In a discussion on the Masters' Council (which you have to log in to to read, I believe) we've been discussing the issue of communicating with our players and, basically, keeping them happy while staying happy ourselves. I had some thoughts on this I wanted to explore a little.
To some degree a GM has to "hire" his or her players, and treating them like employees is not always a bad thing. In management you learn, "Don't reward the underachiever."
That first issue is almost entirely on the GM's side, and a lot of it comes down to self-confidence. While I've never bought entirely into the idea that "what the GM says goes" (because the GM is only human and may forget something or not know something about how physics works or somesuch) I do think a GM needs the self-confidence necessary to kick a player out. Sure, it may need to be a "last resort" kind of situation, but the GM needs to respect him or herself as well as the game in its entirety to make the sacrifice. (I kind of have the opposite problem; I put the game on a pedestal and think, "I'm not good enough to continue this.") GMs should have a passion for their game, and this should come through to the players.
IME, GMs tend to accept responsibility for adversity above and beyond that which they actually have control of inside their game. One of the things that makes this doubly difficult is the same thing that makes GMs unlikely to find a good co-GM relationship; when we have difficulties, we tend to draw inwardly, rather than seek support and join forces. The idea Ginger indicated about having her co-GM support her by writing for the players/characters she finds difficult is an excellent one under this idea. It helps conserve resources.
Sometimes a GM has to take any opportunity to cull someone who is being a drag on the game. Players may offer these themselves; lack of response or other opportunity for redemption. There need to be limits, and while some of them are obvious, some of them don't lend themselves well to communication. The goal needs to be kept in mind: are you here to have fun or battle with people on a regular basis? Most of us are here to have fun. If it has become a war, you aren't reaching your goals...[unless, of course, you like to fight.]
In communicating with our players we have to realize that the players are on a different level. They're not necessarily your friends. They don't know the arc, they don't know how their choices will affect the story, they don't know that their ideas make their characters ineffective in the long run. They DO know they want to run this character idea...so we need to explain how to not do it "into the ground." Communicating clearly and concisely sometimes seems blunt, sometimes seems like we're talking to our players as if they were children. If they're being petulant and sulky it just makes that latter matter worse. On the other hand, you think, "How would a GM best describe this to me?" combined with "How can I keep this player satisfied with playing but make the character fit the group/game/world?"
That last is difficult. I find that delegation of the task helps a lot, like getting the player to make the changes. "Normally I don't let someone change their stats mid-game, but I think we may need to look at some new options." I might run the character through a quick side plot to validate the issues. I might offer them extra experience (bribery is so overlooked in this culture.) You need to know your players: what are they looking for? Whether you use the G/N/S terminology or something else, what are the potential rewards? What is the "paycheck" the player gets? What kind of production is it tied to? In my games, the "paycheck" is often "more play" which is also sometimes "more responsibilities." Of course, that's the way I like it at work, too.
Whether we like to acknowledge it or not, emotional issues ARE a part of gaming. Sometimes the only way to make this work is to search for a goal that you're both committed to achieving. Sometimes the truth is that there is no "discipline" available in the relationship. If I were your boss, I could tie your performance as an employee to pay or responsibility...but I don't have any control over you in a gaming situation except to deprive you of playing privileges. What kinds of consequences do I have to offer? How can I proffer criticism when I have no real authority?