Who doesn’t love a good puzzle?! I’m really glad you liked the idea, and I hope the monthly People Puzzle posts will be stimulating for the community!

Now, for the scenario, I’m sure it’s one that many HR professionals recognise and have encountered before. My immediate thoughts are:

• Why did the manager wait three months to tell me?! - Early involvement is early prevention. It becomes harder and more time consuming to resolve issues (performance or other) the longer you wait.
• What to they mean by “underperforming”? - Is it capability or conduct? Is it evidence based and recorded, e.g., the manager taken weekly notes of missed targets or unacceptable behaviour?
• Why are they considered a “lost cause” all of a sudden? - The employee has delivered for the last 10 years, and manager’s reluctance to support makes me suspicious. Perhaps it’s not the employee that’s underperforming, but something has happened between the manager and the employee leading to the manager rather getting rid of them. Perhaps the employee fears retaliation and doesn’t feel safe raising their concerns when it’s the manager that’s the problem.

I always start with finding out more information, both from the manager and the employee, to ensure I have a complete picture to what has happened. Jumping to conclusions can cause all kinds of issues (unfair dismissal, potential discrimination, demoralised team), and depending on where the investigation takes me, I’ll know what I’d recommend (performance improvement plan, reasonable adjustments, reallocation, etc.).

I completely agree with all the points @nina.johansson  mentioned. They've captured the key red flags and investigative approach perfectly.
Here are some additional considerations I'd like to add:

Beyond the manager-employee dynamic, I'd explore whether there are underlying health issues, family circumstances, or life changes affecting performance. A 10-year high performer doesn't suddenly become incompetent without cause. This could involve discussing potential reasonable adjustments, referrals to employee assistance programs, or temporary accommodations.

I'd also want to see detailed performance records, not just the manager's subjective assessment. Has the decline been properly documented with specific examples, dates, and measurable impacts? Without proper documentation, any disciplinary action becomes legally risky, especially for a long-term employee.

Has the role changed significantly? Are there new systems, processes, or team dynamics affecting performance? Sometimes "underperformance" is actually a mismatch between evolved job requirements and existing skills, which training could address.

The manager's immediate jump to termination for a loyal, decade-long employee raises serious questions about their leadership skills and potential bias. I'd want to understand their management style, recent interactions with this employee, and whether they've made genuine efforts to support improvement.

How are other team members perceiving this situation? A hasty firing of a respected long-term employee could devastate morale and create retention issues across the team.

The manager's "waste of time and money" comment ignores the significant cost of recruiting, hiring, and training a replacement, plus the institutional knowledge loss. A performance improvement plan is almost always more cost-effective than termination and rehiring.

Again, agreeing with Nina here. The approach should be thorough investigation first, never immediate termination.