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Performance Improvement Plans: What They Are and What They Should Include

An underperforming employee in your organization is an unfortunate reality that every business owner may have to face at one point or another. When an employee is failing to meet expectations, not only do those directly associated with that employee suffer, but the entire company will eventually feel the ripple effect of these behaviors. These repercussions are typically felt more greatly and much more quickly within a smaller business, where every employee tends to play a larger role in the success and failure of your operation.

Eventually, though, you’ll reach a point where it’s clear that the situation has to change. While terminating the employee may seem like the logical course of action when you reach this point, performance improvement plans may offer a better approach to employee performance management.

 Silhouette of a businessman pushing a boulder up a hill.

What is a Performance Improvement Plan?

A performance improvement plan (PIP), sometimes referred to as a performance action plan, is a tool used to give an underperforming employee the opportunity to succeed. Essentially, it can be viewed as a probationary period for employees. The plan itself should be a formal, written document that outlines any recurring behavioral and/or performance issues along with a specific timeline for the employee to achieve certain goals to regain good standing in the company.

Steps to Implementing a Performance Improvement Plan

The Society for Human Resource Management (SHRM) outlines the steps that organizations should take to implement a performance improvement plan:

1. Identify the Underperforming Employee

Underperforming employees can be challenging to identify within an organization. For example, an underperformer could be a new hire that has a larger learning curve than originally anticipated. Even a top performer can become disengaged if there’s a lack of growth opportunities or challenges. According to PeopleGoal, an employee experience platform, some signs that may suggest that an employee is struggling include:

  • Decreased productivity
  • Decreased engagement
  • Increased time off
  • Increased tardiness

2. Determine the Right Course of Action

Performance improvement plans can be beneficial in certain circumstances. However, they can also be a detriment if there isn’t a genuine commitment to improvement. SHRM says that performance improvement plans should be implemented when there is “a commitment to help the employee improve, not as a way for frustrated managers to start the termination process.” 

To assess whether a performance improvement plan is the appropriate next step, ask yourself:

  • Is it likely that the issue can be resolved through a formal improvement plan? Problems that involve sales goals, quality ratings, and other quantitative objectives are typically issues that could be resolved with a performance improvement plan. Issues related to a poor attitude or bad behaviors, on the other hand, usually aren’t as well-suited to using the goal-oriented process of a performance improvement plan.
  • Has the employee received the proper training to perform the job well? Was the employee’s onboarding process sufficient? Additional training outlined in a performance improvement plan can help correct any gaps in training.
  • Is there a known personal issue affecting the employee’s performance? When an employee experiences troubles in their personal life, it can affect their work performance. A performance improvement plan can help the employee get refocused and back on track in a reasonable time frame.

3. Draft an Improvement Plan

Once the need for a performance improvement plan has been established, it’s time to start drafting the plan. As you write the performance improvement plan, be sure to:

  • Define what is considered an acceptable level of performance. Consider the employee’s job description as well as the company guidelines outlined in your employee handbook.
  • Identify areas where the employee’s performance is lacking. Include specific details, such as dates, specific data, detailed explanations, and any previous guidance or reviews given to the employee.
  • Set specific, measurable, attainable, relevant, and time-bound (SMART) goals. Keep in mind, performance improvement plans usually last 30, 60, or 90 days. An example of a SMART goal could be, “John Smith must produce at least 100 units per month for the next three months.”
  • Provide guidance on what the company will do or provide to help the employee achieve these goals. For example, a manager might provide additional training, resources, or coaching to help an employee close a skills gap.
  • Include how often you will meet with the employee to review their progress. Weekly check-in meetings can be common, but the frequency can depend on the goals or circumstances.
  • Clearly state the consequences of not meeting the objectives of the plan. Consequences may include a demotion, transfer to a different position, or termination.

4. Review the Plan

It’s important to remove any bias against the employee from the performance improvement plan, especially if you work closely with the employee. Ensure that the performance issue is clearly stated, the goals are fair, and the deadlines are reasonable. It could be in your best interest to have someone in HR review the plan to ensure the plan is attainable and fair.

5. Implement the Plan

It’s now time to meet with the employee to discuss the plan and your expectations. A word of caution: performance improvement plans tend to get a bad rap with employees, as they can often be seen as the first step toward termination. As a result, some employees may decide to quit, rather than stick around for what they believe to be inevitable. It’s also important to note that not every employee will respond to criticism well.

When you meet with the employee, it’s important to communicate the company’s commitment to the plan and to the employee’s success. Employee feedback should also be encouraged during this time to help clarify any areas of confusion and understand their perspective on the current situation. After reviewing the plan and making any modifications, you and the employee should both agree to and sign the written plan.

6. Monitor Progress

As stated in the performance improvement plan, you should regularly meet to review the employee’s progress toward meeting their performance goals. Ensure all meetings are scheduled and occur on time. Cancelling, rescheduling, or tardiness to meetings could convey a lack of importance or commitment from you to the employee.

During these check-in meetings, evaluate the employee’s progress, identifying why progress has or has not been made. If needed, provide solutions or resources to help get the employee back on track.

7. Plan Conclusion

The outcome of a performance improvement plan is situational. In an ideal scenario, the employee would reach their goals by or before the plan’s deadline. If this is the case, formally close the performance improvement plan, recognize the employee’s success, and allow the employee to continue employment with the expectation of continued good performance.

If an employee falls short of meeting their performance goals in the given timeline but is committed to improvement, it could be worthwhile to extend the deadline. In other situations where the employee is unable to improve or their performance worsens, you’ll need to consider whether a transfer, demotion, or termination would be in the best interest of the company.

Benefits of a Performance Improvement Plan

Regardless of the outcome, there are many benefits to implementing a performance improvement plan. The process of identifying the root causes of poor performance, outlining clear expectations for improvement, and giving the employee a chance to rectify shortcomings could save significant time and costs related to termination and re-hiring. Additionally, by having these types of plans in place, you’ll create a culture of performance accountability and continuous improvement along every rung on the corporate ladder. 

Employee Performance Management Services

As a business owner, performance management is critical to making decisions related to training, career development, compensation, transfers, promotions, and termination. Professional employer organizations (PEOs) like Group Management Services can help. Whether it’s reviewing a performance improvement plan, documenting performance reviews, or even initiating demotions, transfers, or terminations, we can take on the administrative challenges associated with managing employees. In addition to performance management, we can provide comprehensive HR services, including payroll, benefits, and risk management. Contact GMS today to learn more about our employee performance management services.

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