How to Talk to Your First Employee About Declining Performance Without Losing Them
Casey was there before there was a company. Before the LLC paperwork. Before the first customer. Before the logo. It was you and Casey and a shared Google Sheet, and they built the ops playbook, the CRM, the support process, and recruited the first three hires — all while the company had no money and no certainty. Now the company is six people and Casey's deliverables are late. Two client projects shipped with errors. Standups are missed. You know something is wrong but you keep postponing this conversation because Casey isn't just an employee — Casey is the person who believed in you when believing was irrational. How do you tell someone who helped build the house that the house has outgrown how they work?
Why This Conversation Goes Wrong
You open with the problems. Casey has given two years of unseen labor to this company. If the first thing out of your mouth is what went wrong this quarter, every sacrifice they made becomes invisible. They won't hear your feedback. They'll hear ingratitude.
You mistake burnout for disengagement. Casey isn't checked out. They're drowning. They're still trying to do the job of four people because that's the identity they built when it was just the two of you. Treating this as a performance problem when it's a role problem will push your most loyal person toward the door.
You offer vague encouragement instead of structural change. "You're doing great, just need to tighten things up" changes nothing. Casey doesn't need cheerleading. They need someone to say: "Your job has changed, and we haven't caught up to that. Let's fix it together."
The Co-Builder Reset
Performance conversations with early employees are not the same as performance conversations with later hires. These people didn't join a company — they built one. The Co-Builder Reset framework treats the conversation as a relationship renegotiation, not a performance review.
Honor the founding story first
Before you say anything about what's wrong, name what Casey built. Not generically — specifically. "The onboarding process you designed is still how every new hire learns the company. The CRM setup you chose is still running. Those first three hires you recruited are still here." This is not flattery. This is historical record. And Casey needs to hear it before they can hear anything else.
Name the drift without blame
"Something has shifted in the last few months, and I don't think it's about effort. Two deliverables came in late, the documentation has fallen behind, and I've noticed you missing standups. I don't think you're slacking — I think something else is going on. Tell me what you're seeing." You're describing symptoms and inviting diagnosis, not delivering a verdict.
Listen for the role underneath the role
When Casey says "I don't even know what my job is anymore," that's not a complaint. It's the answer. The startup grew and everyone else got titles and lanes. Casey is still doing everything, which means they're doing nothing well. Your job is to hear this and name it back: "You're right. We gave everyone a clear role except you. That's on me."
Redesign the role together
Don't hand Casey a new job description. Build it with them. "If we could define your role from scratch today, what would you want to own? What would you want to stop doing?" This is co-creation, not reassignment. Casey built this company — they should build their role in it.
Set the next chapter, not just the next quarter
"You were the first person who bet on this. I want you to be here for the next stage, but in a role that actually fits the company we've become." This is a commitment to their future, not just feedback on their past.
The moment that changes everything
Casey isn't underperforming. Casey is grieving.
When a company grows from 2 to 6, the person who was there at 2 experiences a loss that nobody talks about. The informal ownership — "this is our company, we built this" — gets replaced by org charts and role definitions. New hires walk in with titles and clear responsibilities. The first employee, who once did everything, now does "stuff that falls through the cracks." The decline in Casey's performance is not a work ethic problem. It's an identity crisis. They went from being indispensable to being undefined. The late deliverables are symptoms of someone who no longer knows which deliverables are theirs. If you address the performance without addressing the identity, you'll get temporary improvement and permanent resentment. If you address the identity — "your role in this company has to evolve, and I should have done this months ago" — you'll get Casey back. Not the overextended, burned-out version. The focused, ownership-driven version that made them employee number one in the first place.
What to Say (and What Not To)
Instead of
"We need to talk about your performance lately."
Try this
"You built the foundation of this company. I want to make sure your role still reflects that — because I don't think it does right now."
Instead of
"You've been missing standups and deliverables are late."
Try this
"I've noticed some things slipping, and I don't think effort is the issue. I think you're carrying too many things that should have been handed off months ago."
Instead of
"I need you to step it up."
Try this
"I need to give you a clearer lane. What would you want to own if we rebuilt your role from scratch today?"
Instead of
"Everyone has to be accountable."
Try this
"You've been accountable for everything. That was heroic at 2 people and unsustainable at 6. Let's fix the structure, not the person."
The Bigger Picture
First Round Capital surveyed 500 startup founders and found that the #1 regret in early team building was "not defining roles fast enough as the company grew." 68% of founders who lost their first employee cited role ambiguity as the primary cause — not compensation, not culture, not competing offers.
Research from organizational psychologist Adam Grant shows that employees who experience "role erosion" — where their responsibilities become unclear or expand without recognition — exhibit performance declines identical to burnout, even when their workload hasn't technically increased. The cognitive load of undefined work is more exhausting than the volume of defined work.
Practice This Conversation
10 minutes · AI voice roleplay with Casey Morales
Reading about this is step one. Practicing it changes everything. Sonitura lets you rehearse this exact conversation with Casey Morales, a realistic AI first employee, currently doing product and operations at a 6-person startup who reacts to your words in real time. It takes 10 minutes. Casey is waiting for you to see what they're carrying. Practice the conversation that keeps your first believer.
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