Why Founders Delay Firing Underperformers and What It Costs

(Earnings disclaimer: You have a .1% probability of hitting million-dollar months according to the US Bureau of Labor Statistics. As stated by law, we can not and do not make any guarantees about your own ability to get results or earn any money with our ideas, information, programs, or strategies. We don’t know you, and your results in life are up to you. We’re here to help by giving you our greatest strategies to move you forward, faster. However, nothing on this page or on any of our websites or emails is a promise or guarantee of future earnings. Any financial numbers referenced here, or on any of our sites or emails, are simply estimates or projections or past results, and should not be considered exact, actual, or as a promise of potential earnings — all numbers are illustrative only.)

Look, I’m just going to say it upfront.

Almost every founder I’ve worked with has the same regret when we sit down and audit their team: they didn’t fire someone fast enough. Not once. Not twice. Multiple times.

And here’s the thing that really gets me. It’s never the decision itself that’s hard to understand in hindsight. It’s always crystal clear six months later. The hard part is making the call in the moment when you’re in the middle of it.

I’ve done this myself. I’ve kept people way longer than I should have. I’ve made excuses. I’ve given “one more quarter” about four times to the same person. And every single time, when I finally made the move, my only thought was, “Why didn’t I do this six months ago?”

At Master Internet Marketing, our 7-week live comprehensive training, we work with operators who are building real teams and facing these exact decisions. (Results are not typical. Your results will vary and depend entirely on your individual capacity, business experience, expertise, and level of desire. There are no guarantees concerning the level of success you may experience. The testimonials and examples used are not intended to represent or guarantee that anyone will achieve the same or similar results. We don’t believe in get-rich-quick programs. We believe in hard work, adding value, and serving others. As stated by law, we can not and do not make any guarantees about your own ability to get results or earn any money with our information, courses, programs, or strategies.)

So let’s talk about why this happens and what it’s actually costing you. Because the cost isn’t just their salary. It’s way bigger than that.

What Psychological Traps Keep Founders From Firing Underperformers

There are a handful of psychological patterns that keep founders locked in place when they know someone isn’t working out.

First is sunk cost. You’ve already invested months into hiring this person. You spent weeks interviewing. You onboarded them. You trained them. You’ve put in all this time and energy, and your brain tells you that walking away from that investment means it was all wasted. So you keep going, thinking the next month will be different.

But here’s the reality: that time is already gone. You can’t get it back. The only question that matters is whether keeping them another month is a good use of your next month.

Then there’s the conflict-avoidance piece. Firing someone is uncomfortable. It just is. You’re going to have a hard conversation. Someone might cry. They might get angry. You might feel like a terrible person. And if you’re someone who generally likes to keep things smooth and avoid drama, your brain will find every possible reason to delay that conversation.

Research from organizational behavior studies shows that managers often delay difficult personnel decisions due to cognitive biases, including loss aversion and status quo bias. Understanding these patterns is the first step to overcoming them.

A lot of founders also tie their identity to being good at developing people. You see yourself as a builder, someone who can coach people up. And if you have to fire someone, that feels like you failed. Like you couldn’t inspire them or lead them or create the right environment. So you keep trying to fix it because admitting it’s not working feels like admitting you’re not a good leader.

There’s also this optimism trap. Founders are optimistic by nature. You have to be. You wouldn’t have started a company if you weren’t. But that same optimism works against you here. You keep thinking they’ll turn it around next quarter. You see little signs of progress and blow them up into evidence that you were right to keep them.

The loyalty thing is real too. Maybe this person was there early. Maybe they worked hard during a rough patch. Maybe they’re just really likable and you enjoy having them around. You confuse being a good person with being good at the job. And you feel like firing them would be betraying someone who was loyal to you.

And then there’s the fear of the vacuum. Especially in small teams, you think, “Who’s going to do their work if they leave?” You’re worried about the operational disruption. You’re worried about being short-handed. So you convince yourself that having someone mediocre in the seat is better than having nobody.

Here’s what I’ve learned: that vacuum fear is almost always worse in your head than in reality.

What Keeping Underperformers Actually Costs Your Business

Let’s start with the obvious one: the direct financial cost. Their salary. Benefits. Equity, if you gave them any. The tools and software licenses. The overhead. This is the easy one to calculate and somehow it’s still the one founders ignore.

But the real cost is opportunity cost. That seat is occupied. Every single month that person stays is a month you don’t have an A-player in that role. This is the cost nobody sees and it’s the biggest one by far.

Think about it. If you have a mediocre salesperson in a seat for six months, you’re not just losing their salary. You’re losing the deals. The relationships. The momentum. And you can’t get that back.

