Say It Ain't So

Maybe he dropped hints, or maybe it came out of the blue. Either way, a valued employee has just resigned. What should you do? Wish him well and immediately show him the door? Make a counter-offer and encourage him to stay?

The answer depends on many variables, but you'll be better off if you've determined in advance how to handle such a situation, says Lynn Cottrell, president of IRC-The Employers Council, a nonprofit employers' advisory organization in Salt Lake City.

Long before you have to deal with a resignation, decide whether you need confidentiality or noncompete agreements. Not all companies do, but if there are sensitive aspects to your business, have the documents drawn up and checked by an attorney to be sure they're legal and enforceable.

When the employee tells you he's quitting, give yourself time to think things over before taking action. Don't try to respond on the spot, Cottrell suggests.

Points to consider include how valuable the employee is to the company; whether he's underpaid (either in his own opinion, in yours, or by industry standards); what kind of trade secrets he could walk away with; other issues--perhaps a personality conflict--that may be influencing his decision to leave; and whether making some sort of concession to entice the person to stay would set a precedent that could cause problems for you later.

Once you've considered your options, invite the employee into your office for a private meeting. This is the time to find out why he's leaving and where he's going. If you've decided you want to try to keep him on board, ask if there's anything you can do to change his mind. You should already know how far you're willing to go. Be wary about making offers to keep the person, Cottrell warns; you may regret a hasty decision later.

If he's made it clear he's not open to negotiation or that what he wants is more than you can offer, set the stage for a graceful departure. "Have the employee leave as a friend," says Cottrell. "We all have enough enemies. Why make a person feel poorly about leaving?" Also, he points out, you want the employee to leave on terms that would make it possible for him to return if circumstances should change in the future.

Should you let the employee work out his notice? Before you make this decision, consider his character, his motivation for leaving, and the access he has to computer files and other important information. Keep in mind that someone whose loyalties have moved elsewhere may be in a position to harm your company.

In most cases, Cottrell says, it's better to pay him for the notice period but let him go immediately. "Once somebody has given notice, their heart leaves," he says. "If you don't need them for the transition training, it's best to let them go." It's not necessary to treat him like a criminal by escorting him to his office and watching him pack, but be careful to get his keys back, change computer and other system passwords, and take any additional steps to protect your company's security.

Cottrell gives two reasons for paying employees even though they don't work through their notice period. One, terminating an employee because he or she resigned could leave you open to legal liability. Two, if you get a reputation for firing people who resign, no one will ever bother to give notice, which means you'll never have time for planning or making counter-offers.

Finally, if the resignation of a key employee took you totally by surprise, you might want to consider making changes so it doesn't happen again. Says Cottrell, "It should be a cause for reflection of whether you've been locked in your office or have actually been involved in the business, seeing what's going on around you."

This article was originally published in the September 1998 print edition of Entrepreneur with the headline: Say It Ain't So.