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Every day, we at Hutchison PLLC work with founders and entrepreneurs as they fight and grind and stress and push to bring their visions to reality. We are inspired by their incredible stories of success, of failure, of reworking and trying again.
Chelsey Warren: [00:00:00] Uncertainty is the only certainty. So you might as well shoot your shot and get yourself out there and go for it. And then don't start thinking about people too late.
Ashley Pittman: Don't be afraid to cut someone loose. If it's pretty clear it's not going to work out. It could be hard to assess. Is this person the right fit?
And if they are a bad egg, how that can impact the company.
Trevor Schmidt: Hello and welcome to the Founder Shares podcast brought to you by hutcheson. A law firm in Raleigh, North Carolina that helps founders and entrepreneurs in technology and life science companies start up, operate, get funded, and exit. So whether you're already an entrepreneur or want to be one someday, or are just fascinated by the stories of how a business goes from idea to success or not such a success, this podcast is for you.
Well, welcome to the Founder Shares podcast. We have a really interesting episode today, and I'm so excited to get to it. And with us today, we have Chelsey Warren. The founder and principle of Spark People [00:01:00] Advisory, and we also have my law partner, return guest to the podcast and employment lawyer extraordinaire, Ashley Pittman.
And together we're going to tackle one of the most important aspects of any startup or growth company. It's people. So Chelsey, welcome to the show.
Chelsey Warren: Thank
Ashley Pittman: you. So excited to be here.
Trevor Schmidt: Yeah. And Ashley, welcome back it's old hat to you. I'm.
Ashley Pittman: Yes, obviously I'm, I'm a pro at podcasts now for my, my one prior appearance.
Thank you. Absolutely.
Trevor Schmidt: So, Chelsey, your website describes you as a strategic people leader and advisor and at other places as the HR and recruiting Swiss Army knife. And I, I want to get into what all of that means, but, you know, sometimes it is helpful to ask the question of like, if you're at a family reunion or you go back to a class reunion, you know, how do you explain to people what it is that you do?
Chelsey Warren: Yeah, so the way I describe myself is that I'm a people problem solver. So I help companies hire, retain, grow, uh, their employees. And ultimately the goal there is that when your employees are successful, your business is going to [00:02:00] be successful. So the work that I do ultimately allows companies to hit their revenue goals and be successful based on effective people programs.
Trevor Schmidt: So how did you originally get into this type of work?
Chelsey Warren: Yeah, so I originally went to school for psychology. I've always had an interest in working with people. I've been fascinated by how people think about different things, and originally thought that I would take more of a health or medical route and go to school to become a psychiatrist.
And then what I ultimately landed on was that. I didn't think that I could handle the emotional burden of being that in the weeds with people's day-to-day, um, life challenges. And I also was very interested in business and found what I do through, um, a mentor of mine who encouraged me to think in a different way.
Okay, you're interested in business, you're also really passionate about serving others. How do you combine those two passions in a way that allows you to have a meaningful career? And that's [00:03:00] ultimately how I started. My career, I started, um, in recruiting and so I worked on the agency side working with a number of different industries and clients.
Early in my career, I then transitioned to working in a Fortune 500 atmosphere. And then most recently I worked with a growth stage startup through, uh, pre IP os phases through becoming a publicly traded company and then post IPO phase. So very, a very kind of broad mix of different work that I've done.
Um, but yeah, hopefully that. It answers your question.
Trevor Schmidt: Well, it does, but also, I, I have to go back 'cause you said something about like not wanting to get too involved in the emotional aspect of certain aspects of psychiatry, but talking to Ashley, it sounds like sometimes the employment space gets pretty intense and in depth in some of the, the emotions and the, the feelings people have as as, as they work.
Chelsey Warren: Yeah, that's true. I mean, you do still deal with a lot of emotionally charged situations, especially if you're navigating a layoff or something like that. I mean. Um, [00:04:00] but there is a difference between being able to tie back to the professional element versus being in the weeds with someone's marriage or what's happening with their kids, things like that.
So that was the, the difference for me,
Trevor Schmidt: for sure. So, so what led you to found Spark?
Chelsey Warren: Yeah, so really it came from the observation that I had made. From working at a growth stage company and also interacting with lots of other people, leaders and founders in that space. And what I discovered is that often, um, companies, especially if they're in growth stage, well, it's my point of view that everyone needs to think strategically about talent from an early phase.
But not every company needs a full-time person and to carry that headcount doesn't always make sense for the business. And I felt like there was a gap that really businesses felt it was all or nothing. So I either have to do this all on my own or I have to hire someone full-time. Maybe I don't feel prepared to do that financially or maybe just where my business is at.
From a scaling perspective. It doesn't make sense. [00:05:00] And so I started my business to fill that gap to give businesses the opportunity to leverage strategic. Talent leadership, um, in a way that makes the most sense for their business and the stage of the journey that they're in. So whether that is just advisory support or project-based support evolving to a more long-term, uh, arrangement like a fractional leader, something like that.
So there's really a number of different ways that I work with clients.
Trevor Schmidt: And do you have a favorite kind of size or, or kind of moment in the company's life span that you'd like to work with?
Chelsey Warren: I mean, I love growth stage companies. There's nothing like being a part of an organization when they're scaling and there's energy and enthusiasm about the direction that the company is taking.
So from a headcount perspective, I wouldn't say that there's like a sweet spot in headcount that I focus on, but it's more about just being in the growth stage, moving really fast, being innovative. That's where I really like to meet clients. [00:06:00]
Trevor Schmidt: Nice. Now how about you, Ashley, for those of our listeners who, who didn't get a chance to listen to your prior episode, which I'm gonna encourage everybody to go back and listen to, to Ashley's conversation there, but tell us a little bit about your practice and what it is that you do.
Ashley Pittman: Yeah, so my, my practice is a combination of sort of general corporate venture capital, financings, mergers and acquisitions, and then employment law. Um, I would estimate that, you know, 30 to 40% of my practice is employment law on, on a good day. Uh, um, and. In, in terms of kind of what kinds of employment law?