Then there’s what happens to your culture. High performers notice when you tolerate underperformance. They see it. And it sends a signal that standards are negotiable. Research from Harvard Business School found that avoiding a toxic or underperforming hire creates more value than adding a top performer, because the drag effect is disproportionate.

Your best people start wondering why they’re working so hard when someone else is coasting. Some of them will leave. Others will just lower their output to match what’s being accepted. You end up with norm regression across the whole team.

There’s also the time drain. You spend a disproportionate amount of time managing underperformers: checking on them, coaching them, cleaning up after them, fixing their mistakes. Studies on management time allocation show that managers spend a disproportionate amount of their time dealing with their lowest performers rather than developing their best people.

That’s time you’re not spending on strategy, on sales, on product, on actually leading. It’s time stolen from the things that would actually move your business forward.

If the underperformer is client-facing, you’ve got customer impact: lost accounts, damaged reputation, reduced lifetime value. I’ve seen founders lose major clients because they kept the wrong person in an account management role for too long.

The team velocity slowdown is real too. Other people pick up the slack. They get frustrated. They burn out. Or they just stop trying as hard because why should they carry someone else’s weight?

And if the underperformer is in any kind of leadership or strategic role, they can steer decisions in the wrong direction. That creates compounding downstream costs that are almost impossible to quantify but absolutely massive.

Why Almost Every Founder Admits They Fired Too Late

Here’s something I want you to really hear: almost every experienced founder and CEO, when they look back, says they fired too late. Almost never too early.

Ben Horowitz talks about this in The Hard Thing About Hard Things. He emphasizes that delaying a firing is almost always a mistake and the cost compounds daily.

Sam Altman has said that firing fast is one of the most important and most commonly failed duties of a CEO.

Reed Hastings at Netflix has the “keeper test.” If someone on your team told you they were leaving, would you fight hard to keep them? If not, you should give them a generous severance now.

Jack Welch argued that keeping underperformers is actually crueler than letting them go. You’re wasting their time in a role where they can’t succeed. You’re preventing them from finding something where they could actually thrive.

Keith Rabois has talked about how founders consistently rate “firing too slowly” as one of their top three mistakes when they look back.

The pattern is universal. Nobody looks back and says, “Man, I really wish I’d given that person another six months.”

How To Know When It’s Time To Fire Someone

There are specific signals that tell you it’s time to make the move.

If you’ve had the same performance conversation three times with no meaningful change, the pattern is your answer. You’re not going to coach them out of it.

If you’re making excuses on their behalf, that’s a signal. “They’re going through a tough time.” “The role isn’t well-defined enough.” “They just need more support.” If you’re constantly explaining away their underperformance, you already know.

If you’re restructuring roles or teams to work around them instead of addressing them directly, that’s a signal. You’re creating organizational debt to avoid a conversation.

If other team members are starting to complain or disengage, that’s a signal. The cost is spreading.

If you dread meetings with this person, that’s a signal. You shouldn’t dread talking to people on your team.

Here are two tests I use:

1. The clean-slate test: If you were hiring for this role today, would you hire this person? If the answer is no, you have your answer.

2. The keeper test: If they told you they were leaving, would you fight to keep them? Would you counteroffer? Would you feel relieved? Be honest with yourself.

How To Actually Execute The Firing Decision

First, you need clear, measurable expectations upfront. Ambiguity enables delay. If you can’t point to specific metrics or outcomes they’re missing, you haven’t set up the role correctly.

When you do decide someone needs to improve, time-box it. Give them 30 to 60 days, not six months. Define specific, measurable outcomes. If they don’t hit them, you act. No extensions. No “let’s give it one more month.”

You have to separate the person from the performance. You can care about someone and still recognize they’re not right for the role. Those two things aren’t contradictory.

Pre-commit to action. Tell a co-founder, an advisor, or a board member your decision timeline. Accountability reduces delay. It’s harder to back out when someone else knows you said you’d make the call by a certain date.

Prepare operationally. Have a transition plan. Cross-train people. Document processes. The vacuum fear is usually worse than the reality, but you can make it even less scary by preparing for it.

When you execute, do it with dignity. Generous severance. Honest but kind conversation. Help with the transition if you can. This protects your culture and your reputation. How you treat people on the way out matters just as much as how you treat them on the way in.

In our Inner Circle flagship program, we work through these exact scenarios with operators who are making these decisions in real time. (Results are not typical. Your results will vary and depend entirely on your individual capacity, business experience, expertise, and level of desire. There are no guarantees concerning the level of success you may experience. The testimonials and examples used are not intended to represent or guarantee that anyone will achieve the same or similar results. We don’t believe in get-rich-quick programs. We believe in hard work, adding value, and serving others. As stated by law, we can not and do not make any guarantees about your own ability to get results or earn any money with our information, courses, programs, or strategies.)

