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And what is my problem? I don't like people to be mad at me. I have always felt terrible when someone is upset at me for whatever reason, and then I become incredibly generous to make things better.
And it's not just with these two specific employees. These were the extreme cases, but I try to avoid conflict with everyone I come in contact with, and then I get mad at myself for not having the willpower to speak up and take charge.
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I ran into a similar problem when I was running a small business in that I felt that I was either viewed as a ♥♥♥♥♥ or a doormat. But you can certainly overcome that. When my business failed (after funding dried up following 9-11) I had a number of issues that I had to face. As I made progress I learned that my black/white view and my feeling bad when people were upset with me came from some early childhood issues. It took me sometime and work to get to the source but I have finally gotten to a point where I see when I am being manipulated and know why it yanks my chain and know that my decision is correct even if it doesn't "feel" right.
Your "new" AA did NOT care about YOU when she was given warnings in Sept., Nov, and Dec. You have a business to run. There are other employees who are doing a good job (I assume) and their livelihood depends on your business succeeding. Is it fair for you to jeopardize their jobs by cottling this person who wants a handout for little to nothing in return? I don't mean that in the harsh way that it came out but what I mean is if you cannot let people go and keep them out for your own sake or the sake of the business then surely you can let her go and keep the older man out for the sake of those who work hard and need and deserve their job. Your obligation lies with them not with people who have gotten by.
I suspect the older gentleman feels entitled to his job since he has been allowed to do nothing for a paycheck for so long. Something for nothing engenders feelings of "entitlement."
You can do this. You just need to shift your perspective away from yourself. For some reasons (scratch the surface of your mother or your father's attitudes toward you as a child) you do not feel that you
deserve authority. You do. The business is yours.
Claim your authority as an obligation to your other employees and then spend some inner exploration to findout why you don't feel like you deserve it.
I know you can do it. Do you believe you can?