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updated 12/10/2012 10:22:32 AM ET 2012-12-10T15:22:32

Horror movies no longer scare you? Do you wake up in middle of the night in cold sweats -- terrified by your own Krueger on the payroll?

He or she could eventually slash your business to death.

It always amazes me how small-business owners can be held captive by nightmare employees. I recall a particular consulting firm where the head salesperson was "the man," bringing in twice as much business as anyone else on the sales staff. But he did it by playing mind games -- misleadingly claiming to prospective clients that the consultants he was promising were better than the rest inside the company. In the process, he created a toxic, us-versus-them climate in the office that probably cost the company more than any extra business he generated.

Why don't business owners fire people like this? One answer is because they rationalize. They say, "She’s the only person who can do that database that way." They say, "He's the lead sales guy."

Superstar employees leave because the nightmare is sticking around. Ironically, as your nightmares chase out more people, you're forced to rely on your nightmares more.
Such an employee can meanwhile prevent you from engaging elsewhere. All of a sudden, your business isn't as profitable and isn't playing the role it should in the community.

Related: 3 Secrets of Happy Employees

Here are some warning signs that an employee has become a nightmare and may need to be set free to haunt another company.

1.There’s always a problem with them: It could be something different each time, but you are revisiting their issues more than others. You are consistently going to them about something -- and they are not providing the solutions you need in return. I remember once hiring an assistant for a project, and she was always coming back to me for things. My answer was, "I want three solutions for every one need."

2. They are infecting the positive morale of others: Is there someone who is commanding too much air time with the team -- creating an us-versus-them sort of climate? Are they constantly bickering and complaining, causing your employees to focus more on what’s lacking, instead of what could be? Get rid of your nightmare, and watch how your employees will transform from sleep-deprived zombies into the A-team you need them to be.

Related: What Entrepreneurs Can Learn About Team Training From NASA's Mission to Mars

3. The costs of not firing are too much: Has it gotten to the point that if you continue to empower your nightmare, your superstar employees are going to check out? If your superstars are voting with their feet, it is time to eliminate the nightmare. They’re leaving because you failed to minimize the nonsense. Superstar employees respect competency -- not a leader who allows nightmare employees to turn their workplace into a circus.

4. You’re taking them home with you: You're playing with the kids, you're watching television, you're trying to turn your mind off. You try to go to sleep. And there they are, haunting you -- running that razor glove down your wall. When a misbehaving employee is hurting your home life, it's time for them to go.

Your gut says, "It's time." For a small-business owner, there is just that moment when your gut says, "This person is not right." Have the courage to trust yourself. Sure, everyone has bad days, but trust your gut. In hindsight, I think you’ll realize that you were right.

If an employee's behaviors fit these descriptions, my advice is to document, document, document how they are lacking. Make sure they understand your standards up front, hold monthly meetings with them, and if they don’t show signs of immediate improvement, fire them in the most swift and humane way possible.

Odds are, your superstar employees will respect you more for it. 

Related: How to Break Bad News to Employees

Copyright © 2013 Entrepreneur.com, Inc.

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