issue and move on. We all have too much important work to do to be spending time trying to play personnel chess games.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I think some of this depends on how the prior errors have been documented. If there isn't clear documentation, then I would probably proceed via a shortened PIP. There would be a conversation where I would discuss all the errors and their impact on the organization. Stressing the importance of the associate's contributions to the company, I would create a PIP that would require creation and adherence to a set of detailed processes to ensure these types of errors don't happen again. It is probably worth trying to figure out if the errors are due to an overabundance of confidence by the staff member or something external that is having an impact on work. If you have documented conversations about the errors then a decision to terminate someone will probably be anticipated and 'easy' to conduct. I had to terminate someone who screwed up on payroll (paying people after they left - try getting the money back...) more than once. When I called him in to terminate him, he sighed and said that he expected this and appreciated our efforts to help him succeed in spite of himself.

From an executive level, I would agree with the first response. I have only heard of it happening elsewhere. My experience is that people stay on until they are terminated and do not normally leave when there is an error that can be connected to their leadership. While I haven't seen as much from the perspective of a board being too cozy with a CFO, I have seen owners who feel bad and want to keep the individual who got them into the trouble, hoping they will be motivated to get them out.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Christie,

What level of monetary loss? Material or insignificant?

After the first error was remediation implemented? Was supervision increased?

If all the remediation and supervision was done, why did the error succeed?

Too many questions for a simple yes or no answer.

jason gentile
Title: Peer Tutor
Company: Anne Arundel Community College
LinkedIn Profile
(Peer Tutor, Anne Arundel Community College) |

If the employee has been with the company four years and has made two material mistakes from "forgetting to follow a procedure" within six months, the question for you Christie is if this is a pattern that existed before the six month current period. If this was an issue last year, these mistakes would be termable offenses. I am glad you hold yourself to a high standard. An alternative procedure to deal with this employee would be to email reminders of important procedures to this employee on a weekly basis.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

All great feedback. The history is far too complicated for this setting but in short, yes everything has been documented, there has been coaching conversations with every instance the loss is material and bottom line is I strive for excellence. While I understand mistakes can happen I don't expect a material mistake to happen twice in one year. Of course there has been some other smaller issues that all tied together in a neat package posed this question to begin with. At our office we're like family so it makes the decision difficult. I care about my team and their families but at some point there has to be a line in the sand and I think we've drawn it. The feedback is helpful and I love the different thoughts and perspectives.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Christie
Your work environment does complexify it a little.
How about asking this person what their reaction would be if they owned the business and one of their employees made these mistakes a few times.
Then warn them that the next time is likely to be the last, the ball is in their court. That's fair, honest and clear.

Anonymous
(Associate) |

All great responses! One thing I might add...was the employee remorseful? From my experience in companies "like family", the ones who appreciate the chances they get become very good, loyal employees. The one who make mistakes and then don't take responsibility for their actions are the ones who will continue to hurt the company.

Kevin Roones
Title: Senior Accounting Professional
Company: In-between
(Senior Accounting Professional, In-between) |

From a SOX perspective, is this item that the employee forgot to do twice part of the standard monthly or quarterly closing procedure? If so, there should be a written checklist of closing procedures, where someone signs off that the task has been completed on X date and someone signs off on reviewing it.

Oscar Gregory
Title: Consultant
Company: Spreads
(Consultant, Spreads) |

If in an "At-Will" state, termination can happen for no cause. The question is will the employee's offense rise to the level of egregious making them ineligible for unemployment benefits.
The next question is what are the written P&P's and whether they constitute a de facto employment agreement. A lack of clear P&P opens the business liability to follow industry standards for termination. Either way, it is important to follow the process you have documented.

Bob Low
Title: Principal
Company: Perron & Low
(Principal, Perron & Low) |

I think you could terminate this employee but another question would be: could you assign/demote the employee to a different job within the company so they are no longer in position to make mistakes like this? If so, would you even want to retain them?

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

Does the process need to be modified? Does there need to be a fail safe that would have caught the "forgotten" activity? Not saying that excuses the behavior, but protecting the assets of the company should be the first concern. I also think you should make sure other employees, inside and outside the finance organization, would have been handled in a similar fashion. Definitely think you should document and make sure the employee understands it can't happen again.

Anonymous
(Chief Financial Officer) |

Christie, I think perhaps you should have made your original post anonymous. What are the odds that the employee, or another employee at your firm, happens upon Proformative? If it is another employee that discovers your post, have you created a legal problem for yourself by publicly having this conversation?

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

Maybe by not being anonymous Christie was effectively managing the employee? A de facto PIP perhaps.

Perhaps the employee would take this seriously and improve with no further prompting if s/he reads this discussion. ;-)

Linda StClaire
Title: VP Finance
Company: Extron Inc.
(VP Finance, Extron Inc.) |

I agree: there are too many unanswered questions about the situation to make any kind of decision. On the other hand, I have always felt that if my subordinates make a mistake it is my fault: what training or resources have I not provided to ensure the employee would not have made the mistake or missed performing the task in the first place? After the first occurrence, a face to face discussion should have taken place, not in the form of a disciplinary action, but process improvement.

Was it the same problem the second time? Then, yes the standard disciplinary process should start. Was it a different problem or task? There again, as a manager you should be questioning yourself first.

The fact of the matter is in accounting or finance our mistakes usually result in some form of monetary loss, and I have found that unfortunately as you progress in your career you make mistakes less often, but they are increasingly costly.

These issues should always be viewed as opportunity for improvement. I do have one exception: if the employee tries to hide the issue from me (and they never realize they can't hide them, discovery is inevitable) that is a complete breach of judiciary responsibility that termination is the only option.

