I've built 5 companies, largest had 30 employees and my rule is - especially when you're small - if you're gut tells you their not adding to the output / productivity, let them go so they can go find a position where they'll shine.

It's not cause they aren't a nice person, it's because it's just not a fit - and if you had to ask this question - then you know what you need to do :).

It's also worth noting that startups (< 12 employees) don't have the luxury / systems to mentor coach employees who aren't performing. I believe mentoring is possible, but it takes away from executing and pre-product / market fit, it's dangerous to invest that time with someone who may not work out long term.