- Evaluate employees' performance by comparing their output and behaviors to the agreed-upon expectations.
- Have an in-person discussion with an underperforming employee to identify the reasons for poor performance and create an improvement plan.
- Document the employee's performance and improvement plan to evaluate their future performance and protect your business.
- This article is for small business owners, HR professionals and managers who have underperforming employees.
Underperforming employees can cost your business valuable time and money, so it's imperative to address these situations as soon as possible. The possible reasons for poor performance are plentiful. The good news is that many of them can be resolved with a proper plan in place. If you want to improve your organization, it is important to learn how to identify, communicate and improve poor employee work performance.
What are the steps to managing and improving underperformance?
Discussing poor employee performance can be uncomfortable, but you should do it as soon as possible when you notice an issue. Delaying these discussions will only continue to hurt your business. Most employee performance can improve with the right processes in place, so every small business should outline a formal plan for managing and improving underperformance.
"Small businesses fall into the trap of thinking they don't need the same things they find in big business – formal policies, performance management programs or even documented discipline processes," Chris Young, director of workforce development at the Texas Department of Transportation, told Business News Daily. "In fact, small businesses have less room for legal risk and need these things even more than large companies. Having formal policies and processes for performance and discipline will also professionalize your workforce faster than just winging it." [Read related article: How to Craft Company Policies for Your Small Business]
Here is a three-step process your small business can follow to manage and improve employee performance.
1. Discuss the issue with the employee in person.
The first step in improving performance is for the employee's manager to have a private conversation with them about the issue. Approach the conversation with curiosity, not accusations. If necessary, involve an HR person who can help lead the discussion. The intent should be to not only uncover the problem, but also designate a solution that gives the employee a chance to succeed. Be direct and clear in what you are trying to accomplish, raising the issue with the employee in a professional, non-personal way.
- Do say, "I notice that X task was not completed when we agreed."
- Don't say, "I notice you did not complete the task on time."
Follow up the statement with curiosity. For example, you could ask, "Can you help me understand what happened that caused the deadline to be missed?"
Leaders and managers should be open to any feedback from employees. At the end of the discussion, the two parties should agree on what is necessary for the employee to succeed and create a plan for how they will move forward and check progress.
Young cited a similar verbal approach you can take to address the employee – the FOSA (Facts, Objectives, Solutions, Actions) method. In this performance improvement model, Young said, the manager identifies the facts of the poor performance without judgment.
"Then she links the desired performance to the organization's objectives and waits for the employee to offer more than two solutions," he said. "It's critical that the employee develop the solutions, because whoever comes up with the idea owns it, and managers want their employees to own their solutions. Finally, they all agree to specific actions and a date to revisit the plan."
2. Document the discussion and expected deliverables.
In addition to discussing the problem and solution, you need to formally document them. You can keep an internal document for your reference and give the employee a letter for notice of unsatisfactory performance. Include details about the employee's performance, the problems (e.g., quality, timing, behavior), the steps you and the employee have already taken, and the agreed-upon steps that will be taken moving forward.
Documenting this information can help you evaluate the employee's future success. If the performance does not improve and you choose to terminate the employee, the documentation can serve as protection and evidence for why you made the decision.
3. Create a performance improvement plan, or terminate the employee.
If the employee does not start meeting the new agreed-upon expectations, it is time to revisit the conversation in a more serious manner. Hold another in-person discussion with the employee about whether they would be most successful staying in their current role, moving to another role within the company or leaving the company altogether.
"If the employee decides that they want to remain in their current role, a performance improvement plan can be created that not only outlines a clear path forward toward success, but also includes any committed-to interventions (mentoring, coaching, training, HR discussions) and what the eventual consequences are for the performance not improving," Colton said. [Read related article: How to Create an Employee Performance Improvement Plan]
Key takeaway: To improve poor employee performance, have a discussion with the employee, create an employee improvement plan, and document the occurrence.
