Performance improvement plans and termination give managers options.

Performance improvement plans and termination give managers options.

Currently, as in this very second, some of the approximate 82 million hourly workers across the United States are underperforming. These aren’t the obvious bad apples violating the company code of conduct (who hopefully are being shown the door). They’re the ones who for some reason, whether they’re a recent hire or a worker who’s been on the job for years, are failing to meet the day-to-day expectations of the role. The food server botching too many orders. The hotel services agent being a little too short with guests. The nursing assistant always showing up late. 

Managers face the difficult challenge of how to address these workplace behaviors. In some instances, the best (and quickest) option is to fire the employee. But in others, it may be worth developing a performance plan to motivate and get a worker back on track. Either way, it’s important to take decisive action.

The cost of keeping subpar employees 

Speed, accuracy, quality, dependability and attitude are all measures by which businesses are judged. And employees who don’t deliver in these areas weaken your operation. In the immediate, this may appear as fewer units coming off the line during second shift or more customer complaints about pizzas arriving cold with unwanted anchovies. As a result, you may see earnings dip. But as the little things add up, you also risk damaging your brand and earning a reputation for something you don’t want to be known for. And sometimes, just one little thing could be huge:

In addition to impacting future business revenues, poor performers put pressure on the rest of your team. Someone has to pick up the slack or fix a problem that didn’t need to happen, and that takes a toll on morale. Ignoring a worker’s underperformance also signals to other team members that it’s acceptable.

There will come a time when a manager has to take drastic action regarding a worker’s deficiencies. You’ve done plenty of on-the-job coaching to change behaviors and outcomes, but to no avail. So now, you either need to begin steps to let the worker go or put them on a performance improvement plan. Both actions call for thoughtful consideration and understanding of what will be required of you and your business.

Direct and indirect costs of firing a worker 

For the most part, terminating workers in the U.S. isn’t difficult. In every state except Montana, at-will employment is the default relationship between employers and employees. This means that an employer can terminate an employee at any time for any reason, as long as it isn't discriminatory, and that employees can resign at any time. There are exceptions for employees who do have a contract agreement in place, say, through a union.

Before proceeding to official firing protocols, make sure you’re fully aware of all the specifics pertaining to a worker’s poor performance. Have a direct conversation with the worker. Do they fully understand the role and duties? Was an up-to-date job description provided in writing? Is there a personal situation affecting their work, perhaps an injury, illness or divorce? Did they miss a training session when out on sick leave? Speak with any other team members or managers who can provide facts and feedback.

Firing someone doesn’t come cheap. There are direct costs associated with dismissing the worker and finding a good replacement. You may be required to compensate an employee for accrued time off. If your business has a healthcare plan, you’ll likely need to offer continued coverage through COBRA. And then there are the expenses at every phase of getting a new worker into the position. Fees for recruiters and posting ads on job boards. Labor costs for interviewing and onboarding—this may include your time. Dollars required for training and new equipment (e.g., mobile phone, computer) and much more. In today’s economy, replacing a non-management employee or a manager can cost $5,700 and $14,700, respectively.

There are also indirect costs that won’t appear on your balance sheet. Turnover at a company can affect employee morale. It may also negatively impact client relationships and your industry reputation. Remaining team members having to perform the duties of the open position, while also managing their own, may burn out and possibly quit. Employee and manager time must also be diverted from business as usual to train the new hire. And finally, there’s the loss of institutional knowledge. Departing workers take their job-specific know-how, tricks of the trade and valuable contacts with them.

Pros and cons of performance improvement plans

For scenarios when termination isn’t the right call, the performance improvement plan (often abbreviated as “PIP”) is a useful tool managers can deploy to help a worker. Ariane Laird, CEO & Founder of ConnectUsHR, defines a PIP as a formal plan you put into place when you’re experiencing a fixable performance issue with a valued employee. Plans have structured, specific steps for improvement and typically last 30 to 90 days.

PIPs empower workers to take ownership of their performance and commit to improving it. It’s true that documenting a process for improvement may defend against litigation from an employee who ultimately fails to strengthen performance and is dismissed. But the intent of a PIP should be positive. The experience should be fair, supportive and not feel like a prelude to termination.

If designed properly, working through a plan will require a lot of time and effort, on the part of the worker and a manager. And the outcome everyone wants may not always happen. But when a stronger employee emerges from the process, it’s a great win for your organization. According to Laird, there are certain instances when a PIP makes sense.

When a PIP makes sense

• When a labor agreement dictates it as a must-have process when there’s a performance issue

• When you haven’t structured your employee handbook to allow flexibility or discretion in how you will deal with a performance issue. If you say your policy is to implement a PIP when performance issues arise, employees will believe you and expect it.

• When the employee is a “keeper” and most other areas of performance meet expectations. (On the contrary, when there’s evidence that a worker’s performance issues have a low likelihood of correction, it’s best to not attempt a PIP.)

• When the employee has historically been a good performer and the issue is a recent anomaly

• When the employee is going through personal challenges and the window for accommodation is closing

• During probationary period, if the new hire is a keeper but additional time is needed to assess a fit or skill set

Designing and implementing a performance improvement plan for your worker

The beauty of an individual performance improvement plan is that it can be tailored to fit your specific worker with specific performance issues. Clarity and detail are essential. The Society for Human Resource Management offers excellent step-by-step guidance for creating and managing a PIP.

The first step in drafting a plan is to define what the acceptable performance levels for the role are and indicate how your employee is deficient. Note specific examples (with dates) of unacceptable performance. Include a role description and any HR/employer policies info that will clarify expectations.

Follow this up by defining SMART goals—smart and measurable objectives that are achievable, relevant and time-bound. Length of time should be based on how long it would reasonably take to improve a performance issue. As mentioned previously, this is usually in the neighborhood of 30, 60 or 90 days.

You’ll then want to note how management and the company will assist the worker in meeting these goals. This may come in the form of additional training, coaching and resources. You should also declare how often the worker and manager should meet to discuss progress.

Lastly, you need to state the consequences of not meeting the goals of the plan. Will the worker be demoted, transferred or terminated?

Before any actual performance improving can begin though, it’s critical to first vet your PIP with HR staffers or consultants. They should ensure that the plan isn’t biased against the worker and that goals and timelines are reasonable. With the greenlight from HR, you then need to introduce it to the employee. Encourage honest feedback and be open to suggestions that may lead to a more effective plan.

Monitor progress with your worker regularly over the course of the PIP. Acknowledge the small victories and guide when he or she may be struggling. At the end of the performance improvement period, hopefully you will be able to celebrate their successful efforts!