When you know that a team member is not going to work out, you need to make the difficult call and let them go. The price of a bad hire has already been incurred. You are incurring a greater cost to the organization by continuing to employ the individual rather than letting them go.
You are not being a good steward if you continue to invest time, energy and money into a team member that you know will not improve over time. You will also frustrate your best team members if you don't make the tough decision. Your best people know when a team member is not carrying their weight or just aren't working out. It's never easy, but sometimes, it has to be done.