Every entrepreneurial organization will, at some point, outgrow one or more of its legacy employees. Maybe they no longer have the skill set to lead their team, perhaps they're not able to make the transition toward a more mature organization or maybe they struggle with having to fit in a new structure.
If a new employee was exhibiting these characteristics the decision to let them go is an easy one. With legacy employees, however, there's often a degree of institutional knowledge they have, a connection with your customers or at the bare minimum a degree of sweat equity from their tenure.
As a result, they tend to stay past their point of usefulness. The problem in keeping them around is that it breeds the belief that the organization will put up with mediocrity from long term employees. For everyone else, this realization creates an increasing sense of resentment.
Here's the most effective way to deal with those long-term but under-performing employees.
Start with what the organization needs.
Legacy employees often have amorphous job descriptions. In fact, it's usually accepted that their job spec. is what they chose to do on a daily basis. In many instances, they develop particular expertise whether its sales or customer service or a part of the manufacturing process and within that area they have almost complete autonomy to act and behave how they see fit.
The first step is to strip out that 'heads' based job description and to build an objective 'hats' based description that the organization requires to operate effectively. Start with the role closest to what they do and build a job description for that position without taking that individual's daily workflow into considerations.
Issue a challenge and provide support.
There nothing inherently wrong with providing support to legacy employees but it should come from the perspective that what came before is no longer sufficient. In order for all employees in your organization to enjoy your support, they must provide ongoing and repeated performance. Your tenured staff should be no different.
Sit down with them and review the new hats based job description. Ask them if they believe they can do this newly defined role and what support and guidance they'll need to be able to do so. Then give them as much support as they need to get there.
Be ruthless in your assessment of their progress.
One of the hallmarks of long term employees is that they escape the same degree of accountability that newer people have. In rolling out the new job description and providing the support they need to be able to do it, you should also set clear measurable milestones for their progress in the role alongside clear repercussions for not achieving those.
This re-injects a degree of accountability back into their job and prevents them from paying lip service to it without following through.
In doing so you'll end up in one of three positions. Either they'll knock it out of the park and will continue to positively contribute to your organization over the long wrong, they'll self-select out as they realize they're unable to perform at the level you need or you'll be faced with having a difficult conversation about their future with your organization.
No matter which of the three scenarios you end up with, you'll be in a much better place than you were before.