You know, in some ways you kind of are serving as an outside HR person for the early stage clients who don't yet have an HR consultant or an HR employee. Um, but it's also kind of. Onboarding folks doing offer letters, PIAs, proprietary information agreements, um, terminating folks when you need to. Again, because some of these clients in the early stages, they just [00:07:00] don't have support yet, and so you're providing that support.
Um, we, you know, we don't do litigation. Thank goodness. When I went to law school, I knew that I did not want to do litigation. I wanted to be a corporate attorney. And I, I have. Managed to mostly stick to that. Um, but there are some, you know, tastes of litigation or kind of a lead up to litigation because sometimes we're not able to, you know, get somebody out the door neatly and cleanly and it ends up, you know, becoming a dispute.
So the, the hope is always to avoid it. Um, but sometimes things go that way and, uh, yeah. So it's, it's nice when I. And sticking to most of the corporate stuff, it's a little more boring, less interesting. Um, but yeah, as, as Trevor mentioned, I sometimes have really fun stories of the dramatic things that are going on.
Trevor Schmidt: I was gonna say, so now, but how did you get into kind of the employment side of the work that you do? Was this something you went to law [00:08:00] school for or,
Ashley Pittman: um, I took, you know, a couple classes on it in law school as just something that sounded like this could be interesting. Um. Some of my work in the prior life before law school was just transcribing interviews from workplace investigations and in that capacity thought, wow, this is some really interesting stuff.
You know, people are gossiping. It's not as fun when you're the person actually like running the investigation, but it's neither here nor there. Um, so I had a little bit of, you know, experience with dealing with employment. Stuff. Took a couple classes on it in law school and then after law school being here at Hutchinson, um, there was an opportunity here for we need this skillset.
And the team was, you know, willing to have me learn that skillset and run with it and. Here we are. Yeah.
Trevor Schmidt: Well, I'd be interested to hear from both of you, kind of having worked with kind of a number of different companies at different sizes, you know, what are some of the differences that you see from an HR [00:09:00] recruiting perspective for that differs for a startup versus, you know, maybe a venture backed company versus a Fortune 500 or, or IPO company?
Ashley Pittman: Yeah, I, I think there's, you know, a number of, of of things to think through. One of them is, you know, we kind of talked about compliance a bit. The rules that apply depend on how many employees a company has, and each state is different. But for purposes of this, from a federal perspective, title VII doesn't apply until you have at least 15 employees.
You should still probably be abiding by those principles, especially because, as I said, some states it have their own discrimination laws that apply. To smaller companies. Um, but once you cross that threshold of 15 employees, okay, now I have to seriously understand if an employee comes to me requesting an accommodation for a disability, what do I have to do with that?
What is the process? Because there is a process. Um, you know, and that that increases, you know, as, as you keep going up. There's more things like [00:10:00] that once you get to 50 employees. Okay? Now I have to follow FMLA. If somebody wants to take me an extended period of medical leave. What does that mean? What are the rules I have to abide by?
So there's more things to be aware of as you grow in terms of kind of legal compliance. Um, the sorts of issues that I think you run into on a day-to-day basis are gonna change too. In terms of early stage. When you have five to 10 employees, you're largely kind of. Culturally, just thinking about like, what's the, the minimum I have to pay folks in cash because I have to get this company off the ground.
Wait, do I have to pay them? Well, yes. Yes you do. Please do. Okay. Uh, um, you know, how much equity can I throw at people to make it worth their while? You know? And then as you grow there, there's less of that and more of kind of what are, you know, meaningful employment benefits that I can offer folks to keep this an exciting place to work.
And, um, you know, things like that. And so just kind of. The structure of how you're incentivizing your team changes, how you're doing [00:11:00] compliance changes. Um, and in terms of kind of building a culture too, in those early stages, often there's kind of this feeling of, you know, I just kind of, if people want PTO, they can just do whatever, just kind of communicate with me and kind of a loosey goosey approach to things.
But as you get larger, you kind of have to start implementing policies and culture just so that you don't. Accidentally end up backing into treating somebody differently than somebody else. In a way that when there was three people on the team, we all kind of knew what was going on, but when there's 40, hey, it looks really unfair that Jim, Bob is getting to do X, Y, Z, and I don't get to do that.
And you know, so things, things certainly shift as, as you grow in size.
Trevor Schmidt: Well that provides a good segue. I mean, because as you think about some of these steps that A, a really young company that can take. You know, like for example, employee handbooks, you know, is that something that kind of a baby company really should be thinking about?
Or is that something that they can wait and put off until later? [00:12:00]
Chelsey Warren: My point of view is that you shouldn't over-engineer too early. I think you need to think about the critical policies that you need in place to be compliant. Some of the things that Ashley was just talking about, but when you spend too much time on that, in the early stages when you really need to be nimble and focused on speed, and it may not be the best utilization of time and resources to go into an employee handbook when you have.
Under 30 employees, that's probably not the best use of your time. It's focusing on what are the most critical policies that you need in place and evolving over time to add more structure where it's needed and where things are popping up.
Ashley Pittman: Yeah, I think, I think that's exactly right, right? There are some policies that kind of from employee one you should have, whether they're in writing or not.
And for that it's things like, you know, if my team is in California, California requires paid sick leave, okay, I need to abide by that because it's a legal requirement even if, you know, I don't have a written PTO policy yet because there's only a handful of us and we have kind of an [00:13:00] unlimited PTO arrangement.
Um, so there are certain things that from early on. You should have policies in place and it never hurts to have like an equal employment opportunity statement in your policies. Um, and frankly, PTO is a handy one to have from an early stage just because it's something that everybody cares a lot about and wants to know the rules of so that they take that benefit.
But yeah, certainly no need to have a long handbook and a state by state agenda when you have a really small team. You, you know, it's just, you don't really need to spend the time and the energy. On that until you have a team that's large enough to warrant needing to set these policies, and in some ways you'll kind of find what policies you need as things happen.
Hopefully not super messy things, but like, Hey, this guy asked for, you know, can I bring my dog to the office? Can we have a policy on bringing dogs to the office and who, you know, what the rules are for that? I have actually drafted a policy like that before, just [00:14:00] things like this come up. So.
