When you tell someone to shape up or ship out, you are warning them that if they don’t behave themselves, you will ask them to leave. In other words, you want them to meet your expectations.
Example. ”Nandini, you’re constantly handing in your assignments late. Shape up or ship out.” * “This is the third time this month that our new driver has been involved in an accident. Tell him that he either shapes up or ships out.” * “I am sorry to say that your performance hasn’t been up to the mark. Either you shape up or ship out.”