Your employee's telephone antics sound phony. If you are on a business call and your manager walks into your office, do you instantly hang up? Hand gestures or briefly placing a call on hold are more normal reactions. Although you do not have ironclad evidence that she is on personal calls, her behavior is simply not what is found on business calls.
Although she is the one on the phone, part of the problem is your managerial style. Sometimes this type of thing happens with managers who are trying too hard to be liked.
Let your employee know that her actions certainly do not appear to be business calls, and then tell her where you and your company stand on this matter. Your company policy can be an excellent guide here, as employer rights can be rather broad in this area.
You should check up on her more often, document what you see and hear, and be sure she knows that if she continues this type of behavior, she is going to end up having a long-distance relationship with your company.
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