HANNAH BATES: Welcome to HBR on Leadership, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock the best in those around you.
Joel Peterson has spent a career leading teams, building businesses, and managing people at every level. Along the way, he’s learned valuable lessons about the best ways to bring on new talent, as well as when and how to let people go.
Peterson is the former chairman of JetBlue Airways and he also teaches at the Stanford Graduate School of Business.
In this episode, he shares his approach to hiring for top leadership positions and why it’s so important to slow down and take plenty of time with interviews. He also explains how he coaches new hires who are struggling and how he knows when it’s time to let someone go.
You’ll learn why Peterson says you shouldn’t wait for a triggering event to fire someone who’s not performing. And you’ll learn why he never outsources that difficult conversation to HR.
This episode originally aired on HBR IdeaCast in February 2020. Here it is.
ALISON BEARD: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Alison Beard.
Today about some of the most important decisions a leader makes. Hiring and firing. It can be the best news you’ll ever deliver.
CLIP: I think if I had a catch phrase, it would be “you’re hired and you can work here as long as you want.”
CLIP: I said to myself, go ahead. Take a chance. Hire the smart, fat girl.
CLIP: I just want to be a broom boy so bad. I like your attitude. Your hired. How about you, missy? You want to be a mop girl? Not really, no. I like your honesty. You’re hired. And you two haven’t said a word. I like that, you’re hired.
ALISON BEARD: But letting someone go is a hard job.
CLIP: I hear what you’re saying, but I don’t think you’re saying what you mean. I don’t think you hear what I’m saying. You’re fired.
CLIP: Third prize is you’re fired.
CLIP: Ok, kiddo. Fire me. If she’s going to be doing this on a regular basis, don’t you want to know if she can fire somebody? She’s fired Ned. My dog can fire Ned. Fire me. You don’t need to do this. No, it’s okay. I got this.
ALISON BEARD: Our guest has spent decades working as an executive and adviser to companies of all sizes in a variety of industries and he’s developed a few rules for hiring and firing well. He’s had to do a lot of both, and that mastering these skills are key to managers’ success. He has advice on how effectively evaluate candidates, promote employees, and get rid of poor performers.
Joel Peterson is the chairman of JetBlue Airways and he teaches at the Stanford Graduate School of Business. He’s the author of the book Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others, and Running Stuff. Joel, thanks so much for being on the show.
JOEL PETERSON: My pleasure.
ALISON BEARD: So, hiring and firing are such important things for managers to get right, but most of us don’t get formal training in them. How did you learn first and foremost to become an effective talent spotter?
JOEL PETERSON: Well, by making a lot of mistakes. So, experience – the school of hard knocks. I made a lot of mistakes in hiring, even more in firing.
ALISON BEARD: And judging someone in a first interview, from a resume, even from reference checks is also really hard.
JOEL PETERSON: Very hard.
ALISON BEARD: So, what are the lessons that you’ve learned about how to do that well?
JOEL PETERSON: So, I’ve learned to spec the job, to think about what really is the job? How would we make the decision? So, it’s not just sort of technical expertise, but really why would we choose one person with the same characteristics as another?
So then, making sure that you have a bunch of candidates, so that you’re seeing a lot of people, having a whole team do the interviewing, meeting together as a team to share notes, doing reference checks and doing them yourself, not having somebody else do it. A lot of time people offload that. Then I think taking longer on the interviews. I’ve learned to spend a fair amount of time on interviews for a really important position.
ALISON BEARD: Like how much time?
JOEL PETERSON: Often an hour or more. A lot of times these interviews are 20 minutes, 30 minutes. You can’t make an important decision in that, so I’ll often say, it has to be at least an hour. I’ve worked with a fairly sophisticated group who spends four hours and they go all the way back to the beginning. Earliest memories almost. Every change in your life. Why you made the change. They do a really thoughtful analysis. So sometimes in an important position I’ll get outside help to do that.
ALISON BEARD: And that yields better people?
JOEL PETERSON: Better people and a better hit rate. I mean they say that if you get it right 50 percent of the time, I had the former head of HR at Citibank say, that we figure 50 percent is about our hit rate on getting somebody that’s the right person for the job. I’ve heard people who are experienced managers say about two thirds. You can get, if you can get two thirds. These folks claim they get over 90 percent of the time they get it right.
