Module 06 of 08
Managing performance in a small team
Managing people is different in a small business than in a corporation. You can't hand a problem off to HR. You see this person every day. You may genuinely like them. And you probably haven't done this before. This module covers how to give effective feedback, address performance issues before they escalate, document problems correctly, and when and how to terminate employment.
The cost of avoiding the conversation
Most small business owners wait too long to address performance problems. The reasons are understandable — it's awkward, you feel bad, you hope the problem resolves itself, you don't want to lose coverage. But delay almost always makes things worse.
A problem that could have been addressed with a two-minute conversation in week one becomes a documented disciplinary process by month three. Other employees notice the tolerance. Standards slip. Your best employees — who are keeping themselves to a higher standard — get frustrated and leave.
THE MANAGER’S TRAP
Tolerating low performance to avoid a hard conversation usually ends with termination anyway — just later, messier, and with more collateral damage. The conversation you're avoiding now will happen eventually. Early is almost always better.
In this Module
Cost of avoiding conversations
Giving useful feedback
Verbal, written, termination
The documentation habit
Real-world examples
Related Modules
Training staff
HR legal requirements
How to give useful feedback in a small business
The best feedback is specific, immediate, and private. "You did a great job today" is nice but doesn't tell someone what to repeat. "The way you handled that return without getting flustered — that's exactly how I want it done" is feedback they can learn from.
For corrective feedback, use the SBI model: Situation, Behavior, Impact. Describe the situation, the specific behavior you observed, and the impact it had — without attacking the person's character or making assumptions about their motives.
SBI IN PRACTICE
"This afternoon during the lunch rush (Situation), I noticed you didn't acknowledge three customers who walked in and waited at the counter for a minute (Behavior). Two of them left without ordering, and I heard one say something about being ignored (Impact). I need you to acknowledge every customer within 30 seconds, even if you're busy — a quick 'be with you in a moment' is enough."
Handling performance conversations — three scenarios
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A verbal correction is used for first-time issues, minor recurring problems, or anything you want to address immediately without formal documentation. It should still be specific and documented by you privately (a quick note to yourself with date and topic), but it's conversational in tone.
What to say (verbal correction example)
"Hey, can I grab you for two minutes? Yesterday when the register was short $12, I noticed you didn't recount the till when your shift ended. I need you to always do the recount at the end of your shift — it protects you as much as it protects the business. Does that make sense? Good. If you're ever unsure about the procedure, just ask me."
Note: Short, specific, non-accusatory. Ends with a path forward.
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A written warning is appropriate when a verbal correction hasn't changed the behavior, when an issue is serious enough to warrant documentation from the start, or when you're building a record that may eventually support termination. The employee should sign the warning acknowledging they received it — not that they agree with it.
What a written warning should include
Date of the conversation. Description of the specific issue (dates, observable behavior — not characterizations like "bad attitude"). What was discussed in the verbal correction(s). What the expected behavior is going forward. What will happen if the issue continues. Signature lines for both parties.
Keep it factual. Courts and labor boards care about documented facts, not feelings.
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In most US states, at-will employment means you can terminate for any legal reason. But "legal" matters — you cannot terminate for discriminatory reasons, for protected activities (filing a wage complaint, taking medical leave), or in ways that breach a written employment agreement.
The termination conversation
Keep it brief and factual. "I'm letting you go, effective today. This decision is final." Do not over-explain or argue — that's where things go wrong. Have their final paycheck ready (most states require same-day or next-day payment on termination). Collect keys, access cards, and any business property. Document what was said.
Do it in private. Do it in the morning, not at the end of a shift. Have a second person present if possible.
FINAL PAYCHECK RULES
Many states require final pay on the day of termination. Others allow next payday. A few allow longer. Violating your state's final pay law adds penalties to the separation. Look up your state's rule before you have the conversation.
The documentation habit
You don't need a formal HR system to document employee issues. A simple folder per employee — digital or physical — with dates, a one-sentence description of the issue discussed, and how it was resolved is enough for most small businesses.
The habit to build: any time you correct an employee, write it down the same day. "10/3 — spoke with Jordan about being 15 min late without calling. Reminded of call-out policy. No prior incidents." That's it. Two sentences, one minute, and you have a record if you ever need it.
REAL-WORLD EXAMPLE
Teresa's spa — the undocumented termination
Teresa fired a massage therapist for "constant attitude issues." The therapist filed for unemployment and claimed wrongful termination. Teresa had no documentation of any conversations, no written warnings, no record of specific incidents. The state unemployment board sided with the employee — not because Teresa was wrong, but because she had no evidence. She paid higher unemployment insurance rates for the next three years. The same termination, with documentation, would likely have gone the other way.