What Actually Happens When You Replace An Underperformer

There’s research from McKinsey that suggests top performers in high-complexity roles can be significantly more productive than average performers. In sales roles specifically, the gap between a top performer and an underperformer can be substantial in revenue generated.

But beyond the numbers, there’s something else that happens. Replacing an underperformer often has an immediate morale boost on the remaining team. It signals that standards matter, that performance matters, that you’re serious about building something great.

I’ve seen this happen over and over. You finally make the move. You bring in someone great. And suddenly the whole team picks up energy. People are excited again. The person you brought in raises the bar. Other people rise to meet it.

The time you were spending managing the underperformer gets freed up. You can focus on strategy again, on growth, on the things that actually matter.

And here’s the thing about A-players: they attract other A-players. Great people want to work with other great people. When you upgrade one seat, it makes it easier to upgrade others.

What The Research Says About Bad Hires

Let me give you some context on what this actually costs. SHRM research discusses how the cost of a bad hire extends well beyond their salary when you account for hiring costs, training, lost productivity, and disruption.

A CareerBuilder survey found that a significant percentage of employers report they’ve hired the wrong person for a position. And that’s probably conservative for startups, where each person has outsized impact.

Gallup research on employee engagement shows that disengaged employees create substantial productivity loss. At the startup level, even one disengaged person on a small team represents a massive drag.

So when you’re thinking about whether to make the move, run the math. Take their salary. Add the lost productivity. Add the time you’re spending managing them. Add the opportunity cost of not having the right person in that seat. Add the team morale impact.

The number gets big fast.

A Few Important Nuances Worth Considering

Look, I want to acknowledge something. Sometimes the founder is part of the problem. Poor onboarding. Unclear expectations. No feedback loops. Chaotic priorities. Sometimes the “underperformer” is actually a decent person in a broken system.

Before you default to “fire faster,” make sure you’ve actually set people up for success. Make sure you’ve given clear direction. Make sure you’ve provided feedback. Make sure the role is actually doable.

Also, not every underperformer should be fired. Some should be repositioned. Occasionally the person is in the wrong seat, not the wrong company. If someone’s struggling in sales but they’re great at operations, maybe there’s a different role where they’d thrive. That’s worth exploring before you cut them loose.

And “fire fast” can be taken too far. There’s a difference between decisive action after due diligence and a trigger-happy culture that creates fear. The goal is timely, fair, and clear. Not ruthless.

You want people to know that if they’re not performing, you’ll address it directly and quickly. But you also want them to know they’ll be treated fairly. That they’ll get clear expectations. That they’ll get honest feedback. That if it’s not working, they’ll be let go with dignity.

The Bottom Line On Firing Underperformers

Here’s what I want you to take away from this. If you’re on the fence about someone, you probably already know the answer. If you’re making excuses, you know. If you’re restructuring around them, you know. If you dread talking to them, you know.

The question isn’t whether to make the move. The question is whether you’re going to make it now or six months from now after it’s cost you even more.

Every month you delay is a month of salary you’re paying for underperformance. A month of opportunity cost. A month of team morale erosion. A month of your time being drained. A month you don’t have the right person in that seat.

The cost compounds. It doesn’t stay flat. It gets worse over time.

I’m not saying this to be harsh. I’m saying it because I’ve been there. I’ve made this mistake. And I’ve watched hundreds of founders make it too. And every single time, the regret is the same: I should have done it sooner.

So if you’re reading this and you know you have someone who isn’t working out, make the call. Time-box the improvement if you want to give them one more shot. But set a deadline and stick to it. And if you’re past that point, just make the move.

Your future self will thank you. Your team will thank you. And honestly, the person you’re letting go will probably thank you too, even if it doesn’t feel like it in the moment.

They’ll find something where they can actually succeed. And you’ll find someone who can actually do the job. That’s better for everyone.

If you’re building a team and need frameworks for hiring, firing, and everything in between, we cover these operational decisions in depth at Master Internet Marketing, our 7-week live comprehensive training. (Results are not typical. Your results will vary and depend entirely on your individual capacity, business experience, expertise, and level of desire. There are no guarantees concerning the level of success you may experience. The testimonials and examples used are not intended to represent or guarantee that anyone will achieve the same or similar results. We don’t believe in get-rich-quick programs. We believe in hard work, adding value, and serving others. As stated by law, we can not and do not make any guarantees about your own ability to get results or earn any money with our information, courses, programs, or strategies.)