If you run an MSP, chances are you didn’t get into the business because you love managing people. You got in because you love the tech, the problem-solving, and the entrepreneurial side of building something. HR is somewhere down the list of things you wanted to become an expert in.

But at some point, you’re going to have an employee who isn’t working out. And how you handle it matters more than most MSP owners realize.

I sat down with Natalie Hell, an MSP operations veteran working toward her SHRM certification and building out HR training for MSP owners through Pax8 Academy, to talk through the full arc of employee performance issues. From early warning signs to termination. This is the stuff nobody teaches you when you start a business.

Catching Performance Problems Early

The most common mistake MSP owners make isn’t mishandling a termination. It’s waiting way too long to act on a problem they already knew existed. I’ve seen this in my own travels and see it frequently with my Peer Group members.

The first thing to look for is repeat offenses. If you’ve told someone the same thing over and over and nothing is changing, that’s a signal. Other early warning signs include slipping utilization, team morale suffering, and quiet passive-aggressive complaints from the people around them. If your team is hesitant to work with someone and their KPIs are trending the wrong direction with no self-awareness about it, you have a problem.

I had a technician once who was genuinely great at the technical work. Clients loved having him on site. But he couldn’t get his time in on time to save his life, sometimes entering the previous week’s time on Tuesday of the following week. We had the conversation over and over. Eventually we had to let him go for what felt like a dumb reason. Sometimes the issue isn’t dramatic. It’s just a consistent inability to meet a reasonable standard.

There’s another pattern worth calling out: the early employee who thrived when the company was small and has become a problem now that you’ve grown. At two or three people, a tech who does whatever they want is fine. At twelve people, that same behavior is actively toxic. If someone can’t adapt as the MSP scales, that’s a performance problem even if their technical skills are solid. Do they get it, do they want it, and do they have the capacity to deliver? That question needs to be revisited regularly, not just at hire.

The right first move when you notice something brewing is a direct coaching conversation. Document it. If it’s not written down, it didn’t happen. Do NOT be the owner or manager that buries their head in the sand. The term “hire slow and fire fast” exists for a reason.

PIPs: What They’re Actually For

Performance improvement plans get a bad reputation because they’re usually used wrong. The common perception is that a PIP means you’ve already decided to fire someone and you’re just building a paper trail. Sometimes that’s true. But that’s not what a PIP is for.

A PIP is a structured, time-bound attempt to give someone a genuine shot at turning things around. The key word is genuine. If you already know you’re done with the employee and you’re just going through the motions, a PIP is a waste of everyone’s time unless your outsourced HR requires it for compliance.

When used correctly, a PIP can actually work. I’ve seen employees come out the other side and stay with a company for years. One of my managers put an employee on a PIP that I honestly expected to end in termination. That person completely turned around once they had defined clarity on what was expected. Sometimes the problem isn’t the employee. Sometimes you just haven’t been as clear as you thought you were.

For structure, 60-day PIPs work well for most tech and manager roles. Thirty days often isn’t enough to get past the initial “figuring out what’s actually happening” phase. Sales roles warrant 90 days given the nature of the funnel. Whatever the timeline, the check-in cadence has to be consistent, and the success criteria need to be binary. They either hit the mark or they didn’t. No “kind of” or “mostly.”

Document every check-in. Every. Single. One.

Terminations: How to Do It Right

When the PIP doesn’t work, or when someone does something immediately terminable, the conversation has to happen. Here’s what a clean termination looks like.

Have everything ready before you walk into the room. Documentation, final paperwork, the offboarding checklist. You should never have to leave the room to go print something.

Have a witness present. The rule should be to fire in twos. Whether that’s the owner and a service manager or you and your office manager, have someone else in the room to witness the conversation.

Keep it short. I’ve never had the actual termination conversation take more than five minutes. You’re not there to debate or relitigate the last six months. The message is simple: here’s where things stand, today is your last day, this is not a negotiation. Then let your HR person handle the paperwork, and if that’s you, expect it to take more than 5 minutes.

You still have to be compassionate. You’re changing someone’s livelihood. It should feel heavy. It always has for me, even for the people I was relieved to let go. That’s appropriate. If it’s easy for you, I’m not sure leadership is your strong suit.

Know your state’s compliance requirements before you get to this point. Every state handles things like final paycheck timing and termination documentation a little differently. If you’ve never fired anyone from your current company before, spend an hour with an employment lawyer first. It’s worth the consultation fee to have someone sanity-check your process.

For MSPs specifically: revoke system access immediately. This is not optional. A peer group member fired a disgruntled employee and didn’t terminate his access. The employee came back and wiped every virtual desktop in his entire client fleet. Cyber insurance typically doesn’t cover malicious intent. Have a checklist ready: RMM access, email, client portals, building keys, company equipment. Run through it the same day.

One last thing: the most common mistake owners make is going into the termination meeting and getting talked out of it. The employee is persuasive, you start second-guessing yourself, and you leave the room without doing what you came to do. If you’re not confident you can hold the line, bring someone who can. Someone has to be the stoic one.

Documentation Is the Thread Running Through All of This

Whether you’re coaching someone early, running a PIP, or heading toward a termination, documentation is the constant. One-on-one notes. PIP check-in records. Written coaching conversations. All of it.

This isn’t just good HR practice. It’s your protection if things go sideways legally. Treating employees evenly and having the paper trail to prove it significantly reduces your exposure if you ever face an employment lawsuit. Employment practices liability insurance is also worth having. Your broker can help you set that up. I actually talked about this with Jake Charen when we dove deep with all things insurance in this video.

Final Thoughts

Tech is the easy part of running an MSP. The hard parts are cash, finance, and people. HR isn’t glamorous, but doing it well is one of the most important things you can do as an owner.

If you want to go deeper, Natalie runs an intro to HR course through Pax8 Academy, a four-week instructor-led training covering the full employee lifecycle. Peer Groups are also a great resource for sharing PIP templates, job descriptions, and professional development frameworks. Nobody should be starting from scratch on this stuff.

And if you don’t already have an employment lawyer you can call, find one. You want that relationship in place before you need it.