Businesses, and startups in particular, often are like families. The startup environment -- where everyone knows everyone else, works towards the same goals, and shares a stake in the company's success -- creates the kind of familial atmosphere that produces a strong, close-knit team that innovates and overcomes challenges in ways larger, more impersonal companies can not. That close nature makes it particularly difficult, however, to trim the family tree.

No business can escape the eventual need to let someone go. While any parting -- even those that are on good terms and to the benefit of everyone -- is difficult, dismissals are particularly so. Terminating a team member can feel like exiling a member of your family, and can effect the remaining staff in a variety of ways. The key to meeting this additional pressure head on is to know from the start when the pink slip is the right thing to do.

There are a variety of performance-related reasons an employee should be dismissed:

Inability to Meet Expectations. Informing someone that they aren't able to do their job properly isn't easy. Allowing someone who cannot effectively perform their duties to remain, however, is an invitation to your startup's downfall. In some cases, it may be appropriate to transfer an otherwise valuable employee to a position better suited to their abilities, but when that can't be done, dismissal is the best choice for the company, and likely for the employee as well.

Failure to Perform. Separate from being unable to do the job in question is simply failing to do it. Employees who are capable of meeting expectations but still chronically miss deadlines, produce inferior work, or in extreme cases, flat out refuse to perform their duties should be replaced immediately.

Breach of Confidentiality. "Loose lips sink ships" was a popular phrase during World War II to remind servicemen to be careful about what they discussed with others, and it still applies today. An employee who fails to keep company information in confidence is a liability your startup cannot afford -- this is doubly true when legal obligations are involved.

Serious Mistakes. [I don't really like this heading, but don't have a better one.] Forgiveness is a virtue, and it applies to businesses and saints alike. While most issues, especially those that are unintentional, deserve a second chance, sometimes employees make mistakes that simply can't be forgiven. In such cases, a discharge -- however difficult -- is required, though offering the person the opportunity to resign is an honorable choice.

Dishonesty. Employees who lie to you, fellow staff members, clients, or other contacts should not be allowed to remain on the payroll. Those who steal from the company must be dismissed, and if appropriate, reported to law enforcement. Those that hide information -- for example, failing to disclose a potential investor or acquisition -- cost the company dearly, financially, in networking, and in opportunity. Allowing a dishonest employee to continue with your startup -- or worse, hiring someone you already know is dishonest -- is asking for trouble.

Poor performance is not the only reason to let an employee go, as Part II will explore. Regardless of the source, being prepared when the day comes is essential in order to act quickly and with confidence that your decision is the right one.

Flickr image courtesy of emmamccleary.