Ep. 511 - Tough Decisions: Firing for Values and Financial Health

Summary

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Podcast Summary

Second in Command with Cameron Herold

Episode 511: Tough Decisions – Firing for Values and Financial Health
Release Date: September 18, 2025

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Episode Overview

In this episode, Cameron Herold and a roundtable of COOs dive into one of the most difficult dilemmas for any business leader: choosing to part ways with distributors or team members who breach company values and contracts, even when it means risking significant revenue. The discussion focuses on enforcing standards, the balancing act between financial health and integrity, and how making these tough calls can impact team morale and company reputation.

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Key Discussion Points & Insights

1. The Dilemma of Firing High-Revenue Distributors

• Nick introduces the central challenge: firing two major distributors who make up 14-15% of overall company revenue but are violating contracts and racing to the bottom on pricing.

• The anxiety stems from the potential revenue gap and the uncertainty of finding suitable replacements quickly.

  Nick [01:37]: “We have started the talks of firing a couple of our distributors for not matching our values as a business and it’s a huge piece of revenue. That gives me a little bit of anxiety... Has anybody done this in the past?”

• Cameron presses for hard numbers and asks about the true margin at risk. The gross margin is significant, with an estimated $1 million "at risk" if these distributors are cut.

  Cameron [04:26]: “How much gross margin's at stake?”
  Lacy [05:09]: “I would say probably close to it.”

2. Distributor Breaches: Pricing and Contractual Violations

• The distributorships in question are engaging in prohibited activities: offering competitor products and undercutting prices, going against exclusive agreements.

  Nick [02:59]: “They're racing to the bottom with pricing... they're using other competitors, and it's against their contract with us.”

• While the distributors claim their actions were strategic and necessary for their business, Nick admits some company operational failures did play a part, but also notes strong corrective actions have been made.

  Nick [03:53]: “We've... made large efforts as a supplier to correct our mistakes. And I don't think that they're willing to open their eyes to the changes we've made.”

3. Developing Contingency Plans

• Cameron urges the team to think ahead: if the distributors left by their own choice, how would the company recover revenue/gross margin? Lacy notes multiple contingency plans are already being mapped out.

  Cameron [05:10]: “What would you do if they just told you tomorrow morning they're leaving and you've got to recover?... I would get started on that.” Lacy [05:31]: “We have... so many different plans in regards to that. You can do a lot of fun stuff. Shady, unshady, just part of it.”

4. Upholding Company Values to Set the Standard

• The group agrees that acting decisively on value breaches sends a strong message to the wider team and partners—encouraging compliance and protecting company culture and reputation.

  Lacy [06:55]: “I can't allow the rest of the distributors to think it goes unseen... I have to prove to everyone else, this is the way we do business. If we don’t, we have, we lose all respect and we start losing our market share, which would be worse.”

5. Shared Experiences: Firing for Values

• Kathy draws a parallel with firing an executive team member for poor cultural fit, despite his likability and short-term value, because “the standard has to be held to.” She points out how it improved team morale and clarified company expectations.

  Kathy [07:47]: “What I found is the team's number one rallying... to your point, that raises the bar for everybody else... it's hard decisions... but in the long run, it's the right decision.”

• Cameron illustrates with a story from his franchising days: sometimes you have to “find a reason” to exit problematic partners due to legal or reputational concerns, but the main thing is upholding values and protecting the team.

  Cameron [09:05]: “It also sends a very clear shot across the bow that scares everybody else back into shape a little bit... I’m super protective of my team. And so if that happened to any team member, they’d be out. I wouldn’t worry about the consequences.”

  Cameron [10:56]: “The cost to the wrong person is 15 salary.”

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Notable Quotes & Memorable Moments

• Nick [01:37]: "That's... gives me a little bit of anxiety... Has anybody done this in the past?"
• Lacy [06:55]: “I can't allow the rest of the distributors to think it goes unseen. We have to prove to everyone else, this is the way we do business.”
• Kathy [07:47]: “It’s setting that standard... it raises the bar for everybody else.”
• Cameron [09:05]: “It sends a very clear shot across the bow that scares everybody else back into shape.”
• Cameron [10:56]: “The cost to the wrong person is 15 salary.”

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Timestamps for Key Segments

• [01:05] – Setting the scene: Why firing for values matters
• [01:37] – The risk and anxiety of firing major revenue sources for value misalignment
• [02:59] – Details of distributor breaches and contract violations
• [04:26] – What’s really at financial risk? Calculating gross margin and needed replacements
• [05:10] – Contingency planning: What if they leave tomorrow?
• [06:55] – How acting decisively protects standards, reputation, and morale
• [07:47] – Kathy’s experience: Firing for values and the positive internal impact
• [09:05] – Cameron’s franchise story: Walking the talk on values and protecting the team

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Takeaways

• The hardest decisions—letting go of high-revenue partners/team members for breaches of values—are essential to protect company culture, morale, and long-term market position.
• Having contingency plans isn’t optional; you must plan for sudden change.
• Actions speak louder than words; enforcing standards sets the tone for the entire ecosystem of employees, partners, and customers.
• There are gray areas and practical realities (legal, financial), but clarity and adherence to company values must guide all big decisions.

