In June, General Stanley McChrystal committed the ultimate blunder. For the benefit of those of you who may have been occupied with other matters, McChrystal, commander of the U.S. Forces in Afghanistan, sharply criticized senior Obama Administration officials, including Vice President Biden, in an article that appeared in Rolling Stone. I think we can all agree that making derisive remarks about your bosses to the national media is, at best, a sign of poor judgment. The trickier question is whether it is grounds for dismissal, particularly when weighed against what many considered an otherwise outstanding performance. President Obama clearly believed the damage caused by McChrystal’s comments outweighed the benefits of keeping him onboard—and he promptly sacked him.

As managers, we’ve all faced similar dilemmas. What do we do about the executive or employee whose job performance is solid, even stellar, but who nonetheless presents a serious problem? Consider the VP of Sales whose results always exceed plan. Or the VP of Engineering who delivers complex product releases—on time and within budget. Or even the waitress whom customers repeatedly ask for by name. How do we assess such obvious positives against what may be a less obvious ethical transgression, a disturbing lapse in judgment, disruptive conflict with other employees, or personal conduct that exposes the company to unreasonable liability?

For good or for bad, in the absence of an actual crime, the most appropriate conclusion can be elusive. But there are key considerations that can help guide you through these thorny personnel conundrums. As a CEO with decades of managerial experience, here are the five I have formulated—and actually relied upon myself—to resolve an array of situations over the years:

1. Were There Prior Warning Signs?

• Were there previous issues or events that individually might not have been significant but caused you to stop and think?
• With hindsight, did these issues foretell the current problem and suggest that the problem might continue?
  

2.  Who Can Replace this Individual—Tomorrow and Thereafter?

• Can you identify internal candidates for the position?
• Is there an external consultant who can steady the ship and maintain momentum until a replacement is hired?
• Perhaps there is a Board member or valued (former or retired?) employee able to return temporarily?
  

3.  Can Short-term Disruption Lead to Long-term Gains?

• No one is irreplaceable—even you, so don’t avoid problems as they arise!
• Do you have the cash and the stability to weather the squall?
• Is there an opportunity to make long-deferred changes, either in strategy, organization, or personnel as a result of a shift?
  

4.  Which Exposes The Firm to Greater Jeopardy—Doing Nothing or Taking Action?

• Has an ethical or legal boundary been crossed?
• Does the situation threaten success if left untended?
• What are the likely consequences of doing nothing?
• Can you quantify the impact if you intervene now (sales, morale, cash, etc.)?
  

5.  Does My Action (or Inaction) Expose Me to Career Risk?

• Will making this change (or not) affect my performance review in the short term or over time?
• Am I risking litigation or termination?
• Neither is as bad as incarceration, which cannot be ruled out when you hold the top job, if you’re convicted of knowingly tolerating illegal conduct.