I am an owner of a small business with three divisions. I have an Ops Manager that runs one of my divisions.
In this economy, the business is stagnant and dips between making and losing money with the last year (and most likely this year's) result being around break-even.
My Ops Manager has been in the position for approximately a year. He hasn't been great, but he hasn't been bad. I give him feedback (not as well as I should) and have coached him on what I need from him as a manager. He does not deliver the results I am looking for in terms of lifting the performance of the techs. He is a good technician and struggles with the "Soft Skills". He knows I would prefer more from him, but as is the case in many small businesses, I am somewhat stretched and have probably not given him the time and specific goals he should have.
This being said, through my network of contacts, an individual has come across my way that I do feel would be a stud of an Ops Manager for me. I don't feel this guy will be around for me to give my current manager the time needed to prove his ability to succeed or fail.
Ethically/Morally, I would prefer to give him a clear picture of where he is lacking, get him some coaching with timeline, etc...My gut tells me, he's not the guy I need to help me get this division where I want.
So, is it ethically poor if I let him go? What do you guys think I should do? I am considering a generous severance if I do let him go to aid in the transition. At the root, I fear I made a bad hire.

Hard Decisions
Matthew,
Thanks for the post. This is a hard-hitting issue that gets deeply into the struggles of executive leadership.
It would be irresponsible to say, "Hire the new guy" or "Work harder to develop your existing manager" without a deeper understanding of the personalities at play.
Keep in mind that bringing the new guy up to speed will also require significant effort on your part. Will it be more or less effort to get the incumbent to do what you need?
Consider outside the box alternatives. You don't mention anything about the other two division managers. What about swapping your challenged manager with one of them? It broadens perspective for both, sends a positive message to one, (I trust you enough to turnaround a troubled division), and a warning to another, (I'm concerned about your management abilities, but perhaps you'll do better with a division that's already operating smoothly), and if the challenged manager still can't meet your expectations a decision to separate may crystalize.
If you decide not to hire the candidate, keep them on your bench. Touch base with them every two months to see what they have going on. You may call upon them if the tide turns.
Good luck, and let us know what you do and how it turns out.
--Michael