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For more practical COO strategies and leadership insights, visit COOAlliance.com.

Transcript

[Nick]

It was a strategic business move for them to offer more products on their website. It was a lot of work for them and they're not going back for adding that stuff onto their website. At the end of the day, it's just bullshit.

[Cameron Herold]

But you can see their point or.

[Nick]

No, I do to some degree. Like we've, our operations have, have lagged for. I understand their decision for making it happen, for adding the competitors to their sites and advertising and selling the other product. But we've also made large efforts as a supplier to correct our mistakes.

[Podcast Host]

Welcome to the Second in Command podcast produced by the COO alliance and brought to you by its founder, Cameron Herold. In the second in command podcast, we talk to top COOs who share the insights, strategies and tactics that made them the chief behind the chief. And now here's your host, Cameron Herald.

[Cameron Herold]

Today we tackle one of the toughest decisions a business leader faces. Parting ways with those who don't align with company values, even when substantial revenue is at stake. We discuss a scenario involving firing distributors who violate contracts and race to the bottom on pricing. This episode highlights the importance of maintaining standards, the financial implications and how such actions can boost internal team morale and send a clear shot across the bow to.

[Nick]

I had a question. So we have started the talks of firing a couple of our distributors for not matching our values as a business and it's a huge piece of revenue. That's I guess a little, gives me a little bit of anxiety and I guess like has anybody done this in the past? Can they share any experiences, just any type of information or experience share? I'd love to hear it.

[Cameron Herold]

What's the anxiety that it's giving you? What are you worried about? I know they just people that sell your product or.

[Nick]

Yeah, it's replacing the revenue.

[Cameron Herold]

How much revenue? What percent of your total do they account for?

[Nick]

They account for, I think they, we were told 35 to 40% on one side of the business. So let me look real quick. 14 or 15% total.

[Cameron Herold]

Okay, anybody any experience around that? How much additional overhead is there in supporting them versus your traditional distributors?

[Nick]

One of them we do quite a bit of design, service and support work for the other one we don't do as much design work. But I mean they're a large part of revenue, so they're a large part of operations and shipping shit out, which we'd have to. That piece would be replaced ideally.

[Cameron Herold]

What's the problem? What are they doing wrong?

[Nick]

They're racing to the bottom with pricing. At the end of the day, that's what it really boils down to is they're racing to the bottom with pricing, they're using other competitors, and it's against their contract with us. That's why we give them such great margins and they're basically screwing us.

[Cameron Herold]

Okay, do you have someone that can pick up that revenue?

[Nick]

Not sure yet. We need to identify a couple of dealers that are capable or who have shown capabilities and really hone in on them, but I'm not sure that they'll be able to cover that, the gap that we need.

[Cameron Herold]

And have you had the discussion with the suppliers or distributors, I mean.

[Nick]

Oh, yeah.

[Cameron Herold]

What are they saying?

[Nick]

It was a strategic business move for them to offer more products on their website. It was a lot of work for them, and they're not going back for adding that stuff onto their website. At the end of the day, it's just bullshit.

[Cameron Herold]

But you can see their point or.

[Nick]

No, I do to some degree. Like we've. Our operations have. Have lagged for. I understand their decision for making it happen, for adding the competitors to their sites and advertising and selling the other product. But we've also made large efforts as a supplier to correct our mistakes. And I don't think that they're willing to open their eyes to the changes we've made. I think that they're just like, nope, you screwed us once. So this is what we're doing now.

[Cameron Herold]

Since how much gross margins at stake?

[Nick]

Couldn't tell you. That's a good question to ask.

[Cameron Herold]

About 5 million in revenue.

[Nick]

Nick says closer to 6.

[Cameron Herold]

And what would the gross margin be on that, Nick?

[Lacy]

I think it would be lower. Lower than overall. Just because they. There can. We have different classifications for distributors, so they're on the tier one. So I would say the. It's tough. I mean, that's why Lacy has a project to get us out of our current systems into a different erp. But I would say that if we were to push that business elsewhere, we would probably make an extra 5% in margin overall.

[Cameron Herold]

So is it. Is it about a million dollars in gross margin that's at risk?

[Lacy]

I would say probably close to it.

[Cameron Herold]

And then if you're able to save half of that revenue. So I guess. Do you guys just really have to take a look at, you know, a very simple, simple plan B to be able to turn from that quickly? Right. What would you do if they just told you tomorrow morning they're. They're leaving and you've got to recover? If it wasn't your decision, it was their decision to leave. What Would you be doing? I would get started on that. Some of that.