Chelsey Warren: On that note, I think another important thing to add is in those early stages when you're doing things like implementing a dog work policy, is thinking through the long-term impact of rolling out a policy like that.
Because what works when you're a company of maybe 20 people, when you scale to 50 or a hundred, may not be, and then you have to think about, it's much harder to take things away once you have introduced them, which is another reason to be really thoughtful about the policies that you do put in place. So just to add on there.
Ashley Pittman: Uh, another example of one that you might consider, um, implementing early on in, in terms of kind of just thinking through like legal risks is, do I just have a policy, an anti-harassment policy that just says if you ever experience or witness somebody else exp, you know, experiencing harassment in the workplace.
Here are the two routes that you can report it to. Either your supervisor or HR or the Cee o, you know, something like that. Not an essential, you have to have this, [00:15:00] but in terms of just kind of thinking about potential liabilities and just kind of a safe culture at your workplace, that's another one that would be easy to implement early on.
That can be as simple as, you know, we're not gonna define what harassment is. Most folks know what it is. If you experience it or see somebody else that you think has. Here's what to do is an easy one to put in place without having to have a lot of legal language.
Trevor Schmidt: Well, I would think that that one's gotta be tough or a small team in some respects too, because when you're a small team and there's, you know, maybe a dominant personality in the Cee o, how do you respond to kind of issues with managers or issues with your boss, or issues with the Cee o?
I imagine that's gotta be pretty challenging.
Ashley Pittman: It. It definitely is tricky with a small team, and that's why, you know, as I mentioned, you'd have kind of two avenues for reporting things like that in your policy. That's both important from a legal liability perspective. If a lawsuit were to happen and just practically of like.
If it's my boss that's doing it, I don't want to report it to him. Um, but that's also where it [00:16:00] becomes really helpful to have somebody like Chelsey as an external resource of, Hey, there's only, you know, eight people on this team. Two of them are butting heads and we're having a real problem. We need a neutral person to come in and guide us through this situation.
So that, that's one of those times where having an HR consultant, even if it's somebody fractional, can be really helpful.
Chelsey Warren: Another thing I would add, just as I was thinking about it more is how critical it is to make sure that your teams are trained to be able to interview effectively and understand the things that they should and should not be asking people while they're interviewing.
I'll never forget, I had a friend of mine who interviewed with a company when, um, and the hiring manager asked her if she had children, and then went on to explain how the environment wasn't conducive to. People with families because of the hours they were working and things like this. And so a lot of people have never been taught how to interview effectively or how to think about discrimination in the interview process.
They think, oh, I'm just getting to know someone right now. I'm [00:17:00] learning about, and I'm being honest with them about the environment. And so I think that there's a lot of opportunity from that perspective early on, even if it is just. Setting some guardrails and making sure that your team and everyone who's involved in evaluating talent that's entering the organization is able to do this successfully and without bias or discrimination because that can create some major friction for early stage companies as well.
Trevor Schmidt: Well, that's an interesting point 'cause it sounds like, you know, a big part of, of your role may be kind of educational, kind of training leaders within the organization and the employees as to how to do things and how to do things well,
Chelsey Warren: yes.
Trevor Schmidt: So talk to me a little bit about kind of best practices from, from a hiring perspective, you know, how do you help guide companies when they're thinking about either setting up interview processes or setting up a recruitment process?
How do you kind of help guide these companies?
Chelsey Warren: I think the first thing is really thinking critically about why they need the person. So a lot of times people will rush to hiring because they're having some sort of immediate fire and [00:18:00] asking the critical questions about why are we really making this hire, and what does the need look like in six months, and is the need going to be the same, and are you being really thoughtful about the skillset that you're bringing in?
Or are you just trying to solve an immediate fire? Or are you just trying to backfill the role that you, maybe someone left and you think, okay, we need to backfill this person. 'cause there's a gap. But are you taking the time to think critically about how maybe things could be differently and you should be approaching that next hire?
So I think that's one. Um, when it comes to the panel, it's thinking critically about who is involved in why I am a big. I really push on teams who have to have consensus hiring, and every single person in the company needs to meet with this person in order for them to make an educated hiring decision here.
Um, so keeping panels smaller where they can be and really focusing on the most critical people that need to evaluate and understanding exactly what they're going to be evaluating so that they're clear and also the candidate is clear on their role. I also am not a big fan of peers [00:19:00] or subordinates, inter interviewing their manager.
Um. Peers don't concern me as much, but the times when I see people who are going to report to that leader interviewing that I think can make kind of a funky dynamic and lead to some complications down the road. So I usually advise against that. And then I think wherever you can have structured interview guides and put those in place, even if they aren't overly formal, but so everyone has a sense of what their role in the process is, and it also keeps peak teams accountable to having a consistent process across candidates so that you're not allowing.
Risk to pop up through the interviews because you're maybe evaluating one candidate a certain way and then adjusting how you're evaluating talent for a different candidate. So just having that consistency I feel is very important as well.
Trevor Schmidt: That, no, I think that's super helpful and, and it's interesting to me kind of talking about, yeah, I, I guess having that consistency across it.
So what are some of the risks that you've seen kind of creep in without [00:20:00] those types of guidelines or guide rails in place, what are some of the downfalls that could come about.
Chelsey Warren: I mean, cost. You hire someone and they're not the right person, and you bring 'em in, and then you have to go through a costly exercise of calling actually to help you terminate them because you made the wrong hire.
So I think it's the risk that you're putting your business at from just bringing someone in that won't be the right fit. And then it's also the cost when you, it's a, it's a tremendous cost to one, just recruit talent. The amount of time that you're spending, not only promoting the opportunity, but then spending the dollars of your team.
Interviewing, considering the amount of hours that are put into those efforts. So you have to be very thoughtful about the impact that that makes. Um, a bad hire can also take down the entire morale of the team. So if you have, you make one, if there's one bad egg that can spread like fire throughout an organization and really unravel the culture very quickly.
So finding the right people early on is so important for all those reasons. [00:21:00]
Trevor Schmidt: That's helpful. And Ashley, what, what are your thoughts from the legal side? I mean, what do you see when it comes to hiring, um, that you advise companies about?
