My view is simple: if you’re letting someone go for performance, pay generous severance. Not because poor performance should be rewarded, but because a clean separation is part accountability, part compassion, and part respect for everyone’s time.
When we did this well, our default was 1 month of compensation for every year of employment together. That rule wasn’t meant to be “fair” in some abstract sense. It was meant to be predictable, dignified, and fast. It reduced drama, reduced bargaining, and made it easier for both sides to move on.
When it comes to compensation, I don’t do 1-offs. It is either what we do for everyone, from now on, or we don’t do it. No exceptions. The moment you make severance discretionary, you invite negotiation, inconsistency, and second-guessing. The whole point of a severance rule is to remove heat, not add it.
Over time I noticed most performance exits fall into 1 of 3 situations.
First, someone who did well for a long time, but can’t keep up with where the company has grown to. The job changes. The bar rises. The cadence accelerates. The person isn’t bad, the fit has simply changed. This is the expensive case because tenure is long, but it’s also the easiest case morally. The relationship worked for years. In my mind, that earns real runway on the way out.
Second, someone who has been a poor performer for a long time, and the situation was allowed to drag on. This is the frustrating case, and it can also be expensive. It’s tempting to frame it as “their fault,” but in most cases the bigger failure is upstream. Someone hired them, placed them, and then tolerated a gap between expectations and reality. When a performance problem is avoided rather than confronted, severance becomes a tax on managerial procrastination.
Paying severance here is still the right thing to do, but the lesson isn’t about the employee. It’s about the leader and the system that let it persist.
Third, someone who joins the company and within 6 months it’s clear performance isn’t adequate, then they get the next quarter to correct. This is the least expensive case and, counterintuitively, the healthiest signal. It means the company is paying attention early, expectations are being measured, and mismatches are resolved before they calcify into long, miserable stalemates.
You should expect more churn inside year 1 in organizations that are honest about performance, and lower churn after year 1 because the people who remain are genuinely aligned and supported.
None of this is meant to romanticize severance or to pretend every exit is blameless. Sometimes the employee truly isn’t meeting the bar. Sometimes the company didn’t set the bar clearly. Often it’s both. Generous severance is not an endorsement of the performance; it’s the cost of ending the relationship cleanly once you’ve concluded the fit isn’t there.
A boundary that matters: if people leave of their own accord, that is their decision. I wouldn’t pay someone to make that decision unless it was a negotiated exit.
By negotiated exit I mean this: if someone is on a performance improvement plan, we tell them that if, at any time over the duration of that plan, they decide this role isn’t for them, we pay severance. We make it easy for them to self-select out. The goal is speed, honesty, and a clean reset for both sides.
There are exceptions, like dismissal for cause. In my experience, “for cause” was rarer than I thought it would be early in my career. And when I did think I had a “cause” situation, hindsight usually showed something more uncomfortable: I hadn’t managed the problem early enough. I let ambiguity build. I let standards slide. I let resentment replace leadership. By the time you’re debating “cause,” you’re usually debating your own avoidance as much as the employee’s behaviour.
One caveat: employment law and severance norms vary widely by jurisdiction, and “severance” can mean different things legally than it does in conversation. This is a values-based view, not legal advice. In real situations, you still need to work through local minimum requirements, benefits and other accrued entitlements, and any contractual or common-law obligations before you decide what “generous” means.
If you want a high-accountability culture, you can’t outsource accountability to a harsh exit. You build it through clarity, measurement, coaching, and timely decisions. Severance is what you do after you’ve failed to find a path forward together. When that happens, pay people in a way that reflects who you want to be, not just how disappointed you are.