Executive dismissal at OpenAI: many lessons for businesses

Firing a CEO is a big decision and should not be taken lightly – especially when the company is in the limelight like OpenAI is.

Since the board of OpenAI fired CEO Sam Altman last week – and even with his reinstatement as top boss – it’s been one news story after another. First, the standard, “CEO fired articles,” and now we saw information like this:

Good Morning Everyone! The insane OpenAI saga continues to take even stranger turns

– 745 of the 770 employees at OpenAI have threatened to resign if Sam isn’t reinstated as CEO

– Some investors are mulling lawsuits against the OpenAI board

– OpenAI reached out to its… pic.twitter.com/t6UC3UPnIH

— Genevieve Roch-Decter, CFA (@GRDecter) November 21, 2023

I don’t pretend to have unique insight into the backroom decisions of OpenAI, ChatGPT, or Microsoft. But what I do know is people. And as a people leader, I would have advised the board to think through the people side of things.

Let’s assume that the OpenAI board was correct and that Altman shouldn’t be the CEO. This was open for debate – clearly, many people think it was a bad decision, and as it happens, it was reversed just days later with Altman reinstated as CEO.

Regardless of the outcome, there are important lessons to be learned here regarding a decision that’s bound to reverberate through the ecosystem as we’ve seen with OpenAI. Whatever happened behind the scenes at OpenAI, it’s clear that it was not the right move in the end.

So, I would advise your company to think through these things before making moves like this one.

Popularity means a lot

For instance, when 745 of 770 employees threaten to quit over a decision you make, that’s a huge problem. Did the board even know just how popular Atlman was with the employees?

This isn’t to say that you should make decisions based on popularity. Popular does not always mean good. In fact, it can often mean terrible.

But, before you terminate someone at the top, you should have a good idea of how the employees will react. An employee survey would have been a good idea before a change of this magnitude.

Have clear reasons for termination

Why did the board terminate Altman? The OpenAI board tapped Emmett Shear to replace Altman – and Shear then explained on X:

“Before I took the job, I checked on the reasoning behind the change. The board did *not* remove Sam over any specific disagreement on safety, their reasoning was completely different from that. I’m not crazy enough to take this job without board support for commercializing our awesome models.”

Okay, so we know it wasn’t because of the board’s concern that Altman was willing to allow AI to destroy humanity. But that’s a good thing – so what was the reason?

CBS News reports the reasons as follows:

“OpenAI said Friday that Altman was pushed out after a review found he was ‘not consistently candid in his communications’ with the board of directors, which had lost confidence in his ability to lead OpenAI.

“However, one Wall Street research firm said it believes that tensions arose over Altman’s push to develop more advanced products.”

So, there is a lack of communication and a disagreement on products, but not because of Skynet concerns!

So, what is the actual reason?

It’s entirely possible that the board has an excellent reason for the termination they are not publicizing, but it’s unclear, and the employees aren’t buying it as a valid reason.

There is no claim of impropriety, and Microsoft offered Altman a job even before the tweets on the topic stopped trending, so clearly, many people are not concerned about Altman’s character or skills.

If you don’t have a solid reason, it’s time to step back from any termination. I often tell managers and HR to be prepared to have their decisions go viral and to be very careful, but going viral is actually pretty rare for most businesses.

But OpenAI? They knew (or should have known) that this would be hashed out in great detail online. You may never be able to explain it to internet mobs, but OpenAI’s employees clearly weren’t buying it.

In tech, all you really have is your employees

Yes, OpenAI has distinct products, including ChatGPT, but it’s not like a factory where you have machines with distinct value. If all the people who threatened to quit actually quit, will ChatGPT shut down? How long will it take to get going?

And while it’s a difficult market out there, many of them already have job offers from Marc Benioff.

Salesforce will match any OpenAI researcher who has tendered their resignation full cash & equity OTE to immediately join our Salesforce Einstein Trusted AI research team under Silvio Savarese. Send me your cv directly to [email protected]. Einstein is the most successful… pic.twitter.com/1RXoc9ekeo

— Marc Benioff (@Benioff) November 20, 2023

If Altman hadn’t been reinstated, and consequently if these people had walked, Shear would have had one heck of a time replacing them. And he would have had to offer people big raises to stay – since Salesforce is offering to match current compensation.

Even the return of Altman to the fold won’t necessarily reverse the damage. Some (many?) employees could still be looking at the exit doors.

How should they have handled it?

Let’s assume that termination was the right path to begin with. Would it have been at all possible to terminate Altman without an employee revolt?

Perhaps. The best bet (and maybe they tried this) is to give him an exceptionally good golden parachute that included, in exchange, a resignation because he wanted to spend more time with his family, travel the world, or build a time machine.

But the whys don’t matter so much here; what matters would be that Altman would be the one leaving voluntarily rather than what came across as an abrupt and rude executive dismissal.

Would this have been possible? If Altman knew his own popularity, he would have had them over the proverbial barrel. And that’s something you should also consider – is the problem you’re going to (or hoping to) solve with such a high-profile termination going to cause even more significant pain down the road?

A new CEO may have happily communicated with the Board more effectively – but what can they say if they have no employees to report on?

You probably won’t have a termination anywhere near this dramatic, but there are many more things to consider when terminating an executive. Proceed with caution.

Executive dismissal: guidelines to follow

Your company probably isn’t as newsworthy as OpenAI, but you don’t want to have a disaster on your hands even if it doesn’t hit the news.

So keep these things in mind before carrying out a decision like the one seen at OpenAI:

• Know your people. If necessary, do a survey.
• If you can’t explain why you’re terminating a leader, reconsider your decision.
• Remember that without your people, you have no business.
• Consider the long-term impacts of any major decision – and weigh them out.

Thinking through these things can help prevent disaster, which is what you’re intending to do in the first place. If it’s worth it to you to replace a leader, then taking these steps will be worth your time.