The hardest thing I've had to learn as a manager is when and how to fire people.
If you're a decent human being, you'll never look forward to this part of the job. If you're a decent human being who doesn't like to deliver bad news and pass harsh judgment on other human beings, you'll dread it.
But you have to do it. For you. For your colleagues. And for your company. And the sooner you do it, the better.
No matter how carefully you check references and how thoroughly you interview, you're still going to hire people who are a bad fit for your team or just can't or don't get the job done to your standards. If you allow these folks to stick around, you'll be taking a big step toward mediocrity. You'll also dilute the excellent job the rest of your team is doing and undermine their confidence in you.
In my experience, most of the folks you will eventually have to fire get off to a rough start. Their attitude isn't quite right, or their skills or judgment aren't what you expected. You should address this immediately.
(Days or weeks, not months.)
Some people get off to a rough start and then improve quickly and end up being strong members of the team. Most of the time, however, your first impression is likely to be the right one--especially because if a new employee doesn't understand immediately that his first job is to win your confidence, he's already doing a lousy job.
So if things aren't going well after a week or two, sit down with the employee. Ask how he or she thinks it's going--and listen to the response. In this first meeting, give the employee the benefit of the doubt. If the employee doesn't understand what he or she should be doing, then explain even more clearly than you (hopefully) did when he or she arrived. Then explain the key areas where you need to see rapid improvement.
A week or two later, if you haven't seen that improvement, sit down with the employee again. Explain clearly the areas in which the employee is falling short. Say clearly that the employee has to improve or that it won't work out. Make sure the employee understands that his or her job is on the line. Follow up this meeting by reiterating the key points you made in writing and saying that you'll meet again to assess the employee's progress in a specified period of time.
By the time you have that second meeting, you can be reasonably sure that the employee won't work out, but to be fair it is best to spell everything out.
A week or two later--whenever the specified period ends--have another meeting. In the unlikely event that the employee has radically improved, give him or her another month to demonstrate that the change is permanent. If the employee hasn't improved enough to meet your standards, it's time to fire him or her.
The longer the employee works for you, and the more you like him or her personally, the harder it will be to cut the cord. Unless the employee's performance really is due to a temporary situation, however, the sooner you cut it the better. And the more straightforward and clear you can be along the way, the better.
As the old saying goes, it's not the employees you fire who make your life miserable--it's the ones you don't. Every minute you invest in trying to help a weak or disruptive employee limp along is a minute you could have spent finding a strong one. And you owe it to your company, your staff, and your shareholders to focus on the latter.