Ashley Pittman: Yeah, fortunately I don't have to do a whole lot of the kind of pre-onboarding, pre-hiring work that's much more Chelsey's area of kind of.
Is this person the right fit? Legal's usually not involved with that, fortunately 'cause that can be hard to assess. My, my commentary would be kind of on the, on the legal side and mechanically make sure that, um, you have an offer letter and a proprietary information agreement with confidentiality, assignment of work product, non-compete if applicable, non-solicit.
Make sure you have those kinds of documents when you onboard folks and that you know, that will. Be extremely worth its weight in gold. And I'm sure we talked about on the previous episode of that I was on about kind of what those agreements typically cover. And um, you know, that's the kind of thing that an investor is certainly gonna wanna see, but you just as a founder, [00:22:00] want to have in place to protect the company's IP and to protect the company from.
Somebody going and poaching all your customers or poaching all your team members. Um, and then the other thing I would say, um, just kind of on the more kind of cultural and right fit commentary is don't be afraid to cut someone loose. If it's pretty clear it's not going to work out. You know, as Chelsey said, it could be hard to assess is this person the right fit, and if they are a bad egg, how that can impact the company.
If a, if a week or two in, you can just tell it's not gonna work out this, this person's gonna cause headaches. Just save everybody the time. It's only gonna, you're only gonna spend more and more money paying this person if you don't take care of it. Obviously, if you think there's potential, they just need to be trained up, keep with it.
But if it's clear from the start that this person just is not a fit for whatever reason, and obviously not for any discriminatory reason, um. Just cut them loose because it's only gonna frustrate your team and lower their morale. If you're keeping somebody [00:23:00] that they all know it's not, it's not gonna work out.
Um, it, it can be really costly. And so, um, you know, one thing you can do is to have an introductory, a 90 day orientation period. Um, but. You know, their, their employment is still at will during that period. But kind of having a check-in after 90 days, is this going well? Are you performing to expectations or not?
And if not, that's a good kind of off-boarding checkpoint. Um, but even in, in lieu of that, my advice would be if you can tell it's just not gonna work out, don't drag it out.
Trevor Schmidt: So the conventional wisdom of a higher slowly, and fire quickly is, is good advice?
Ashley Pittman: I think so. Um. Like I said, if, if they, if they just some training would fix it.
Oh, for that. That's not what I'm talking about. I'm talking about people where like the first week everybody's kinda like, huh, this just doesn't seem like the right
Trevor Schmidt: energy. What were we thinking during the interview process? Right.
Ashley Pittman: Yeah. You know, sometimes you can just [00:24:00] tell that the culture just is isn't the right fit.
Trevor Schmidt: Chelsey, you got thoughts on that?
Chelsey Warren: I think this goes into something that I, I think we're gonna talk about soon, but it's kind of the, um, when things go wrong and how to handle that. The only thing that I would add to what Ashley just shared there is that if it's not a situation like that, I think that's very unique to the situation and circumstances that Ashley's talking about.
Right? You hire someone, it's very apparent in the first week or two that they aren't the right fit, and then you, you know. Cut that quickly. Where I see this not work as well, the cut quickly mentality is when you have someone that's been with the organization for an extended period of time and you know, a leader, this, this has happened so many times, they'll have a leader come to me and they'll say, I need to fire this person.
And you'll say, okay, why? And they'll tell you why. And you'll say, okay, have you talked to, are they gonna be, so this is the question I always ask, are they going to be surprised when we terminate them? And they'll say, well, I mean, I, [00:25:00] I don't think so. I think they, I, I think they'll know. I think they'll know.
And I'll say, well, how do you know They'll know? Have you given them this feedback directly? Have you taught, have you been very, everything you just shared with me about why you're frustrated? Have you shared that with them? And nine times outta 10, I'll find that. They haven't because people are scared to give feedback and not many people know how to do it effectively.
And so a big part of the work I do is coach leaders to be able to give effective feedback so that when they do reach these points, they're able to say with confidence, yes, I actually have given this person feedback multiple times. I gave it to them ideally. Verbally, and then I followed that up in writing.
So I do have a paper trail to be able to support why we made this decision that was based off of facts and their actual performance versus any sort of, you know, funky circumstance that a person could make it about. That isn't the case. And then making that, making that decision. And I do think that they should.
Move quickly once either way. If someone's been in the organization for a while, if you know they're not [00:26:00] working, they should move quickly. But I also think that it goes back to just in general, why it's so important that you're giving, uh, effective feedback constantly so that you're putting yourself in a better position to make decisions like that quickly when it does come up.
Trevor Schmidt: Well, I mean, I think that's so true because at least from my work experience, everybody thinks that they're communicating clearly as far as. What their expectations are and how they're not being met, but without fail, people are always surprised when they're let go, it seems like. So it's good to know that there is training out there that's possible to, to help overcome that.
Chelsey Warren: It also makes it easier when you actually have the exit conversation because you can stick to those concrete examples and point back to, you know, we talked about this a week ago, this exact situation, we talked about this exact situation two weeks ago, and you stick to those concrete examples and you move on.
You don't have to get into the gray area. Outside of that, it's, these are the reasons that's it. And you can close the chapter, but if you haven't done that pre-work, it makes it [00:27:00] harder for you to have that conversation. And this
Trevor Schmidt: leads me into kind of a question about PIPS or performance. Is it performance improvement plans?
Is that right? Yeah. Is it possible to actually have a PIP used effectively? Because it seems to me that like everybody hears pips and they're like, I'm done. This is, this is my marching orders. They're just giving me time to find my new job. So I'm curious from your, both, both of your perspectives is, you know, is it possible to kind of use that to, I don't know, save a candidate or save the relationship with the company?
Ashley Pittman: Yeah, it's tricky, right? I think the, the perception of most folks when they get put on a pip is. They're about to fire me and this is just a precursor to firing me or just a cover up before they're gonna fire me because of X, Y, Z reason. If you look online, you see a lot of discourse like that. Um, and I, I think unfortunately that reputation comes from, yeah, there are companies that do that, unfortunately.
