After serving as Panera Bread's CEO for 26 years, co-founder Ronald Shaich resigned in January. Although he still remains the company's chairman, Shaich reflects on what he wishes he did differently as CEO in an article for Entrepreneur. "I wish I fired more people," he writes.
Shaich says that looking back, he was "too obsessed with being a caring leader" and he thought of his employees as family. The founder points to a senior executive who worked at the company for more than 20 years. His job eventually "outgrew" him and he was checked out, but he kept showing up to work.
"I pushed him and waited for him to step up. For years. But I didn't fire him," writes the founder. "What I should have done was let him go sooner, and many others like him."
As Panera grew bigger, other members of his team simply couldn't keep up. Still, Shaich refused to fire them because they helped build the company.
"Instead of confronting them, I'd find ways to cover for them," he writes. "I was willing to do their work. Time and time again, that hurt the organization."
Shaich admits that it took him so long to fire poor employees because he didn't fully "come into my own as a leader" until the last ten years of his CEO career. However, to be an effective leader, you must know when it's time to let go of an employee, says Neal Hartman, a senior lecturer in managerial communication at MIT Sloan School of Management.
Hartman tells CNBC Make It that company leaders must focus on two things when gauging an employee's work: attitude and performance. Performance is generally easier to measure, says Hartman, because you have a better sense of whether an employee's work is improving, slipping or remaining consistent.
Attitude deals with how the person acts at work. For example, is the employee enthusiastic about coming to work, is the person energized about projects that they're working on and does the individual have a positive approach to what they're doing and in their interactions with other employees and clients?
If you find that an employee's performance or attitude is sub-par, honesty becomes critical. "The challenge has to be spelled out very clearly between the manager and the employee so that there are very clear expectations and very explicit plans on what needs to change and in what time frame," explains Hartman. "Then that has to be monitored."
Once the specified time frame is reached, determine whether the behavior has improved. If the employee's behavior is still not up to par, this signals that it's time for the person to be let go, says Hartman.
The MIT professor adds that there are a number of benefits to firing poor employees. "We always think about having to let an employee go as, perhaps, a negative experience," says Hartman. "But in many cases, it actually can also be a very positive experience for that employee."
Despite your best hiring efforts, an employee isn't always a good fit for the company. "It's probably far better to sever those ties and help the employee move on to a job or organization where the fit is much better and where he or she may be a more productive employee," explains Hartman.
The same goes for employees who have been with a company for a long time and are showing signs of burnout. Dismissing these long-term employees gives them a chance to rethink their career options and find a job where they feel motivated, says Hartman.
In fact, retaining poor performing employees hurts fellow colleagues, says Hartman, because these co-workers often have to pick up the work that the ineffective employee is not doing or is not doing well. This creates a growing level of resentment among employees or managers who are now doing additional work above and beyond their own.
"From an organizational perspective, if you continue to allow that employee to be there you're certainly going to run the risk of a low morale among other employees who in fact are performing well or want to perform at a high level of quality," says Hartman.
As for Shaich, he writes that after many years as a CEO, he now sees his mistakes: "I didn't understand that a leader can't put up with employees' baloney. If someone isn't producing, a leader has a right and an obligation to fire them."
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