- What a Performance Improvement Plan (PIP) consists of
- How to implement a PIP
- How a PIP can protect the company
- How a PIP can help an employee improve
- The difference between firing and laying off
Sometimes, a bad job candidate slips through the cracks even with the best hiring processes. It's sad that sometimes new hires simply don't live up to their potential.
Here’s an example: One of our employees at Acquira used to head a project to create a new HR Management System (HRMS) in a large organization. The team would gather every morning to hammer out the best design and the modifications that needed to be made to the HRMS template they had purchased.
One new hire, who had appeared brilliant during the interview process, could not make up his mind. He was a perfectionist and repeatedly brought the team back to second-guess each decision, getting quite emotional about it. The hiring process could not have brought his indecisiveness to light, and in other types of jobs, it might not have been an issue.
But it isn't just about the hiring process. An employee's performance can also slip due to matters in their home life, training that doesn't keep up with changing regulations or technology, or personal problems between them and a manager or coworker. The important part is not necessarily why their performance is faltering, it's that you identify that it is faltering and provide a means for the employee to make corrections. That's where the Performance Improvement Plan comes in.
The Performance Improvement Plan
When an employee first displays a pattern of poor behavior or performance – not just a single instance – you should document and date it and keep doing so if that pattern continues. This will help you prepare a PIP (performance improvement plan) and serve as documentation if the company is sued due to the dismissal. Ensure you keep the document in the employee file where no one else can see it.
Before launching a PIP, talk to the employee privately and briefly about the problems with their performance or behavior. The second step should be a formal performance review where you can discuss the employee's job performance. Make sure the notes of the meeting are attached to their personnel file.
A talk with the employee might be sufficient to improve the behavior. This is often the case if the employee is particularly young and the problems are related to punctuality, procrastination, or taking too much time off. After all, there is a socialization process that comes with working for the first time, and the employee might be seeing what they can get away with, or they may just be unaccustomed to the expectations in the workplace.
Implementing A PIP
If the above steps fail, a PIP should be implemented in the following types of situations:
- When an employee’s productivity is poor – this may be a chronic problem or an anomaly, in which case you need to find the root cause
- When an employee is taking too much time off
- When an employee is frequently unpunctual
- When an employee performs poorly in one or more areas but still performs well in other areas.
- When an employee is unengaged with the job, slams the company, or does not get along with other employees.
A PIP is a written plan with a time limit of 30, 60, or 90 days aimed at correcting poor performance. It should include:
- PIP Beginning and End Dates
- Employee Information – name, position, name of manager to whom they report
- Target Area – description of behavioral or performance issues, with specific examples of failure to meet standards (preferably dated). It is completed before the PIP meeting.
- Expected Standard – employee expectations regarding behavior and/or performance by the end of the PIP process.
- Actions for Improvement – actions the employee needs to take to attain the required level of performance
- Training and Support – Details the training and support required to improve performance.
- Reviews Planned – Gives dates for subsequent meetings between you and the employee while the PIP is in effect.
Sometimes, inadequate performance is not wholly the fault of the employee. Poor performance may indicate that the training or onboarding processes are not sufficient. When you initiate a PIP, this should also trigger an audit of the training and onboarding process to see if improvements are necessary. Perhaps the root cause is illness or other problems at home.
So, the PIP process has two distinct purposes: it aims initially to try to help the employee and get them back on track. It may ultimately serve as a document supporting the company if the employee has to be fired and litigated.
What needs to be made clear is that, while you would like to help the employee, the PIP is the first step on a road that will lead to further disciplinary action if performance or behavior is not brought up to the company’s standards.
What needs to be made clear is that, while you would like to help the employee, the PIP is the first step on a road that will lead to further disciplinary action if performance or behavior is not up to the company’s standards.
Acquira recommends quarterly performance reviews, with salary increases tied to a more formal annual performance review. This quarterly process will capture shortfalls in employee performance. Therefore, the PIP process could be launched due to a negative review and last a shorter period, 60 days or less.
According to Jim Collins, author of Good to Great, it is imperative to have the wrong employees off the bus and the right employees on the bus in the right seats. If you’ve determined that you have an employee who is irredeemably wrong for your company, it is preferable by far to have them self-select for termination – ie., quit before they have to be fired. This will often be what happens. If you are ready instead to fire someone, we recommend you consult with an employment lawyer to reduce the chance of litigation.
If an employee’s employment terms with you include an ‘at will’ clause and you have documented their failings over time, litigation is unlikely.
However, a lot depends on the character of the problem employee. There can still be frivolous litigation even when the employee is highly unlikely to win. That’s why we suggest you check with an employment lawyer to judge the strength of your case before proceeding. It is possible to pay the fired employee in exchange for negotiating a release with them, but that can involve a very expensive back-and-forth process between both parties’ lawyers.
Not to mention, firing is stressful. It is hard on you and generally much worse for the employee. That’s why it’s preferable for a disgruntled employee to leave of their own accord.
Remember that it is illegal to fire an employee for discriminatory or retaliatory reasons. (Retaliation is involved if an employee is fired for whistle-blowing or refusing to do something illegal.)
How To Fire An Employee
The Harvard Business Review has some excellent pointers that you should consider when you need to fire an employee:
Don’t drag your feet – don’t put off the task just because you find it unsavory. It’s better for all parties to get it over with as soon as possible.
Use your HR department – Before you begin the firing process, make sure you consult with HR. Human Resources could point out, for instance, that the employee's pension vests next week, so firing him now could be viewed as suspect.
Keep it short – Make sure you avoid any confusion. Use short, simple words to get your point across. If the employee tries to argue, avoid responding and do not argue.
Stay in the room – Any leader worth their position will stay to ensure that the job is done.
Show compassion – As we said, firing is difficult for anyone in a leadership position. But for the employee, it can be traumatic. Explain that you’re happy to provide references for the employee, walk them back to their desk so they can gather their belongings, and then walk the employee out of the office like it’s a normal day.
Talk to your team – After the person you’ve fired has left, gather everyone on your team who has been affected termination and address the matter. This allows you an opportunity to reassure others that their jobs are safe.
Focus on the future – Don’t wallow in the firing. Rally the remaining team and look at your collective goals. This will help everyone move on.
Sometimes, people are terminated for reasons that have nothing to do with them. You may have to lay off an employee when their position is eliminated, a takeover has happened, and you are left with duplicate positions, or if there is insufficient work to warrant keeping them. In cases like this, it is normal to include severance pay and offer a favorable reference.
Severance pay is usually calculated as 1-2 weeks of pay per year worked.
Terminating an employee is never easy; hopefully, you can avoid it at all costs. The Performance Improvement Plan is an excellent way to help employees improve their performance. It will help protect the company if there is any legal fallout due to a dismissal. They can also help point out problems within the training or onboarding processes.
Do you have any firing horror stories as an employee or a manager? We’d love to hear them in the comments below.
The above article is taken from a section of the ACE Framework, our change management system that helps business owners create post-acquisition growth. The Framework is only available to Acquisition Entrepreneurs who have closed a business through our Accelerator Program. If you’d like to get started on your own acquisition journey, the Accelerator is your first step. Schedule a call with us today to learn how we can help.
- A Performance Improvement Plan (PIP) is used to help problem employees correct poor behavior.
- A PIP can also be used to identify problems with the company’s training and onboarding processes.
- Before launching a PIP, talk to the employee privately and briefly about the problems with their performance or behavior.
- If you are ready instead to fire someone, we recommend you consult with an employment lawyer to reduce the chance of litigation.
Acquira is a business acquisition in a box service. We help entrepreneurs buy businesses and we invest in them and their chosen businesses. We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.