I have worked in the SME space for over twenty years and I have seen this scenario play out more times than I can count. This is not usually a performance management issue in the traditional sense. It is rarely about gross misconduct or obvious incompetence. It is about growth. The business has evolved. The role has evolved. The expectations have evolved. They have not. And if I am honest, by the time you are seriously thinking about it, the rest of the team can see it too.

In the early stages of a business, loyalty, hustle and proximity to the founder matter enormously. You need people who will graft, who will wear multiple hats, who will stay late because they care. That energy builds something from nothing. But scaling a business demands something different. It demands capability, adaptability, commercial awareness and strategic thinking. The skills that helped someone survive the start up phase are not always the ones required to build the next stage. Long service is not the same as long term suitability.

As a leader, you have to separate emotion from responsibility. Keeping someone because they deserve it or because they were there at the start is an emotional decision. Keeping someone because they are the right person to take the business forward is a leadership decision. Those two positions do not always align, and when they do not, you are the one who has to choose. I pride myself on integrity and authenticity, and that has meant making difficult but fair decisions in the hardest of times. Long term gains have to outweigh short term comfort.

There is also a hidden cost when you protect the biscuit box favourite. High performers notice when standards shift. New talent quickly works out whether progression is based on capability or history. If someone is being carried, others start to question whether performance truly matters. Promotion pathways become political. Quiet resentment builds. Sometimes newer team members will leapfrog them, not because they are ruthless, but because they are better equipped for where the business is heading. That creates an even harder dynamic, a long standing employee who subconsciously feels owed, and a team unsure where they stand. That tension does not resolve itself. It spreads.

This is where the uncomfortable question sits. Are you protecting them, or are you protecting yourself from feeling like the bad person? Letting go of someone who helped you build the business feels deeply personal. It can feel like betrayal. But leadership stops being personal at a certain level. Sometimes keeping someone in a role they have clearly outgrown is more unfair than letting them go. It denies them the truth about where they stand. It denies the team clarity. And it quietly limits the organisation’s potential.

My philosophy has always been that if a process no longer serves, or simply is not good enough, you blow it up and start again. That principle applies to people decisions as much as it does to systems and strategy. It does not mean being ruthless. It means being honest about what the next stage requires. If you step outside the bubble and look at the situation as an adviser rather than the founder, the answer often becomes clearer. You would not tell another business owner to compromise the future because of the past. You would tell them to build for where they are going, not where they have been.

You already know whether you are carrying a biscuit box favourite. You know whether you are quietly adjusting standards to maintain comfort. You know whether others are waiting for you to make the call. Staying inside the bubble can feel kinder in the short term, but it rarely builds longevity. If this resonates, it may be time to have a braver, more honest conversation about what your business needs next.

So let me ask you this, are you building for loyalty to the past, or capability for the future?