When dealing with difficult people as a manager you must be able to address the situation properly and bring it to a conclusion. This is not only a demonstration of your effective leadership skills, but it also shows that you are in touch with the organization as a whole and can effect change in a positive way.
First off do not avoid the confrontation. It goes without saying that these people can be difficult. But the challenge should be one that you can embrace as an opportunity. You have the chance to influence a coworker in a positive way and create benefits for the whole organization. Leadership will be evident if you take the path of resistance and you do what is necessary to fix the problem.
Hopefully the problem is not you. Don’t assume that because you are not getting along with the individual that it is entirely their fault. Do a self assessment to see if you have contributed to the situation. Is this person just difficult with you? Is it a reaction to something you did or said. Get peers involved to assess the situation. Don’t encourage them to seek solutions to the problem. Instead try to validate that what you suspect is going on.
Manage the situation with a private talk with the person. This should be a one on one conversation in private. Don’t air your grievances in a meeting or in the break room. You want the best opportunity for your message to be heard and that will not happen with the person on the defensive. Be honest about how you feel without making any personal attacks. Try to keep the meeting short and be direct. No one likes to be treated like a child or patronized. Just address the issue as a behavior you are not happy with and not the person. Get a commitment from them to work on the issue then wrap the meeting up with something positive. Like a statement about how much better you think this talk will be on your work.
After you have spoken the individual don’t seek immediate changes. People can change, but it typically takes some time. Be prepared to see gradual changes and follow up with your co-worker to give them praise as you see results. Re-enforcing the positive behavior as it occurs is the key.
If you don’t see results, or you are not able to win them over with your talk, it is time to get someone else involved. This may mean that you rely on a peer to intervene. If you feel you have done a reasonably good job handling the situation to this point then it may be a good idea to have them assess the situation and then recommend the direction you should go. If you are lost, not really sure how well it turned out, get the pros involved. Talk with HR and your direct supervisor. They need to be in the loop about the difficulties you are having. They may not be altogether surprised you are having these issues and they may be able to take a much firmer approach to the difficult employee.
If all goes well you should experience better interactions with this employee. Many times you will win more respect and trust from the person for being up front. This is usually enough to get them really thinking about the difficulties they created and genuinely working to make the office less of a battle ground.