And it's a shame because. [00:28:00] There is a place for pips, I think. And you know, when a client comes to me with, I wanna put somebody on a pip, I tell them, you know, I, I wouldn't bother with it unless you truly are gonna keep them on. If they succeed on the pip. Yeah. This is not like, this is a precursor to firing.
That's not, there's just, then just go ahead and fire them. If you're gonna do that, there's no reason to do the PIP process unless it is truly, I want this person to improve. I want 'em to sticker out on my team and communicating that to them. I, you know, this is the metrics for success for you here. We want you to stick around.
I'm putting you on this plan to, to make that happen. Um, unfortunately, I think it still often comes across not in the way that it's intended as, as I'm describing it. Um, and so it often doesn't go well. Um, and so I'm, I'm interested for Chelsey's thoughts on kind of, is there a way to deploy a PIP that is more likely to be successful?
Um, because yeah, off often. Folks are not happy about it, which, I mean, who [00:29:00] would, who would be overjoyed about it? But you know, often it, it is taken in a, in a really bad way that you don't really intend it to be.
Chelsey Warren: I'm not a fan of pips for all the reasons that Ashley just stated. The only time I've seen a PIP be successful.
I think that there's one world in which this word, this is just my point of view, but if you have a very metrics driven role, so let's say that you're in a sales role and it's very black and white. It's either you hit this target. Or you don't. That makes a lot more sense to me from a PIP perspective than roles where don't, that don't have as clear of metrics.
Um, and I have seen it work in those situations where you have a sales person who's not hitting their quota. You clearly outline like, here are the requirements of the role. You have to be hitting this in order to be here. That is a bit more black and white. Sense. And in most of those cases that I have seen the leaders truly feel if they, if they start hitting their quota, then we're gonna keep them on, this is strictly a quota [00:30:00] issue.
This isn't anything outside of the quota. Um, but generally speaking, I think that pip's come across as reactive and like punishment, and they don't build trust between the leader and the individual. It just erodes it and puts people in a bad head space. And ultimately, if you're to that place, then. Most times a leader is looking to terminate that person, and the individual knows that.
So I think that they can work under a very specific set of circumstances, but overall, I don't advise pips.
Trevor Schmidt: So, and maybe it's not called a pip, but like, what, what, what do you recommend for management then, if you have a candidate who's like, I don't know, the, the management team feels like there's potential there, but for whatever reason they're not meeting it.
I think that goes back
Chelsey Warren: to the feedback that I was talking about. It's being really effective about exactly what they need to do and making it more of a point of discussion during your weekly checkpoints. Mm-hmm. But it's not a formalized structure. It's you're writing it down, you're putting it [00:31:00] on your agenda for your meeting.
You're having the discussion, you're following it up in writing, but it isn't a formal pip that feels really, um, like you're being punished.
Trevor Schmidt: Right.
Ashley Pittman: Yeah, implementing the the devices in a PIP toolbox without calling it that. Yes. And really leaning on the kind of coaching side of things and honestly not calling it a pip, but still kind of tracking performance against metrics and having those checkpoints.
That's what a PIP is. Just don't call it that. And I think it's a lot more effective.
Chelsey Warren: Yes.
Trevor Schmidt: Names have importance, don't they?
Ashley Pittman: Yes.
Trevor Schmidt: Well, so that leads us probably to probably with some of the more. Unpleasant portions of both of your jobs, which is terminations for, for a company. Um, so I just would be interested to hear kind of what are some best practices that that small companies or kind of growth companies can put in place to, to handle terminations, to handle them well, to be respectful of people and kind of still do what they need to do to take care of their business.
Ashley Pittman: Yeah. Um, [00:32:00] we've touched on this a bit already, but sort of, if you already know, you can tell it's not gonna work out. Don't drag it out. Um, you know, obviously give folks opportunities to turn their performance around as we've talked about. But if it's clear that this is, this person isn't working out for a cultural reason, performance reason, whatever it is, just deal with it.
It only gets harder and worse. Um, and especially if it is a cultural issue, they only start to cause more and more friction as time goes by. It doesn't get easier. Um. But you know, from the legal perspective, make sure you have thorough documentation because we kind of touched on this already of, you know, you'll ask a client, is this person gonna know this is coming?
They'll always say, yes, totally. We talked about their performance. They know it's coming. They're always shocked. And so Chelsey already kind of shared, make sure you have documented these, you know, conversations that you've had [00:33:00] with them about feedback and performance. Um, you especially are gonna want that because sometimes.
Like I said, they're kind of shocked by it and kind of separate those things as, yeah, but I thought I could still turn it around or whatever, and they're still surprised. And so having that documentation in the unfortunate event of a dispute of somebody saying, actually that's a pretense. You actually fired me because of this discriminatory reason or whatever.
You wanna have that documentation. The other thing that I advise folks from a legal perspective is. Frankly, I prefer to be candid. Sometimes clients will wanna just say, let's just call it a layoff to spare their feelings. And then, you know, that's, that's great In the moment I, you're not having to make somebody feel bad about their performance, but.
If that person then files an EEOC charge and you're now changing the reason in your argument against why they're claiming it's discrimination, you're saying, well, actually, you know, we eliminated the position and, and [00:34:00] also it was because their performance was bad in these different ways. And that looks like pretense to a judge or to the EOC that you're making up reasons now to cover for this discrimination that they're saying.
And so, you know, ultimately up to you of kind of what's the way to get somebody out smoothly. But in terms of kind of legal risk, I generally try to stick to be candid. If it is a layoff, say it's a layoff. If it's performance, say it's performance. If it's both, say it's both. You don't have to beat up on the person in the meeting, but you know, be candid of, we've talked about your performance in X, Y, Z ways.
We're not seeing the improvement that we wanted to, and the budget is tight with the market or whatever. For all these reasons, here's what we're gonna do. Um, and then kind of as a general practice, always have more than one person present for that conversation, just so that there's a witness who can confirm what was said and try to keep it relatively brief.
Don't kind of open the door to arguing against the reasons that you're giving. Try to just keep it to your thesis [00:35:00] and get through it quickly. Um, so that's, that's kind of the, the things that I think through from that kind of a legal perspective. And then obviously we kind of run the analysis of do I think there's risk here, somebody making a claim for discrimination, should I offer them some severance to get a release of claims instead of the other, you know, legal dynamic here.
