Your employees will do much better if you have high expectations of them. Studies by Warren Bennis prove conclusively that, the more you expect, the more results will be achieved (obviously with some limit). In many experiments, heterogeneous groups were divided into two subgroups with identical goals. One subgroup was treated as if excellence was expected. The other subgroup was treated as if mediocrity was expected. In every experiment, the group for whom excellence was expected outperformed the other group.
You can show in many ways that you expect excellence: Be an example (work hard, be proud of your efforts well done, don't play computer games on the job). Provide educational benefits to your employees to help them achieve their best. Reward excellent behavior.* Coach, tutor, cajole, and attempt to inspire your poorer performers toward better work products and habits. If you (or they) fail, find more suitable opportunities for them within your organization or your company. If all else fails, help them find a job outside. You cannot allow them to stay in an inappropriate job, but you must also show compassion. If you leave them where they are, your product will be of lower quality and your other employees will assume that poor performance is acceptable.
Reference:
Bennis, W., The Unconscious Conspiracy: Why Leaders Can't Lead, New York: AMA-COM, 1976.
