As a small business owner in Kansas, problem employees can cause low morale for your team, absolute dysfunction and worse-yet, cause you to lose customers. All these problems certainly lead to lost profits. Not good in this economy.

The first step is crucial to dealing with problem employees; you need to handle this NOW. Waiting for any amount of time creates more dysfunction among your other employees and can cause you to lose customers faster than you know.

Step two is a no-brainer, but remember to document everything. Each performance review should be in writing, with specific changes and steps that need to be taken to ensure continued performance. If the issue is a cause for immediate termination, you’ll need to be able to back up your reasoning to avoid any wrongful termination lawsuits.

Provide a specific policy when it comes to employee problems. Do you write employees up? How many times? What could a person be fired for doing? All these questions being answered in an employee orientation period or in an employee manual could be important and give you a leg to stand on when dealing with a troubled employee.

If you think the problems that the employee is creating are solvable (by them) take these steps to right the course.

Step 1: Clearly explain their expectations and where their performance is lacking. Clear communication may help you actually build rapport with the employee. Maybe they really want to succeed, they may just not know how.

Step 2: Ask the employee to participate in finding a solution. How can both of you work together to solve the problem. Maybe there are external factors (like family or health) that are contributing to the problem. Can you get them help? Maybe it’s the work environment (lack to resources, a problem with a co-worker) that you can discuss. What other changes could you make to help them. Finally, maybe the problem is simply with them. Lay out a plan to fix the problem and how they are going to fix it.

Step 3: Communicate a turnaround strategy and timeline. Tell them their expected timeline for turning around the problem. If they can’t fix the problem in a certain time, maybe this isn’t the place for them. Be fair but firm in your decision. Check in with them to make sure you are helping them through this time. Again, track everything.

Problem employees can actually help you manage your entire team better. Who knows, maybe the problem isn’t them, but a system that you put into place to help profitability but crushes morale. Only you can decide if it works for them.