In a small business it is common for employees to become close friends with the managers and owners of the company. In fact, it is often those very bonds that produce an unstoppable teamwork that gives the company a competitive edge. However, those same relationships can prove counterproductive when the priority of maintaining the friendship supersedes what is actually in the best interest of the company.

Business owners do not necessarily recognize this, as it culminates subtlety over a period of time and can be the result of many factors. As companies grow and change existing job positions may require skills and expertise beyond the person’s capabilities but in the name of loyalty the employee’s shortcomings are accepted. The person may have never been the best selection for the job but for budgetary reasons, existing relationships or some other justification beyond skill level they were hired. A long time employee may be promoted beyond their capabilities (often known as the Peter Principle where tenured employees are continuously promoted until they reach a level of incompetence). Now they been with the company for many years and rather than letting them go management tries to change the job to meet their skill level.

As uncomfortable as it may be to address the situation today’s small company have no choice. In a small business every single employee plays a crucial role and if someone is underperforming the entire company suffers. Very few smaller organizations have the expandable profit margins to “just keep” someone on the payroll. Moreover, often companies are losing out on new skills and expertise that could be employed if they were to search for replacements within the current talent pool, exemplifying the company’s needs as they exist today.

So how do you know if an employee is no longer beneficial to the company? Here are some obvious signs to look for.

Other employees complain about their performance and management responses with justification, such as, “he/she is really trying, he/she is not a computer person or he/she has been with the company for some time.”

The company considers making procedural technology changes but does not for concern about how the employee may adapt or that they will no longer be needed due to the automation.

Management and employees change working habits, behaviors or procedures as a “work around” for the person. The person may have their own accepted way of doing things indifferent to whether it is the most efficient or productive manner. The employee follows outdated methods which are less efficient than the newer hired employees who perform similar task.

If any of these situations sound familiar, it may be time to consider some options. You need to either invest in the employee to bring their skills in line with company needs. If they are unwilling or unable to do so, it may be time to consider replacing them.

Remember—the replacement does not need to be inhuman. You can offer them a severance pay while they look for other opportunities. In the long run it is better for both parties. The money is a good investment that can be recouped with future gains from the new direction and the employee will be better served if they can find another employment opportunity where their skills can be of value.