Every company wants, and needs, to attract the best people that it can. Good companies will invest in those people, empower them and hold them accountable for their performance. As time goes by it becomes evident which of the people are top performers, which people are performing at an acceptable level and also the people who are not performing become identified.
"Hire people who are better than you are, then leave them to get on with it. Look for people who will aim for the remarkable, who will not settle for the routine." David Ogilvy
There are lots of reasons why people don't perform, ranging from attitude problems to lack of training or skills, to the fact that they are just in the wrong job. Managers will inevitably find themselves spending a significant amount of their time on people management, dealing with the non-performers and their various personnel issues. Good companies will work with these people to try and fix the situation, and sometimes things turn around and sometimes they don't. It is important to both company and employee to resolve these situations quickly, so both can find the right solution moving forward. If someone is in the wrong job, it is far better that they move on and find a place where they can succeed. It is also a huge bonus for a manager, and consequently the company, to replace a "problem employee" with a top performer!
"Often the best solution to a management problem is the right person." Edwin Booz
In today's world of skills shortages it is tough to find those top performers, so when opportunity arises it is smart to take advantage. Some thoughts:
You need to act quickly to manage non-performers out, unless they are working hard to fix things, or you are doing no-one any favors.
Don't try to keep marginal performers who choose to leave ... there is always a better option out there.
Hiring and firing decisions are business decisions, not "popularity contests", don't hire or fire JUST because you like or dislike someone.
Any time you upgrade your team (replace lower performer with higher performer) you are magnifying the positive impact on your business because it also increases management efficiency.
A positive improvement to a team will also have a positive impact on the rest of the team. People know when others are not pulling their weight.