But Chelsey, I'm interested for your thoughts on kind of how to smoothly exit somebody to the extent that you. You know, what are, what are the lessons for that?
Chelsey Warren: Yeah. There were so many things that you said that I wanted to speak to. I mean, when, when speaking to the layoff versus fire, there are also considerations there if you plan to backfill the person, and so depending on the state that you live on, if you have a layoff, there's a difference between that.
And someone being terminated. So there's a window of how long you have to wait to reopen that role. So there's just like a whole consideration from that point of view. Um, when it comes to the, um, another thing that I have found when, you know, actually we were talking about being to the point, not making it a long, [00:36:00] drawn out conversation.
And I think an easy way to establish that right out of the gates is we've put a lot of thought into this. This is a final decision. Then you kind of. Take people away from the place of feeling like they need to defend themselves or that they can make a case to be able to, you know. Earn their employment back.
I think saying that early on, this decision is final, we won't be making any adjustments here, um, makes that a bit easier. And I do think wherever you can allow people to leave with dignity and also. You know, most times in these situations it's just, you know, people want to do a good job. They wanna go to work and work hard and do a good job, and not every role is going to be the perfect fit.
And so having a little bit of compassion there when you're going into these conversations, and depending on the circumstances surrounding the termination, but being able to say like. Yes, I will support you with this next step. Or allowing them to exit with dignity. And I do think that when you can give severance, you should, because there are a few reasons.
I mean, [00:37:00] one is that it allows people to have a smoother transition and their exit from the organization is going to be much stronger and every. Person that you have employed then becomes someone who talks about, you know what it's like to work there and impacts your employer brand. They, it could impact your customers.
And so if you have an ability to have them sign a separation agreement, that also makes it so that they're, you know, not going to talk poorly about the organization when they leave. I think that's great. And it also reduces your risk around them, you know, filing a claim or something after the termination because they've agreed to, you know.
Sign that in exchange for a severance. So wherever you can, I really think that that's what you should do, even in a situation where someone's being terminated for performance. Mm-hmm. Mm-hmm.
Ashley Pittman: Yeah, and, and as I kind of mentioned, especially if it's somebody that you think may have some kind of claim, even if you don't think it's valid, but let's say this person complained once about what [00:38:00] they perceive to be somebody being treated differently than them.
A year ago, let's go ahead and offer them some severance. Just that we make sure that we kind of have a clean break. Yeah. Because that severance agreement typically is gonna cover a release of claims. Not all kinds of legal claims can be released in those severance agreements, but a lot of them can, and in particular, discrimination claims can.
Um, it's gonna cover as, as Chelsey mentioned, in non-disparagement of. I agree. I'm not gonna go posting on Facebook and Google reviews about, or Glassdoor about, uh, the company and saying negative things. Um, it can also cover off, you know, other things if, oops, we never had this person sign a confidentiality agreement when they first came on board.
'cause it was early days and we didn't have that kind of stuff in place. We can put things like that in there kind of. I'm agreeing in exchange to the severance that everything that I learned here in terms of trade secrets, I'm not gonna disclose it to anybody else. He wouldn't really probably put a non-compete in an agreement like that because an employee's gonna say, why would I agree to that?
Now you could try, uh, [00:39:00] but, you know, thing things like that can be, can be put in those agreements as well. But the, the important and most common ones are the release of claims and that, that non-disparagement,
Trevor Schmidt: this is kind of a vague question, but I was sitting here thinking about it. Is there situations that you've, either of, you've experienced where.
A Cee o or a management team comes to you and you're like, Hey, we're doing these terminations, and you're like, we just talked about this. You shouldn't be doing the termination because X just happened, or we just had this conversation about, I don't, I don't know what It could be the situation that causes you to roll your eyes when you get that email from your, your, the client or for the business team.
You're like, we just talked about this. This is not what you're supposed to be doing.
Chelsey Warren: I can't say that that comes to mind for me. I mean, maybe Ashley has experienced that only because my job as a partner is to really support the business in doing what they need to do. Right. I think what could be frustrating is if you've had conversations around feedback and you really think that they're opening themselves up for risk by making these decisions and they're not listening to you, then that would just signal to me that there isn't an effective partnership there.[00:40:00]
Um, but would love to hear what Ashley has to say.
Ashley Pittman: Yeah. The only thing that kind of comes to mind with that is sometimes you have a person who seemingly is sort of misconstruing situations to look like discrimination consistently. You know, you have somebody who. You know, clearly just doesn't really like to work at this company.
Um, or at least that's how it comes across and is complaining about every little thing that they can, um, and making it a legal complaint. You know, making it a, obviously this is because of X, Y, Z protected characteristic. Um, and you know, then when the client calls and says, I really wanna fire this person.
I'm tired of dealing with all these complaints and stuff. It's kind of like, well, okay. You and I both know that there's a larger story here, but this is gonna look like retaliation for making a complaint, which is a protected activity, and now you want to fire them. [00:41:00] Are there other things going on too?
And usually yes, like they're also not performing or in some cases they're not performing and they know they're not performing, so they start making complaints. Unfortunately. This is to be clear, this is extremely the minority, but there are some people who leverage things like this to try to save their position and.
It gets a little bit scary. Um, you know, it, it's frustrating because these laws are important and they really protect people from some really insidious and horrible stuff. But there are that, that small percentage of people who kind of weaponize those protections. In situations where it's like, dude, we're just trying to help you.
You know? Like, we, we want to have you work here, but you're making it, you know, too complicated. And anyway, so yeah, that, that's a situation where I'm kinda like, no, please don't fire this person of like, have they actually, you know, done it? Like, are there performance issues? Okay, then. Let's talk about those, but, um, that's the, that's the time that kind of makes you go, oh, do we have to, [00:42:00]
Trevor Schmidt: well, now let's move on to something a little more fun.
Enough, enough for firing people, not even to go at least fun from my perspective. Uh, tell me a little bit, uh, how you're seeing AI impact kind of the HR and the recruiting fields. Um, do, are you seeing it kind of trickle into your practices and what does that look like?
