Bought a business earlier this year. 25 employees. Production-type of business where most employees are working on machines and a few have desk jobs. Most are paid hourly ($18-24) and four are paid a salary around $50-65k. One employee “Bob” is paid $95k and get an average annual bonus of $10k. Other bonuses are in the $1-5k range.

This business has very little structure and management in place. During diligence, I noticed Bob’s exceptionally high salary and asked the prior owner more about his role. He couldn’t give a straightforward answer, which now makes sense given what I’ve come to learn is a total lack of structure at all, but he said multiple times “oh Bob will be critical for your success” or “you’ll want to lean on Bob, he’s been doing this for a long time and keeps this place running.”

That could not be farther from the truth. Bob is 55 and the previous owner’s wife’s friend’s husband. He’s been here 25 years. He sits in a tucked away office taking customer orders and making work orders, but he maybe does 10% of the volume of that. We have 2 CSRs who process 4x as much as him. That’s all he does. Yes he knows a lot, but he doesn’t do a lot. I’ve even tried asking him to do some more managerial tasks and help with some of the bigger picture things but he just doesn’t do it. He’s very resistant to change. He’s clearly checked out and just collecting a paycheck. He took 2 weeks of vacation and it literally made no difference in the operations or workload of the rest of the team. If he quit today, there would be no impact. He’s set in his ways and won’t learn new things, so I can’t try to repurpose him either. Also, some of my better workers and other managers don’t like the guy because they see how little he does.

He originally told me that he planned to retire at the end of this year, but now it sounds like money isn’t good and retirement isn’t in the future anytime soon. I also heard through the grapevine that he got a health diagnosis that won’t impact his work/life but is also another driver of needing to stay working for the money and insurance.

I need to hire another customer service rep and two more machine operators, which will cost me around 40k each, meaning I could hire 2, almost 3, people for what I’m paying this guy. I don’t just have tons of spare money to be paying someone $100k for basically nothing.

I feel like I need to get rid of him, but I don’t know how. I’m also concerned about how that could impact my relationship with the seller since they are friends. I have a seller note and the seller is still working here for a few months, and he’s just been really good so I don’t want to hurt that relationship.

I had another business owner friend suggest that promoting someone else as his boss (which I plan to do) might make him quit, but I don’t think it will. I am also planning on cutting his bonus at least in half. I think I am still going to need to lay him off rather than him leaving. How do I do that? Do I say I can’t afford him? Do I say I don’t need his role? Do I offer him a part time job with a fraction of the pay? What do I need to consider with this decision?