ALISON BEARD: Wow. You talk a lot in the book about the importance of character and values, both knowing your own and then surrounding yourself with people who are aligned with you. So how do you test for those things in an interview setting or with reference checks?
JOEL PETERSON: So, I think people’s values are really where they spend their time, where they spend their money and where their mindshare is. People always love to claim virtues, but they aren’t necessarily their values. So, I think if you’re really interviewing for values you find out where people spend their time, money and mindshare. What have they read? What do they think about? What issues concern them? And then you really understand values. People’s values don’t really change very much. They bring with them their values. What they learned at their mother’s knee is really kind of what drives them. And so, I think you want to suss that out in an interview.
ALISON BEARD: When you’re hiring for values and character is there a danger of just hiring people who are just like you, who grew up the same way you did, all of that? So how do you avoid that?
JOEL PETERSON: Yeah, that’s a really great point. I think that we’re obviously more comfortable with people who have similar backgrounds and similar values. So, values really if you think about them in terms of what a company does, it’s really how does it set its priorities? You want people who can get comfortable with the same set of priorities. So, I think you want diversity, all kinds of diversity of thought, of optic or whatever, but you don’t want people to have different priorities.
So, the example I always use of that is an orchestra. If you have an orchestra that’s made up of bassoons, it would be miserable to listen to. There’s no diversity. But if you have diversity of pieces of music, if everybody’s playing a different piece of music that’s a kind of diversity too. Which is a mess. So, you want everybody playing the same piece of music. That means they share values, but you want them to have different optics, different experiences, different things that have happened to them growing up, so they see the world through different lens.
ALISON BEARD: Yeah. So, speaking of diversity, your book is called the Entrepreneurial Leader and you’re saying that it’s, that’s a good thing to be. And you make the distinction that it’s not a manager, it’s not someone who presides over an already successful business. It’s not an administrator and it’s not even a pure entrepreneur that’s very good at starting things, but maybe not scaling them, or overseeing a larger operation. Are you always trying to hire entrepreneurial leaders, or do you want a mix?
JOEL PETERSON: Well you need all of those skills and I actually think the best entrepreneurial leaders have all of those skills to some degree. But they’re able to make durable change. They’re able to lead organizations to places they would not otherwise go and it sticks. And I think you can have specialists like you can on any team. I use the baseball theme, but you can have football or whatever where people play different positions. Wide receivers run fast and catch balls. Running backs run through the line. Offensive linemen block people. So, you want people who can play different positions. But in terms of who leads the organization, you really want an entrepreneurial leader who can do all of those things. They can innovate. They can administer. They can manage. They can preside. They can act as politicians. They understand power.
ALISON BEARD: Right. And surely that’s true for anyone you’re hiring to lead a team, or lead a function?
JOEL PETERSON: Yeah. Anytime that you have somebody who’s leading a group of people that has an objective they’re trying to get down and needs to coordinate with the outside market and everything, you want an entrepreneurial leader.
ALISON BEARD: Yeah. So, you have had exposure to so many different industries – real estate, the Chairman of a big airline. You work with lots of startups. Do these different types of companies need to approach hiring differently?
JOEL PETERSON: Well at one level they do. For example, the high-tech companies that I work with out in Silicon Valley have a certain spec that they look for. On the other hand, if they’re going to go to scale, it’s actually a lot the same. People are people. Whether or not they’re trained as engineers or doctors or lawyers, or whatever, they have these human emotions. They work in certain ways. And I think if you can get good at that, because in the end what you want to do is build a complimentary team that functions well, that trusts each other. It’s so much faster. They’re so much more flexible. Their decisions are so much more durable that at the end, whatever they’re doing, you need it to all come together that way.
ALISON BEARD: When you’ve hired a bunch of individual stars and individual entrepreneurial leaders, how do you get them to cohere as a team?
JOEL PETERSON: I always make the distinction between stars and divas. And they’re really difficult to tell the difference early on. Because they both work hard. They’re incredible. You can’t always tell the difference. Over time divas drive you nuts and they destroy organizations and you have to move them on. The stars, you can typically get so they’re working together around a mission, which is one of the reasons that I say it’s so vital to have a shared mission. If you can decide what peak you’re climbing together. People can help each other. They belay each other. They help each other through everything and so stars can do that.
