Performance Improvement Plans (PIPs) – are they worth it?
Are PIPs a golden solution to managing underperformance? What are the considerations for employers in utilising PIPs?
Performance Improvement Plans (PIPs) are an increasingly common tool utilised by employers to manage cases of poor work performance. A Performance Improvement Plan is not a legal requirement and there is no legal definition of same. A PIP can be understood to be a documented plan which outlines the improvements in performance required from an individual employee and the timeline for achieving these improvements. A PIP will also generally set out the dates for review meetings between the employee and the line manager over the duration of the PIP. At these PIP review meetings, the employee’s progress will be discussed and any supports/training will be identified. When poor performance is identified and a PIP is put in place, the employee will be expected to agree to the performance targets in the PIP. PIPs are commonly used prior to or during a formal disciplinary process to assist in setting performance expectations and monitoring performance. They are not typically used during the probation period.
Benefits of using PIPs
There are a number of benefits to employers in using PIPs. The process of meeting with an employee to discuss identified underperformance can highlight surrounding issues that need to be addressed in the first instance. For example, there may be training needs, a lack of role clarity and/or the existence of family/health issues that are impinging on the individual’s performance. These factors would need to be appropriately addressed to ensure that PIP targets are reasonable and certainly prior to any formal disciplinary action.
The PIP discussion between a line manager and an employee should also assist in setting reasonable performance expectations. If there is a disagreement regarding the reasonableness of the employer’s performance expectations, then a PIP discussion should flag this. It is crucial that an employee is aware of the performance standards and that he/she is agreeable to these.
A company wide approach of utilising PIPs to address cases of poor performance should also assist in ensuring consistency across different business units. Companies that utilise PIPs to manage underperformance will generally use a standard internal template document to structure the discussion and will implement a similar timeframe for PIPs. Where a disparate group of line managers are managing individual performance cases on their teams, it is important that there is consistency in approach. A policy of using PIPs and the structure that a PIP provides can assist in this regard. Crucially, the PIP discussion with an employee ensures that the employee is on notice of the performance shortcomings prior to the initiation of a formal procedure.
A PIP will also ensure that there is a written record of the employer’s efforts to notify the employee and to address underperformance prior to any formal process. This can be a valuable reference document if the individual case progresses to more formal actions subsequently. PIPs are also utilised to set performance targets for employees who are on formal disciplinary warnings. In this regard, a PIP is a useful tool for structuring the performance expectations and supporting the employee. Leaving an employee to fend for himself following the receipt of a formal warning for underperformance may be viewed critically by a third party.
It is well established through case law, that the reasonableness of an employer’s management of underperformance will be judged in part by the timeframe afforded to the employee to affect the performance improvement. A PIP of reasonable duration should ensure that the employer meets this requirement. This time may also allow the parties the opportunity to explore alternatives to formal disciplinary action such as transfer or demotion where it is apparent that the employee’s skillset is not appropriate to the role.
Challenges in using PIPs
In order to utilise PIPs correctly and to get the maximum benefit, the line manager population need to be trained on how to use PIPs. Line managers need to be equipped with the skills to have difficult conversations and to be comfortable giving negative feedback. PIPs are a time consuming process and they can generate a lot of paperwork. To ensure that management resources are being used efficiently and that an underperformance issue is being managed proactively, managers need to have the requisite skills. At worst, a PIP can become a delay to the management of underperformance under the disciplinary process. Therefore employers should invest in training and communications to ensure that managers and employees understand PIPs.
PIPs are not a fix-all solution. They can be difficult to deploy in instances of underperformance that relate to more intangible qualities such as communication skills, creativity and leadership ability. PIPs are not appropriate for a misconduct issue. When an employee receives negative feedback in a PIP discussion, it may prompt a counter allegation (e.g. a bullying claim or a request for reasonable accommodation due to an alleged disability). In commencing a PIP process, there is also a risk that the employee disengages and perceives the PIP as a tool to manage their ‘exit’ from the business. Thus a PIP may prompt actions that are contrary to those originally intended.
A PIP is not a replacement for formal disciplinary action. If an employer needs to address underperformance formally and through to dismissal, then the company disciplinary procedure has to be used.
It is important to remember that PIPs only work where the appropriate surrounding structures are in place. These include a proper induction and (ongoing) training, clear role descriptions and clear documented targets/goals, managers who are willing to tackle underperformance and a means of objectively measuring performance. In the absence of robust arrangements in these areas, a PIP will falter and potentially fail to achieve the desired outcome of assisting an employee to improve his/her performance.
In the next HR link (April 2017) the format of a PIP plan and guidance on introducing a PIP policy will be provided.
Claire Hellen
Tuesday, 21 March 2017