While firing troublesome employees may seem efficient, it can be especially problematic for midmarket companies, which often rely more heavily on individual expertise because they don't have deep benches. When a problem staffer is also the only programmer who has sought-after skills such as security or business analysis expertise or Web services know-how, the CIO is not in a good position to discipline the employee, let alone fire him.

What's more, firing is costly. When you add the costs of paying severance, hiring contractors, and recruiting and training a new hire, it can add up to 250% of the departing employee's salary to replace him, says Diane Berry, managing vice president at Gartner Inc.

On the other hand, keeping the wrong person in a job can cause major problems. A poor performer "sets a low standard for everyone else," says Andrew Walker, a research director at Gartner. And tolerating lower standards leads to lower morale and productivity, which may cost more than simply replacing the problematic person at the outset, he says.

When they face the question of whether to fire or retrain, CIOs at larger midmarket companies can probably count on help from their human resources departments. But CIOs at smaller companies are less likely to have robust HR departments. Worse, CIOs themselves are less likely than other executives to have management training. Chances are they learned what they know about management by observing their own bosses. "If they had a bad boss and learned from that, they're going to repeat those bad habits," Walker says. In the context of personnel problems, bad management habits include ignoring festering problems and, on the other end of the spectrum, firing people when it's not necessary.