ALISON BEARD: I do want to turn to firing in a second, but before that let’s talk a little bit about developing those people who seem like mistakes, but could maybe grow. You’ve said that there are no perfect decisions. There are probably no perfect hires either. So how do you make sure to enhance people’s strengths and then help them overcome their weaknesses so that you don’t need to fire them?
JOEL PETERSON: Yeah, I’m so glad you asked that because I think a lot of times people overlook – somebody isn’t the perfect hire. Well, we need to move on. My experience is if their values are really good and if you give regular feedback. Pull somebody aside in the moment when you see them do something and say, that was really great. Or, did you notice what happened when you did such and such? Or, this last month’s results didn’t really work out. Why do you think the reasons are? And I think if you have that constant dialogue with somebody, you can actually make course corrections along the way. And you want to coach people to great ends.
ALISON BEARD: Yeah. And how do you know when someone’s ready for a promotion?
JOEL PETERSON: Usually it’s so obvious it can’t be denied. You can’t wait to get them in that position. They just, they’re just totally ready and the organization needs it and you’re going to lose them if you don’t. And that you’d like to have that problem all the time where the organization is just pushing you for more opportunity all the time and are ready for it.
ALISON BEARD: So, you’re not an advocate of putting someone into a role that they’re not quite ready for?
JOEL PETERSON: I’m a believer in what they call a deep selection. Where you’re not afraid to get the 30 something with a big responsibility. I’ve had a lot of success with hiring when somebody on paper doesn’t look quite ready, or you know they have the brains, the talent, the work ethic, the interpersonal skills, the soft skills necessary. I’ve had great success with that.
ALISON BEARD: OK, so now let’s turn to firing. This is something that all managers dread and most do not know how to do well. First, how do you know when it’s time to let someone go?
JOEL PETERSON: So, typically what I used to tell a manager was that if somebody darkens your door and you wish they’d go away, or you’d like to slam the door, you probably have come to that point where you need to move on it. Whereas if you say please come in and you look forward to them sitting down, tell me what’s going on, better than you’re probably still on an upward trajectory.
So people, and the only reason I say that is because people have a sense that things aren’t quite going right. Many times they defer dealing with it. They don’t say anything about, say well this would be awkward. My advice is to say right away, somethings not going right. Let’s talk about how are you feeling about your job? How are things going for you? Because I’m feeling uncomfortable. As you have those inklings, you should start talking about it.
ALISON BEARD: And what about when you personally like the person. You enjoy them coming to your door. You like having conversations with them and they’re just, their results are not to par?
JOEL PETERSON: Yeah. So, my experience is that rarely happens because you’re giving feedback and you say, this is what I need you to do. I need the following. But I think you have to say we’re about results. In the end we have to perform. Everybody has to deliver on promises. In a sense that’s how you build a high trust organization. You can’t have trust if people are always falling short of what they say they’re going to do. So, I think you make that a rule going in, is we are going to have a high trust relationship between the two of us and with the organization and if there’s ever a breach of that, we’re going to deal with it immediately.
ALISON BEARD: And in most cases do you advocate that managers create a performance improvement plan? Go through months of attempted development, of trying to right the ship before getting to that we’re going to have to let you go conversation?
JOEL PETERSON: Well, I think the Performance Improvement Plan, typically known as the PIP, is really sort of the precursor to letting somebody go in many cases. And I think many employees view it as that. I think if you can set it up where you say, I want to give you feedback. Let’s keep talking about things. Let’s have an agreement. You can keep it so it’s not quite as formal and as threatening as that. On the other hand the Performance Improvement Plan does give somebody adequate notice. It gives them a chance to get their resume together, to start interviewing, to doing things like that. And the outside chance that they can improve. They can actually meet the goals and objectives. I always try to tell people we’re having this conversation on feedback. This is not a firing. But if these things don’t improve, if we’re unable to improve these things then you and I will have to talk about whether or not this is the right place for you.