What is poor work performance?
To manage and improve employee performance, you need a clear understanding of what poor performance is. An employee displays poor work performance when their actions, output and/or behavior don't meet their clearly defined job responsibilities or organization expectations.
How well an employee performs is based on a combination of several factors: their ability, willingness and capacity to complete their duties; management's ability to set and communicate SMART employee goals; the company's ability to communicate its mission, vision and values; and a company culture that fosters safety, inclusion and transparency. If any – or all – of these factors are lacking, the employee is likely to display poor work performance.
The specific behaviors that constitute "poor performance" can vary by industry and department. For example, Anthony Babbitt, change management consultant and business strategist at Babbitt Consulting, said a manufacturing company may measure performance by productivity, such as acceptable units per hour, whereas an HR department may identify poor performance by high employee turnover rates.
"In service work, performance may be as much about the quality of the work as it is about one's ability to interact with customers," Babbitt said. "Every company defines this differently, but it is one of the most important distinctions a company can make … since this definition typically becomes the deciding factor in whether an employee is retained or discharged."
Key takeaway: Poor work performance is when an employee's output or behavior doesn't meet employer expectations, which might vary by industry, company or job role.
How to identify poor work performance
To best identify how employees are performing, establish clear expectations and goals as soon as an employee is hired – then you can measure their performance against those metrics. Managers and supervisors should have constant communication with their subordinates to give feedback and discuss any problems.
"A good leader and an engaged employee will never come to a place where there is a major employee performance issue, since there would be regular conversations about the tasks, expectations, and deliverables, and a mechanism to identify risks, roadblocks, and gaps," Colton said.
Conducting employee surveys is another way to compare employee performance to the outlined expectations. At the very least, every organization should be conducting annual review surveys, which give employers and employees a chance to formally evaluate performance and identify pain points. Organizations can give additional surveys, like those for employee engagement and satisfaction, to understand whether their staff feels supported and fulfilled in their roles. These types of surveys can boost company morale and improve employee retention.
Key takeaway: Set clear expectations for employees as soon as you hire them, and frequently measure each employee's performance against those metrics.
Potential causes of poor work
While there are many possible internal and external causes for an employee to perform poorly at work, Colton said poor performance is most commonly due to a lack of agreement between the employee and their leader about the work itself, the quality, expectations and/or timelines for completion. This is why you must set clear expectations and maintain an open line of communication.
"Poor performance may also be caused by the employee not having the knowledge or skills to complete the specific task or project, in which case it is the leader's role to guide, coach or mentor them for their professional growth," Colton said. "If there is psychological safety, then the employee will willingly raise the gap in knowledge with their leader, who can support them or reassign work across the team to accomplish the goal."
Poor performance can stem from a lack of willingness or ability (e.g., an employee who is burned out or unhappy with their job is likely to underperform), and some jobs are simply not the right fit for a certain employee. Consider the Peter Principle when promoting employees – the idea that a well-performing employee keeps getting promoted until they can no longer perform well. Babbitt provided the example of a company promoting an introverted software programmer to a management position that requires them to interact well with others; while they were a great programmer, this new job may not fit their strengths.
Poor management, a lack of company vision, toxic work environments (e.g., bullying, harassment, discrimination) and personal problems can also cause an employee's performance to drop.
"Sudden and unexpected changes in an employee's health and well-being or their family situation may also be an outside factor in causing poor performance," Colton said. "An unexpected environmental change, like the COVID pandemic, can cause once-high-performing employees to hit a performance roadblock, or need support to navigate unexpected personal and home needs."
Once you identify the reason behind the employee's poor performance, you can determine how to resolve the situation – whether the solution is setting clear goals and expectations, providing more guidance and support, or addressing the internal or external problems the employee is facing.
Key takeaway: Poor work performance can be due to unclear expectations or company vision, a lack of willingness or ability to perform on the employee's part, poor management, toxic company culture, or an employee's personal problems.