Handling Performance Issues with Care: A Practical Guide for Employers

When an employee isn’t meeting expectations, many small business owners struggle with what to do next. Firing too quickly can create legal and morale problems, but waiting too long can drain your team and your time. The real key is having a clear process that documents concerns, gives the employee opportunities to improve, and protects your business if termination becomes the final step. 

Why Managing Out An Employee Requires Structure

Small businesses don’t always have HR teams or formal processes, but documentation matters just as much—if not more—when you only have a few employees. Without written records, it’s harder to show that decisions were based on performance rather than personal factors, which can create legal risk.

A structured approach helps you:

• Set clear expectations.
• Provide the employee with a pathway to improve.
• Protect your business from claims of unfair treatment or discrimination.
• Reduce stress for managers and owners.
• Keep your team aligned and productive.

Managing out isn’t about punishment, it’s about clarity and fairness.

How to Manage Out An Employee

1. Start With Clear, Documented Conversations

Begin with honest, direct conversations about what’s not working. Focus on behaviors, not personality. For example, instead of “You’re not committed,” say: “You’ve missed three order deadlines this month, which affects our delivery schedule.”

Each conversation should be documented—date, topics discussed, and agreed next steps.

2. Move to a Structured Performance Improvement Plan (PIP)

A PIP outlines exactly what improvement looks like. It typically includes:

• Specific goals.
• Deadlines.
• Resources or support the business will provide.
• Consequences if goals aren’t met.

A PIP doesn’t have to feel harsh. Think of it as a roadmap that gives your employee a fair chance to succeed.

3. Check In Regularly

Weekly check-ins keep the process on track. These short meetings ensure the employee understands expectations and feels supported, while also building a clear trail of documentation.

4. Make a Final Decision Based on Documentation

If improvement is made, great. If not, your documentation helps show that termination wasn’t sudden, retaliatory, or discriminatory.

Questions SMBs Should Be Asking About Managing Out

Before you escalate performance concerns, take time to reflect:

• Do I have written proof of performance discussions? Would someone else understand what happened based on my notes?
• Is a PIP appropriate in this situation? Does the employee have a clear path to succeed?
• Have I been consistent with expectations across my team? Could my decisions appear biased or unfair?
• Do I feel confident that termination—if needed—would be legally sound? Should I ask a Legal Pro to review my documentation?

These questions help you identify gaps in your process and prepare for next steps.

What to Do Next

To manage performance issues fairly and legally:

1. Create a PIP. You may even use a template.
2. Document every step. Keep notes on conversations, goals, and progress.
3. Offer support—but hold the line. Provide tools or training, but maintain clear expectations.
4. Get legal guidance before terminating. A quick review from a Legal Pro can prevent costly mistakes.

With structure, clarity, and documentation, you can handle tough performance issues confidently—and keep your business protected and moving forward.