ALISON BEARD: That in itself can be a really awkward conversation. How do you make sure that the employee leaves it feeling positive and as if there’s hope?
JOEL PETERSON: Yeah, well I think it starts out by saying, by fundamentally letting them know that you’re invested in their wellbeing, you’re a fiduciary for them. You’ve got their best interest at heart. So, I want to help you develop your career. Here’s some things that are getting in the way of that. In your career development and in your progress here, I’d really like you to work on running effective meetings. Here’s what I noticed – so being specific. Here’s what I noticed the last meeting that you ran. You didn’t have an agenda. The follow, there were too many items that you covered and there was no follow up. Let’s work on that. And so that doesn’t feel like a Performance Improvement Plan where everybody signs off on it and it becomes part of your file. It feels like me coaching you.
ALISON BEARD: Right. What are some other big mistakes that people make when they enter into that really tough conversation?
JOEL PETERSON: I think one of the worse ones people make is they wait for a triggering event. They wait for something. I know I don’t like what you’re doing. I know you’re underperforming. This is a problem. This is miserable for both of us. But you haven’t done anything yet that will allow me to fire you. I’m just going to wait. I’m going to pounce when that happens. The problem with that is I’m usually upset by the time it happens. I have, one of my entrepreneurs comes in and she says, you know, I love you, I love you, I love you. Get out of here. Because she just can’t make the decision to say OK, this is enough. OK, that did it.
ALISON BEARD: And you are obviously not a fan of outsourcing any of this to HR or?
JOEL PETERSON: Yeah. I think it’s kind of a chicken way to do it and I think people tend to resent it. I think the HR folks have a big role. I think they have a role in making sure that you have a full file and making sure that you’re following all the legal issues. I think they can help with severance, with vacation pay, with outplacement, with the announcement, with a lot of the details of it. I think they can be quite helpful.
But in terms of if you and I are working together, in terms of me sitting down and saying, I’ve made this decision and it’s based on, you and I have had conversations over time. It’s just not working out. I want to help you be happy someplace else. I want to do that myself. And I think, and I’ve had experience where people come back years later and say I really appreciate that you did that. It actually turned into a good thing for me. I appreciate that you took the responsibility rather than coming in and saying well, the Board made me do that. I wouldn’t have done this. It was the Board that made it some faceless monster. I just think people don’t like being treated that way.
ALISON BEARD: Yeah. You talk in your article a lot about sort of a forward looking mindset even in that conversation. Talking about ways that you can help. So how do you do that in a way that makes the message perfectly clear?
JOEL PETERSON: I try to describe it as we’ve decided to move on, or we’ve decided to make a change. People understand that – people change and organizations change. Firing is such a harsh word that I would try to avoid using that word, but —
ALISON BEARD: But I think it’s hard because people will know you’re using euphemisms. You’re not letting me go, you’re kicking me out.
JOEL PETERSON: Yeah. Well, we’re moving on together. You’re moving on and I’m moving on. I have a duty to do the best thing for the organization. You have a duty to do the best thing for your life and I think this is the right thing for you. But I want to help. What I’m doing is I’m recruiting an alumnus. Or alumni. I really want to make sure that if I run into you on the street, if I hire you again, if I someday work for you, if we end up in the same company again, I mean the world is small and networks are tight, and getting tighter. I want to have an ongoing relationship. I made a mistake as well as you made a mistake. We both thought this would work. It hasn’t worked. We may not know all the reasons, but it hasn’t worked and therefore we’re going to move on. We’re both going to do something different. But that’s not to say that you’re a bad person or that I’m a bad person. It just hasn’t worked. And so that’s an easier conversation I think.
ALISON BEARD: Yeah. What’s the most difficult firing situation you’ve ever been in?
JOEL PETERSON: So, I had one where I had to actually walk somebody to the elevator, lock them out of their office, ship them their computer. So that’s the most stressful and it’s happened one time in 45 years of doing this.
ALISON BEARD: Because the person’s behavior or company protocols?
JOEL PETERSON: Because of the person’s behavior.
ALISON BEARD: Oh wow. So that gets to my next question. What do you do if it’s a person you don’t want to help going forward? You think that they’re an underperformer. You don’t agree with their values. You think they have bad character.
