Anytime you gather a group of managers together, the conversation usually evolves to bad hiring decisions everyone has made at some point in their career. You know, the employees who later turned out to be drug addicts, thieves, liars, cheats, and traitors. However, I think a new discussion needs to begin on the bad firing decisions managers make, because in this economic turndown I'm seeing a slew of bad firing decisions. A bad firing decision is probably just as costly as a bad hiring decision, if you really look at the effect it has on your business.

There's no doubt that since the economy began turning down in the spring of 2006, we've all had to make decisions with employees that we never wanted to make. By late-summer of 2009, most companies had laid off the majority of the employees that they felt necessary to survive the economic turndown. I've written before that the initial layoffs in 2006 were not as difficult, because many of those employees were very transient, hired as bodies to help cover business during the boom. However, with each round of layoffs the decisions became much harder to make. Let's face it, by the end of the major layoff cycle in 2009, most companies were left with only their top players, and we were asking them to do a lot more for less pay.

In 2010, most companies had visions of their "A-Team" excelling, but over the last year, the economy has not rebounded as many had predicted or hoped. For many companies, as they look at their actions over the last several years-which include massive layoffs, dramatic cuts in expenses and inventory, and huge pull-backs in capital projects through closures-they still aren't seeing any positive results. So, who is to blame?

With no more arrows in their quiver to shoot for success, some executives are beginning to doubt their A-Team personnel. They are starting to question if they have the right people, or do they need to shake-up the organization by bringing in some new blood? My advice is to be very careful because circumstances beyond your control can sometimes be the primary driver of your success or failure-not your people. Case in point: the boom of the mid-2000s proved many of us weren't as good as we thought, and we were all riding on a magic profit carpet.

In the midst of a major economic turndown, a bad firing decision could be the final nail in your coffin because that man or woman you are about to let go could be the glue that has kept you hanging on-don't underestimate the power of one person. Here are some key issues you should consider before making a major personnel change:

  • Is the person doing his or her job? Does your current A-Team employee work hard, put the proper hours in, protect your company's interests, and (most importantly) has he or she been a top producer in the past? If you have an employee who is working really hard and doing the things they should be doing to be successful, then the issue could be this bad economy.
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  • Can you find a person better than your current employee? If you only have A-Team members whose to say you can find an "A-plus Team" member from the ranks of the unemployed? There have been great employees who have lost their jobs during this recession due to no fault of their own, but that is very difficult to evaluate if the company they worked for is no longer in business.
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  • As an executive, maybe you need to counsel an employee who you believe has dropped his or her enthusiasm a notch, because the same economy your business is experiencing is also affecting your employees. Many of our employees have seen reduced wages, a laid-off spouse, a foreclosed home, and financial pressures from all sides. Maybe an encouraging word from you could be all it takes to offer hope and enthusiasm - inspire them instead of fire them.
  • If you make a decision to replace a key staff member, then you should be prepared to identify the best in the market - both employed and unemployed. Whether you recruit yourself or hire someone to do it for you, the last thing you want is a flood of resumes that drown out the real talent. Most top talent is just as spooked by this economy as you are, and those with good positions believe they must stay put until the economy turns around. Oddly, if you want the best, you must go after them aggressively and knock on their door.
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  • One of the major issues in finding new talent is many prospective employees are house-locked. Many top-quality performers own their homes, and in this market, to move from one area to another is almost impossible because they can't sell their homes at acceptable prices. You need to make sure you are willing and able to assist in moving before you begin your search.
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  • Finally, if firing an employee for a new one doesn't offer some clear-cut advantages for growing the business and improving the bottom line, and you are left with more questions than answers, then don't do it. Many would argue that change for the sake of it offers no guarantee - just ask President Obama.

Desperate times will make people do desperate things, like making bad firing decisions.In February, 1981, I became an assistant manager at Moore-Handley Homecrafters in Pascagoula, Mississippi, and I look back at my first few years as a manager with much embarrassment. I was brash, over-demanding, and pushed liked a bulldozer to please my bosses and achieve success. However, in the course of this, I lost some great employees who could have helped me achieve more success in somewhat similar economic times. Don't misunderstand, I am still a tough taskmaster who is known to be over-demanding; but, it doesn't take too many bad firing decisions to realize how important good people are to your organization. Firing decisions must be carefully considered.
Don Magruder is CEO of Ro-Mac Lumber & Supply in Central Florida and former chairman of the Florida Building Material Association. This article originally appeared in FBMA's July 14 newsletter.