Chelsey Warren: Yeah, so I think, um, AI is everywhere, right?
It's all anyone is talking about. At least that's how I've been feeling in the HR and recruiting space. I think recruiting was pegged as one of the industries that would be able to really overhaul a lot of their processes early on. And what I've just been experiencing over the last couple of years is that companies are still very much in their early stages of using these tools.
Successfully. I think there are some things that we're doing really well in other areas of opportunity that are still evolving. Some of the things that I see tools doing right now are ranking candidates based off of their applications, um, help supporting with scheduling, which can be really burdensome for recruiting teams.
So where I think it's going is that a lot of those [00:43:00] more, um, administrative recruiting tasks are in a really great place to be. Uh, optimized ai, but the, the elements that you're not gonna be able to replace are going to be the human connection piece. And at the end of the day, people work for people. And so, how I think things will shift is that you may need less people supporting, um, you know, the task driven work of actually scheduling people or reviewing resumes and things like that, but you're still going to need.
Strategic recruiting partners to be able to bridge that connection between a candidate and a company and get people excited about the opportunity because people work for people. Um, in hr, I think one of the interesting opportunities is that. You know, for roles that are, have been primarily focused on just being policy pushers, I think that they're gonna be at risk, right?
Because you can use AI to reference different company policy. I've seen some companies doing this already in distribution center environments where they have. [00:44:00] An AI tool that on the floor leaders can reference if they're just trying to do a quick policy lookup. You used to have to go to a person for that.
You don't, you don't have to anymore. What I think again, it's going to, to shift things from the more administrative or process driven hr. Um. Partners are going to struggle if they don't evolve to be more strategic thinkers that are using these tools. And then really partnering with the business to be able to guide deeper strategy and do the things that AI can't do, which is understand the uniqueness of the culture and help weigh the pros and cons of, you know, implementing a new AI tool with maintaining human connection.
And so I think that's where we're at right now is really kind of the messy middle of implementation of understanding. Where are the areas where we can use AI and we should be using it, let's say, easy policy lookups or with scheduling support and recruiting. And where are the elements that we need to maintain the human element and the human connection piece?
Because at the end of the day, we [00:45:00] are all humans, right? Mm-hmm. And we wanna work for humans. We wanna work with humans. And so it's really that balancing act.
Ashley Pittman: Yeah, I, I agree that I think the place that AI is, well, in my opinion, kind of most helpful in the HR space right now is kind of looking up, okay, I just hired my first employee in Colorado.
I know they have paid sick leave. What are the rules there? 'cause they're different in Colorado than California. Can AI just tell me, okay, here are the states I have employees in, what, what should my policy look like to cover all those different rules? Perfect. Um. The, the areas where there's potentially risk with AI is, um, if you have AI reviewing or evaluating candidates and resumes, you have to be careful that they're not inadvertently doing so in a discriminatory or biased way.
And in fact, there's legislation coming down the pike, um, in some states that kind of, that are prohibiting using AI in that way, or if you're gonna use it. Steps that you have to take to ensure that there's no bias [00:46:00] like that. Um. It, it's kind of been an existing thing in the HR space already around like testing candidates and personality tests and things like that are regulated because that can be used in a discriminatory way.
Again, often, not intentionally, but it has what we call disparate impact on certain groups. Um, and I think ai, we're gonna be running a very similar analysis around is the AI. You know, shelving, anybody who has this, what we think of as an innocuous phrase in their cover letter or in their resume, and I'm losing out on these candidates, what legal risks does that create?
Or just candidates that I never met because the AI told me that I didn't want to, but actually they would've been great. So that I think is still developing and as I said, there's legislation coming around that California, and I think New York have some in, in process. Um, that's, that's kind of the, the things that I'm.
Thinking about in the AI space and then kind of once [00:47:00] you're on board, something, a word of caution around ai. It, it's really popular now to have AI note takers in all your Zoom calls. Um, make sure if you're doing that, that you have locked down and know for sure. Where those notes are being recorded and who has access to them.
Because I can tell you that in the, what two-ish years that AI has been popular and around multiple clients have had situations where an employee went and saw the notes that an AI note taker took from a Zoom call about them and about their termination, um, I would suggest. Don't include the AI note taker in calls where you're discussing personnel matters.
Or if you keep the AI in the Zoom call, please make sure that the transcript is only visible to the people that are on the call and not saved somewhere in your company intranet that other people can go see. Because when I tell you this has happened multiple times, like I'm sure that there's [00:48:00] other times that I haven't heard about.
So like that's, that's gonna continue to be an issue. Um. Yeah, lock. Lock down your note takers and know where those are being stored.
Trevor Schmidt: Well, that actually provides a good segue too, 'cause I think, I would think, at least from an HR kind of legal perspective, well, there's gotta be some policies for the company about how employees use AI and how the company itself uses ai.
Is that something that you've either of you've seen kind of come across in your practice?
Chelsey Warren: I have from the clients that I'm working with, they have an approved use. You can only use the approved AI tool that they have said that you can use. Um, so they'll form a partnership with, let's say, chat, GPT, and you use the company chat, GPT, and you are not permitted to put any company data just on the regular, um, you know, public chat GPT or things like that.
So that's one. Um, it's funny, one of the clients I'm working with to go back to Ashley's point. We were talking about using transcription for phone [00:49:00] screens and our employment attorney on staff there had said, at this stage we can, we can use it for transcripts as long as we house the transcripts. We need to maintain control of them, especially with some of this legislation that is on the horizon.
And also we cannot use it for hiring decisions. So if you're truly using it as. A way to collect your, and organize your notes, but you're the human being making the decision That's very different from. Taking the transcript, plugging it into a tool and saying, make a recommendation about whether or not I should hire this person.
And so a big part of the work that I've been doing recently is challenging leaders on that very piece. So if they say, I'd like to use the transcription feature in my phone screens, it's, well, one, you need to make sure that you have consent from who you're meeting with. And two, how are you using this transcript?
Are you truly using it because you wanna organize your notes? Or are you going to use AI to help you make a hiring decision? And so. That's one of the things that, um, I've been [00:50:00] thinking about.