JOEL PETERSON: Well, so I start out by saying, how did I bring them on? How did they get here? I have some culpability for that and even if I weren’t the one that hired them, I let them stay on for a period of time. I didn’t correct them effectively. I was unable to manage them to a better place. And so, I start out by saying, I have some responsibility for this. That helps me not just feel anger. And then I think you just say, you know, they have a life. They’re a human being. They may have kids or spouses, or whatever and I do want them to get on with their life in the very best possible way. Even though I don’t approve of or like them or whatever. I’ve often told my students that I love them even though I don’t like some of them.
ALISON BEARD: Right, right. So, we’re talking here about empathetic firing. How much of that is showing in the room that you aren’t emotionless? That you aren’t reciting in monotone, here’s a checklist of things we need to go through. How do you convey emotion without letting it get out of hand?
JOEL PETERSON: So, in many cases I say I’m really sad this hasn’t worked out. I want the future to work out for you and I want to help with that, or I want to make a few suggestions at some point. You just do something to connect with them. But I don’t know that – there’s a line at which you can’t cry, you don’t want to be there blubbering together.
ALISON BEARD: Right. Have you ever been fired yourself?
JOEL PETERSON: Yes.
ALISON BEARD: Tell me about it.
JOEL PETERSON: Well so this is one where I was fired, sued in county court, sued in state court and sued in federal court.
ALISON BEARD: Oh my.
JOEL PETERSON: It was a very short conversation. It actually, as I look back on it it’s probably the best thing that ever happened to me, which by the way, in many cases of being let go it turns out to have been the best thing that ever, could ever have happened to the person, so if it’s for the right reasons. I think in my case it was because I was standing up for a principle that I just couldn’t bend on. I just felt like I couldn’t bend and I think it turned out to have been a very smart thing for the people who fired me because they were able to, I was actually the managing partner of the whole company. And so, I think they sent a message to the other partners that oh my gosh, if you don’t go along with this, look what can happen. If they’re willing to fire the managing partner, they’re willing to fire any of us. So, it was actually very traumatic and very difficult and, but a great thing in the end.
ALISON BEARD: Wow. You have been working for a very long time across so many industries. Has the way people hire and even fire changed?
JOEL PETERSON: Yeah, I think it has. I think organizations used to be more command and control, and people had jobs, and they wanted to maintain their jobs. I think now, particularly information workers are volunteers. They have all kinds of options out there, so you’re really recruiting every day. You’re assessing every day. These are conversations that you need to have. So you stayed this dialogue and you understand that we’re all, this is a dynamic team. This is a team that’s forming, reforming, changing all the time. And so, I think you develop a sensitivity around that and it’s in some ways easier.
ALISON BEARD: Do you find that managers are so focused on hiring and recruiting that they forget how to let people go who need to go?
JOEL PETERSON: Yes. I think there’s a tendency to just be focusing on growth and hiring and holding onto people. What happens is if you’re, if you don’t pay attention to the other, is you build up deadwood, in the organization, and people get shuffled off to places that don’t matter and pretty soon you build up these little corners of deadwood in the organization which is a cancer, in the organization. People sense that things aren’t hitting on all cylinders. And so, I think it’s really important to go through the organization at least every year and say where are we doing really vital things? Who’s really vital to it? Where’s the future taking us? How do we recalibrate, reorganize? Who can grow into new positions? I always tell my young entrepreneurs, if you’re a founder, at some point the organization is going to outgrow you. And you have to be willing to let go. Because it’s in the best interest of the organization. So, every organization and every founder, every CEO has a shelf life. And I think that’s an important thing to setup as a kind of a rule, a norm.
ALISON BEARD: Well, thank you so much for coming in today. It’s been a pleasure talking to you.
JOEL PETERSON: Yeah, my pleasure totally.
HANNAH BATES: That was Joel Peterson in conversation with Alison Beard on HBR IdeaCast. Peterson is the former chairman of JetBlue Airways, and the author of the book Entrepreneurial Leadership: The Art of Launching New Ventures, Inspiring Others, and Running Stuff.
We’ll be back next Wednesday with another hand-picked conversation about leadership from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.
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This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Music by Coma Media. Special thanks to Rob Eckhardt, Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.
