Here's What You Need to Know About Performance Improvement Plans

By: Stephan Miller - Guest Contributor on November 17, 2023
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Does your team have an underperforming employee that needs support? As an HR leader or manager at a small to midsize business (SMB), you want to help that employee improve and get back on track. However, you may not have the right tools or experience to create an effective performance improvement plan (PIP).

You’re not alone. According to Gartner, only 29% of managers can effectively identify the performance of underperforming employees, and only 13% can effectively improve their performance. [1]

A PIP outlines clear goals, actions, and measures to help an underperforming employee improve within a set timeframe. With the right plan in place, you can provide structured support and avoid potential legal issues down the road if termination is required.

What is a performance improvement plan (PIP)?

A performance improvement plan, also known as a performance action plan, is a structured document detailing the expectations of an employee and the cooperative steps that the employee and their manager will take to improve the employee's performance. 

It outlines the specific actions and goals for the employee to address performance deficiencies and lays out the support, guidance, and resources the manager will provide to help the employee achieve the desired performance level.

Gartner identifies six common components of a PIP [2]:

  1. Timelines for achieving goals: A PIP typically includes specific timeframes within which the employee is expected to demonstrate improvement. These timelines provide a sense of urgency and help track progress effectively.

  2. Actions to take if no improvement is made: The plan should clearly state the consequences if the employee fails to meet the expectations outlined in the PIP. This could include further disciplinary action or even termination of employment.

  3. Key development areas and goals: A PIP should identify the specific areas where the employee needs to improve, such as skills, knowledge, behavior, attitude, or productivity. The description should be relevant to the employee’s role and responsibilities. Specific and measurable goals for these areas will guide the employees’ improvement efforts, providing a clear target to work toward.

  4. Frequency of feedback: Regular feedback and check-ins are crucial for the success of a PIP. The plan should specify how often feedback sessions will occur, allowing for ongoing communication and guidance.

  5. Measures of success: Identifying measurable success criteria is important to evaluate whether the employee has met the goals outlined in the PIP. These metrics could include quantitative targets, qualitative improvements, or a combination of both.

  6. Explanation of available coaching support: A PIP should tell the employee about the support and resources available to them to help them improve their performance. This may include coaching from a manager or a peer, guidance from the HR department, or access to online training tools or platforms.

Why are performance improvement plans important?

Performance improvement plans are not just another administrative task or HR procedure. They play an important role in the success of SMBs by providing them with a structured way to address underperformance issues. The PIP process allows them to avoid potential legal issues and productivity problems in the future.

In an SMB, resources are often limited, and every team member’s contribution holds significant weight. One underperforming employee can significantly drag down overall team output and morale. And rushed, knee-jerk firing decisions open SMBs to possible wrongful termination lawsuits.

Implementing a formal PIP process shows underperforming employees where they need to improve and gives them a fair chance to meet clear expectations. If improvement isn’t made after the PIP, the SMB has solid, documented evidence showing good faith efforts were made to support the employee before considering termination.

Does your HR team need a tool to implement and track its performance strategy? Check out Software Advice's directory of performance management software that can streamline your team's processes.

What are the benefits of performance improvement plans?

PIPs give underperformers the motivation, resources, and timeframe needed to get back on track and provide managers with a framework to guide, support, and monitor the improvement process:

Improved employee performance and productivity

Implementing a PIP gives employees a clear roadmap for improvement, setting defined goals and expectations for them to meet. By offering guidance, support, and targeted development opportunities, PIPs can help employees improve their performance and productivity. This can lead to higher quality work, increased efficiency, and better overall output. 

Better alignment with business objectives

It is common for SMBs to face tight budgets and ambitious goals, and PIPs can be a strategic tool for aligning employee performance with your business objectives. By creating performance goals that line up with your company’s mission and values, you can make sure that everyone is working toward the same goals and driving growth and success in your business.

Positive performance culture

The use of performance improvement plans can help an organization create a culture that values continuous improvement and growth. PIPs promote ongoing feedback and coaching, encouraging a supportive environment where employees feel empowered to develop their skills and reach their full potential. A positive performance culture fosters collaboration, innovation, and a sense of personal and professional development, which benefits the business as a whole.

Targeted skill development

PIPs identify specific areas where employees can improve and give them opportunities to develop their skills. Whether it’s through training programs, mentoring, or other resources, PIPs allow employees to gain the knowledge and skills necessary to become better employees. 

Boosted legal protection and internal processes

For SMBs, legal compliance and fair treatment of employees are non-negotiable. Implementing PIPs shows a commitment to fair and transparent processes. This can be important if ever faced with legal disputes or claims, as it proves your attempts at giving employees a chance to improve before more severe actions are taken.

Learn more on how to align employee performance with organizational goals: "Future-Proof Your Workforce With Talent Mapping"

When should you consider implementing a PIP?

A performance improvement plan should be considered when there is a clear and persistent pattern of performance issues that have not been resolved through informal feedback or coaching. Here are some specific scenarios where a PIP might be appropriate:

  • Consistent underperformance: If an employee consistently fails to meet expectations or achieve established goals, despite prior discussions and coaching, a PIP can provide a more structured approach to address the performance gap.

  • Specific performance deficiencies: When an employee is exhibiting performance issues in specific areas, such as missed deadlines, errors, or poor quality of work, a targeted PIP can help address those issues directly.

  • Behavioral issues impacting performance: If an employee’s behavior is negatively affecting their performance or the team’s dynamics, a PIP can address these behavioral concerns and outline expectations for professional conduct.

  • To support employee development: In some cases, you can use a PIP as a proactive tool to help support the development of an employee who shows potential but requires additional guidance and structure to reach it.

  • Documentation for potential termination: If performance issues persist despite previous interventions, a PIP can serve as formal documentation of the company’s efforts to handle the issues and provide support, which can be important in case the employee is eventually terminated.

When should you avoid using a PIP?

While PIPs are useful in many situations, they may not be the best tool in every scenario. Here are some situations where you should consider alternative methods:

  • Minor or isolated performance issues: If an employee’s performance issue is a temporary lapse rather than a consistent pattern, it may not warrant the implementation of a PIP. In these cases, it might be better to address the incident through coaching, feedback, or a simple reminder of expectations.

  • Gross misconduct: If an employee’s actions involve severe violations of company policy, ethical breaches, or illegal activities, it may not be appropriate to use a PIP. In these cases, immediate disciplinary actions could be the better choice.

  • Lack of clear expectations or training: If performance issues are the result of unclear expectations or inadequate training, the focus should be on clarifying what is expected of the employee and providing them with the training they need rather than implementing a PIP.

  • Personality conflicts or mismatches: When there are conflicts or disagreements between the employee and their team or management, a PIP may not resolve the underlying issues. Consider alternative dispute resolution methods.

Transforming performance with effective PIP implementation

Implementing a performance improvement plan for the first time can be challenging, but it is worth the effort. The tips covered above will help you implement a PIP that improves employee performance, fosters a workplace culture that values continuous improvement, and protects your business against legal action.