Senior management dismissals need to be handled and communicated with care
Only eight days into the World Cup tournament and it was all over for Roy Hodgson and his England squad. The media, always quick in these situations to find someone to blame, immediately began speculating about Hodgson’s future as England manager and suggesting potential replacements.
Life is always precarious for football manager. But it can be just as uncertain for senior executives outside the world of football, with investors and shareholders often impatient for stellar results.
Selection
Expectations are most likely to be met if the right senior managers are hired in the first place. So whether you promote internally or look outside the business, it’s crucial to start the recruitment process by defining the role profile and what you want the successful candidate to do so that you can outline the skills and experience they need to have. You should then be able to benchmark applications and make a selection that is right for the business.
It’s also important to adopt a consistent approach to assessing candidates in order to avoid any suggestion by unsuccessful candidates of discrimination on the basis of a protected characteristic such as race or sex. Remember that there is no requirement for individuals to have completed two years’ continuous service before they can bring discrimination claims, unlike those for unfair dismissal. In addition, compensation in successful claims of discrimination is unlimited.
Dismissal
But however much time and effort goes into the recruitment of a senior manager, appointments do not always work out. While the easier option may be to ignore poor performance, this is not going to address the problems, which, particularly in the case of senior employees, are only likely to get worse.
As with any dismissal, the employer will need to have clear and objective evidence of the manager’s poor performance, ideally illustrated with relevant documentation. In this country employment legislation places considerable emphasis on employers completing dismissals in the right way, taking account not only of their own disciplinary procedures but also of the ACAS code of practice.
While employers often have the necessary evidence of poor performance, all too often they fall down in the way they carry out dismissals.
The removal of poorly performing employees who are also directors of a company can be particularly complicated. Ideally, any service agreement relating to their employment will provide that they are obliged to resign as directors if their employment is terminated. Alternatively, you may have to look at the company’s articles of association to see if the board of directors can remove the director or whether it’s a matter for the shareholders.
In addition, regulators may need to be involved in some cases - for example, to approve any payments made to the individual on termination. Limited companies must also notify Companies House within 14 days of the removal of any director.
In most cases the exit of a senior manager or director will be wrapped up under the terms of a settlement agreement, formerly known as a compromise agreement, whereby in return for the payment of compensation the individual waives their rights to bring legal claims associated with their employment or its termination. The sums involved may well reflect the terms of the contract, which can specify the compensation that the individual will be entitled to, depending on both the timing and reasons for the termination.
Communication
One final point to note with a senior termination is that the employer needs to think about how to communicate the decision both within the business and externally in order to minimise any adverse effect on morale and reputation.
Hodgson, meanwhile, appears to have survived the inquest into England’s early exit from the World Cup, and looks set to stay on as manager until the European Championships in 2016.
Jane Cox is an employment partner at Weightmans.
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