[Nick]

We.

[Lacy]

We have. We have. I mean, those plans are already baking out. There's so many different plans in regards to that. I mean, you can do a lot of fun stuff. Shady, unshady, just part of it. I mean, that's the reality of it. You know, at the end of the day, we're going to give them an opportunity to reverse course or bait cut, basically.

[Cameron Herold]

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[Lacy]

In my opinion, because I can't allow the rest of the distributors to think it goes on scene. So for me, it's one of those things where I have to prove to everyone else, this is the way we do business and you are not going to do business if you do it this way. If we don't, we have. We lose all respect and we start losing our market share, which would be worse.

[Kathy]

Exactly.

[Cameron Herold]

I think what you have to look at though, is just what's the financial impact going to be and how do you buffer that quickly? And you do it. Make sure you execute now. But look financial.

[Lacy]

We didn't think about the gross margin overall because it would be lower with them just dramatically over, over. We would need to replace less revenue to actually replace the margin.

[Cameron Herold]

And there might be someone you can cut that's having to spend all the time dealing with them anyway. Or.

[Kathy]

Yeah, okay, my business is very different and this is. It's not comparable in many ways, but just the way that Lacy put it. Has anyone had a shared experience of this, having to part ways with people due to values? I just went through parting ways with one of my executive team and although many staff, they empathize, you know, he's a likable guy. He's a sales kind of guy, so he's a likable guy. But the values in terms of getting shit done and producing results weren't there. And so far, this is still pretty fresh. It's three weeks. But what I found is the team's number one rallying. Like, I think other people saw the same things I did. And so it's setting that standard, right, like, to your point, that raises the bar for everybody else that there's. The standard is going to be held to. And I've also seen, you know, other people following the lead, like my CEO Dennis, in terms of identifying, hey, this other guy isn't. Is toxic and not. He doesn't have the values there. It's hard decisions because they're usually like gray area, like, you know, pros and cons like you guys are seeing. But in the long run, it's the right decision.

[Cameron Herold]

Yeah, I agree. Kathy. What Kathy's bringing up, Nick, is kind of what you're identifying as well is it also sends a very clear shot across the bow that scares everybody else back into shape a little bit. Right now, she's talking about is getting rid of a top employee who's a core values breach. But that really grows for suppliers, for partners, for. We did it for franchisees. I talked to a franchisee one time who had one of our call center staff in tears. And I said. I called him up and said, look, if it ever happens again that you treat one of our employees like this, I'll find a way to pull your contract. I'll find a way to pull your franchise agreement. And about six weeks later, he had done it again. He was just swearing at everybody and completely breaking our core values. So I just had somebody go in and do a forensic kind of research across and found try. I knew that I could find him doing work under the table, so I found him doing work under the table. And as soon as I found it, we called him up and pulled his agreement. And I didn't tell him it was because of what he'd done in the call center. I told him it was because of doing work under the table. But the reason that I found the work under the table was I just didn't want to have him as a part of the program and it was just an easier way to pull him out, but he was gone. I just have a question there. Why not fire him the second you had an issue with him? Because the. This was a franchisee. So when you. When you get rid of a franchisee, the problem is that you can actually. It has to go on your unified disclosure documents. It has to go on a disclosure that all potential franchisees hear about. So if I fire somebody because of a core values breach, it's weird, but if we fire them and we have the cause as doing work under the table, every potential franchisee goes, I get it. There's also no potential for lawsuit because he can't come back and say, I wasn't doing anything that wrong. It's like, no, you were literally hiding jobs. It's called theft and you're done. But a core values breach is a gray area that didn't need to, like, that's why I was doing it. But I found another reason that allowed me to walk through all the loopholes. Gotcha. But you had to wait six months. No, no, I waited. I waited about six weeks. It's not even six weeks. Three weeks. Yeah. Yeah, it was six weeks after the first time that I walked. I walked in on a Saturday and the poor girl in the call center was crying the way she was treated. I gave him notice. About six weeks later, he did it again. And then it took us about a week. Yeah, it took us about a week to find the work under the table. And we killed the agreement. Yeah. Because I'm super protective of my team. And so if that happened to any team member, they'd be out. I wouldn't worry about the consequences. No. Well, there's data around that too. Right. The cost to the wrong person is 15 salary.

[Nick]

Such a true statistic. Also, I can attest to.

[Cameron Herold]

Oh, yeah.

[Podcast Host]

You'Ve been listening to Second in Command, brought to you by COO alliance founder, Cameron Herold. If you enjoyed this episode, please be sure to, like, share and subscribe to us on Apple Podcasts, Spotify and our other podcast streaming platforms. For more best practices from industry leading COOs, visit COOAlliance.com.