Anonymous
(Tax/Business Consultant) |

How about asking "WHY did it happen?" since it happened "twice"!

Most comments are almost unanimous in blaming... the employee!

What caused the employee to be "forgetful"?

What it because that person was overworked?
MANY companies do NOT hire enough people to handle the workload so many existing employees actually do the roles of 2-4 people, depending on the circumstances.

Like many management types, the blame NEVER goes to management but to the employees!

Warren Miller
Title: Cofounder
Company: Beckmill Research, LLC
(Cofounder, Beckmill Research, LLC) |

I think others have made excellent suggestions. Documentation, attempts at rehabilitation, etc., are on-point. I recommend two additional steps:

1. Put the employee on short-term probation for a period that includes an opportunity to do the same work that ended up being expensive for your employer. Don't make that explicit, though. Just make the probation term specific. Give the employee written notice about the probationary period, and be sure that the notice includes an offer to help the employee any time s/he asks for help. That pretty much puts the onus on the other person.

2. You don't say what state you're in, but some states are much more labor-friendly than others; these tend to be states that do not have 'right-to-work' laws on the books. Think Illinois, New York, Pennsylvania, Minnesota, New Jersey, etc. (here's a link to a map of those: http://www.nrtw.org/rtws.htm) In those states, even one that is also an at-will state (link: http://www.paywizard.org/main/labor-law/dismissal/states-with-exceptions-to-employment-at-will), firing should be undertaken only with prior hand-holding from outside counsel. Be sure to get one who works full-time as a management-side labor lawyer. It's worth the extra money. This is no place for legal generalists.

If you have made and documented (meticulously - be sure to include the time of day when each conversation occurred - that is both highly intimidating to the other side if litigation arises and highly beneficial for your credibility and obvious attention to detail) attempts to rehabilitate and have put the employee on probation, etc., you have done your job. People do change, you now. Some become drunks. Others take up drugs. You have no control over any of that. So don't beat yourself up about it. It's not your fault. . .unless you don't try to rehabilitate, don't document, etc.

Good luck!

Michael Filiatrault
Title: Associate Director, Financial Planning a..
Company: Merck
(Associate Director, Financial Planning and Analysis - US Market, Merck) |

As others have said, consider intent and whether this person truly wants to do the best for the company. Is it a fatal flaw or a skill difficiency?

I suggest helping the person with organization and executive functioning skills. Maybe the person has undiagnosed ADHD? While not a protected class of disability, this doesn't mean that you should discriminate.

Either way, executive functioning skills are learned, not innate. Many young people graduate college without having mastered the skills.

The individual could engage a private occupational therapist through their health plan, project management training might be helpful, technology could also be part of the solution.

Help this person overcome this weakness and you could have a dedicated, high performing individual.

Topic Expert
Jim Quinlan
Title: CFO, Managing Director
Company: Trinity Group, BlueGold, Genergy, Wellco..
LinkedIn Profile
(CFO, Managing Director, Trinity Group, BlueGold, Genergy, Wellcount) |

The "why" of the mistakes should be discovered and addressed in remedy or in discipline.

Anonymous
(Tax/Business Consultant) |

THIS is one of the many missing issues with the conversation!
Too many generalizations, particularly blaming... the employee!

What caused the employee in "forgetting" what to do which caused a 'relative' monetary loss to a company?

Look at the public traded companies and all the BS involved.
The company's earnings are down, employees across the board are terminated via lay offs yet NOTHING is done about management.

What about management's role in the matter?

Treated like family?
Could be BS as I've dealt with businesses for many years that treated employees like family and it's NOTHING like they say in many instances.
Many times, I've seen lots of Overworked employees doing the work of 2-4 people, literally and it leads to Burn Out!

If any "honest" discussions are to be made, a FULL background disclosure Needs to be done!

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

I'm not worried about being anonymous, I'm very transparent with my team. Typically I post questions just to gain multiple perspectives. I currently have a course of action but hearing opinions, and gaining peer to peer experience is the reason for this site right? I value and respect the feedback and think these kinds of questions make excellent discussion.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Anon/ Tax Business Consultant. I like to post questions to get executive type feedback based on everyone's experience. I think the wealth of knowledge in this site as other sites is truly invaluable. I could type a book on the history and everything I have done as the leader but we don't have time for that. My post has been answered with some excellent feedback and I have considered all posts. All of the people who have responded with thoughtful, meaningful feedback didn't have all the information either, but their feedback helps. As executives I think often times we know the right answers we may just be looking for validation or things we may not have thought about. There were ideas in here that I hadn't considered. Thanks for the feedback everyone. I think we can close this discussion now.

Hang Nguyen
Title: Plant Controller
Company: Sparton Corporation
(Plant Controller, Sparton Corporation) |

18 years ago, I was a junior finance staff member at a drilling and exploration oil company and had been educated by my boss that we should forget and forgive people mistakes so that people have a chance to start over on their new journey.
That lesson has carried with me until now, I can easily tolerate my staff member's first accidental mistake regardless how serious it is. This is a lesson learned and is brought for discussion with CAPA. If the mistake re-occurs, the employee will be penalized for the lack of improvement in attitude and not for the cost of the mistake.
Honestly, I never ever want to terminate any employee.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

It is easy to fall into the Donald Trump mode of firing people for their mistakes.

You might not like to hear this, but if you didn't put a backup control into place to catch this error, then you are partially responsible. She shouldn't be fired.

In the end, it is your job as CFO to identify all areas where material errors can occur and have controls in place to catch them.

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