Ashley Pittman: You know, the, the thing, Chelsey already touched on this, but sort of, um, not feeding company data or company information into these AI models is the big one.
Um, and the thing that I think a lot of users probably are just not really cognizant of, of when do you put that information into these? LLMs, like you don't know necessarily what it's doing with it, or have you res, you know, have you reviewed the terms of service to see, like, can they train their stuff on what you've entered in here and, and does that impact?
Okay, now a company trade secret is in Chad, GPT in the public version. Like what, what's the impact of that? Um, and so we are starting to see. Companies implementing specific AI policies. Trevor, you and I have exchanged some templates for these. Um, still, still early stage, but largely kind of a, don't put any company information into these unless approved, [00:51:00] because you know, if, I don't know which tool you're using and what the terms of service are.
I don't want that impacting my ownership. It's similar to the open source code issue that, that companies have, have run into for many years now of kind of, if you don't check the license of that open source code and then you incorporate it into our software, that could have major ramifications for our ownership of this code.
Um, similar issue with with AI that I, I think some people are cognizant of, but some employees are not. And so the main thing is being clear with them of like, do not go pudding. X, Y, Z secret sauce into these models if you need it to help you write an email. Okay. But not, you know, helping you draft something that includes company information.
Trevor Schmidt: Yeah, and I, I think that's the important aspect of it, is just being intentional. You can make different decisions based off of the information that's out there, how the company wants to use ai, what the best benefit is gonna be, but be intentional about it. Think about what some of the risks are, either with [00:52:00] regard to.
Making decisions on hiring IP ownership, confidentiality, but have that policy in place and then com communicate it wide to people. But I did want to ask Chelsey, kind of when can a company most benefit from the help of, of, of a spark or something like the services that you're providing.
Chelsey Warren: I think always, I think from employee one, right?
The, how we could partner together would be different based on where you are. But I think early stage coaching and advisory and just thinking and putting the table stakes in place early on so that you're not making costly missteps is very important. Um, and it really just the, the way that we partner evolves based on the scale that the organization is at and how much time we would spend together would depend on that.
So, um, any and all stages. Well,
Trevor Schmidt: and I think I know the answer to this, Ashley, but did, when? When would you like to be involved with these companies?
Ashley Pittman: Yeah, I mean generally you're gonna have corporate counsel involved from the start, right? To form the company. And then kind of, especially for someone like me who's corporate in employment, I'm going to then say, okay, [00:53:00] we formed your company.
So now it's onboard with team. So like, you know, from the start, and you know, there's gonna be some upfront cost of kind of setting up things like. Offer letters and proprietary information agreements, you know, walking you through, kind of, okay, make sure you're doing I nines on the, on their first day of employment.
Like, there's stuff like that you need to kind of learn the groundwork on how to onboard employees. Once you've done a couple, you are gonna need legal counsel a little bit less on hiring the next few. As you grow, you start needing legal counsel again, more for various things, but, um, investing early on a little bit, kind of at the right, at the start to get the forms that you need and to learn.
What do I need to do to get this person into my payroll system and do their immigration compliance? Goes a long way and make sure that you know you're set up correctly going forward.
Trevor Schmidt: So we are the Founder Shares podcast, and so I like to ask all of my guests if there's one piece of advice that you would share with somebody who's thinking about starting a company, what would that be?
Chelsey Warren: [00:54:00] Uncertainty is the only certainty, so you might as well shoot your shot and. Get yourself out there and go for it. And then don't start thinking about people too late, because the most successful founders have a deliberate strategy and are intentional about being compliant and how they're thinking about growing their organizations.
So don't deprioritize that even in their early stages.
Ashley Pittman: The main thing is go out and get involved and meet people and make connections because that's gonna be important in every dimension of your company. Do I want to pursue this? Is this an idea that I really could have traction before I spend the money and the time?
Pushing it forward, meeting investors, finding people who are gonna help me back this thing. Meeting your team, you know, to build up your team and build a culture that's impactful. Like, you know, you have to have people who care about the vision too, and are driven and are committed to a company that in the early days, probably not gonna get you a whole lot of cash, but might change the world.
Um. [00:55:00] And then, you know, meeting advisors, networking with people who can just share their wisdom with you. Um, because, you know, nobody ever really makes it very far doing this alone. It takes people from all of those buckets to get a startup to something successful. And so, you know, going out, making connections, um, just taking the time to.
Have coffee with people. And then once, once you're kind of on the other side and you're successful and your company has grown, do the same for other people. You know, meet with other founders who are just starting out, just fresh college grads, and share with them the lessons that you learned. Um, it's both, you know, feels extremely rewarding.
But it also sometimes can be a positive for you too, if you make an important connection that helps your business. Like you just never know. It's, it's always our, our founding partner, Fred, is, is really the, the expert on this. He, you know, always has time to talk with anybody and, you know, have coffee with them and get to know them and, and connect them with people.
And [00:56:00] that's just something I, I really admire about him and think is really important for anybody who's trying to grow a business and. You know, make their dream take off.
Trevor Schmidt: I appreciate that. Um, how can our listen listeners connect with either of you? Chelsey, how can a listener connect with you?
Chelsey Warren: Yep. On LinkedIn you can find me, Chelsey Warren Spark People Advisory, and then my website is Spark people advisory.com.
Trevor Schmidt: And Ashley, how about you?
Ashley Pittman: I'm, I'm sure you can find me on, on the Hutch Law website. I'm also on LinkedIn and, um, my, my email should be listed on our website as well.
Trevor Schmidt: Alright, well thank you so much both of you for, for coming on and for sharing your wisdom and. I hope, uh, yeah. You have a great rest of your day.
Ashley Pittman: Thanks, chairman. Thank you.
Trevor Schmidt: Thanks for listening to this episode of the Founder Shares podcast. If you're a founder or business owner and need legal advice, be sure to check out our team@hutchlaw.com. That's hutch law.com. We have the capacity to help you out with just about any legal need your company may be facing.
We're passionate about the innovation economy and ready [00:57:00] to help you on your entrepreneurial journey. I'm Trevor Schmidt and thanks for listening to the Founder Shares podcast.