A poorly performing employee should be dealt in the following manner:

1 - have a private conversation to discuss shortcomings and expectations from both sides. follow-up with lots of direction, training and coaching. then leave alone.
2 - if necessary, have a second conversation with HR present. discuss specific performance issues and the need for immediate improvement to be reviewed at the end of a fixed probation period. no need for further coaching.
3 - the next conversation should be an exit interview.

In every case, you'll wonder why you haven't acted sooner. Having no employee is always preferable to having a bad one, even if there is some contribution. A poor employee won't perform, have a bad attitude and will make the manager, or worse the company, look bad. In these times when IT and other technical personnel are commanding a considerable pay premium over their peers, there is no reason to expect good work for the money paid.

No need to keep him around. Best of luck to PHB.

I didn't hear from PHB that he had a bad employee, just that he needed watching. That sounds more like a new manager's comfort level than a necessarily bad employee. As Bob says, PHB needs to make sure that the report knows what success looks like, knows when to ask for help, and gets guidance based on what he produces, not based on his activity. If the guy screws around for half the day, but finishes everything he is supposed to get done and it works, then add a little more interesting work, and let him go again. If he DOESN'T produce (and you'll know because the goals you have set together aren't met....regularly) then you can redirect, refocus or remove.

I am not sure that the employee is 100% of the problem. You are his supervisor and you are not holding up that portion of the relationship either. Some people need some careful prodding to stay on task, or at least need to be told what that task is.

I turned from a hard working, initiative taking individual to someone that sounds like the employee above over a 4 year period because my supervisor never really talked to me about what I was doing and when it needed to be done. If I did something well it was the same as if I did something poorly or late. Thanks to the typical thankless nature of our jobs and the lack of input from my supervisor I found that I really didnt care any more, and neither did any of the other IT staff.

After the inception of regluar communication through standup meetings and performance reviews we quickly got back on track.

Also, it sounds like you are a 'working manager' and you may want to take a look at what "'Real work' for the project" that you should be passing on to your direct reports and managing instead of doing yourself.