Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.

How to Create an Employee Performance Improvement Plan

Nicole Fallon

Sooner or later, every manager is going to face a situation where a team member isn't performing well. This person may be slacking off, or simply failing to complete his or her basic job duties week after week. Either way, it's frustrating for the whole team, especially if the situation impedes the progress of the group.

But firing this employee may not be the answer just yet. Gerry David, CEO of beverage company Celsius Holdings, said it's important to try to get to the bottom of why the employee is underperforming — it may turn out not to be his or her fault, he said.

"There can be many good reasons for an employee to not meet expectations, and only through good communication with the employee will you have a chance to correct the shortfall," David said. "You, as the employer, may learn of deficiencies within your corporate expectations and management system."

If, after this conversation, the employee is still missing the mark, it may be time for a more impactful approach. One commonly used tactic is the performance improvement plan (PIP), a formal agreement outlining the employee's goals and what he or she can do to meet them more effectively. Not all organizations use PIPs, but those that do often use them as a wakeup call for the underperforming team member: Continued failure to live up to expectations after the PIP could result in termination. [See Related Story: Should I Fire an Underperforming Employee?]

Of course, a PIP is not your only option. If your organization is exceptionally good at ongoing feedback, you may not need to use one at all. Lisa Sterling, EVP and chief people officer of human capital management technology company Ceridian, said her company favors constant coaching and learning opportunities over PIPs.

"We have found PIPs to be used as a way for managers to communicate difficult feedback," Sterling said. "If you train your leaders to provide ongoing feedback and deal with performance issues as they arise, the need for a PIP is gone."

However, in some cases, a PIP is the best course of action to help get an employee back on track. If you decide to implement one for one of your staff members, here's what you need to know about making it fair and beneficial for both parties.

Developing the plan

A good PIP should include four key elements, said Clarissa Cyrus, senior business HR partner at human resources software company SilkRoad:

  1. The performance deficiencies.
  2. Measurable improvement expectations.
  3. A reasonable, appropriate time frame for the employee to improve his or her performance.
  4. Detailed consequences of continued underperformance.

It's critical to document absolutely everything, every step of the way, and get the employee to sign off on the plan in case the end result is termination. As the manager, you should check in with your HR business partner to make sure the plan meets company criteria and the language used in the plan is appropriate to the situation, Cyrus said.  

Sterling reminded employers that having the necessary documentation, taking the appropriate steps and getting the individual engaged doesn't necessarily protect you from a lawsuit, but it will help mitigate any wrongful-termination claims the employee may try to make after the fact.

Ready to start? Here's a breakdown of each PIP item and how to approach it.

Part 1: Cite objective instances of performance issues

If you've reached a point where you feel a PIP is necessary, it's likely that you've already given plenty of informal feedback to your employee about what he or she is doing wrong. Sterling noted that documentation of this feedback is important, as well as whether or not the individual was given ample time to improve. She also emphasized the need for unbiased, objective feedback, which may include validation from other managers, colleagues or peers.

Similarly, Cyrus said your personal feelings about the employee must remain separate from anything that goes into the PIP.

"It's human nature for managers to become frustrated with an employee who is failing to reach [his or her] performance potential," Cyrus said. "As difficult as it may seem, they must keep personal feelings or frustrations from affecting their evaluation of the employee's performance."

Managers should understand that PIPs should never be used to address behavioral issues like poor attendance or inappropriate communications, said Jennifer Lasater, vice president of employer and career services at Kaplan University. Instead, the issues documented in the PIP should be related to skills or knowledge the employee is lacking, or specific job functions he or she is not completing properly on a regular basis.

"Stay away from [phrases] like, 'you always,'" Lasater added. "Instead state [facts, such as], 'reports are due at 10 am on Monday and on X date, you did not submit a report.'"

Part 2: Provide clear expectations, actions and metrics for improvement

Once you've stated the employee's performance problems, you should work with the employee to develop a plan of action that encompasses training (if necessary) and clear benchmarks to meet. Decide what tasks should be accomplished and how to best measure them. Lasater noted that creating this plan together with the employee in question will ensure understanding and create commitment on the employee's part.

Cyrus said the PIP should identify any internal resources available to assist the employee in meeting his or her performance goals (training programs, mentoring, etc.). She also said the expectations set forth in the plan should be consistent with the company's policies and past practices.

"Managers must ensure that performance expectations and goals are appropriate, and their method for measuring improvement is fair and consistent with similar situations," Cyrus said.

Part 3: Determine a reasonable time frame for the plan

Most PIPs are measured in increments between 30 and 90 days. The appropriate time frame to make the agreed-upon improvements depends on the employee's job duties and the nature of your business, David said. It's important to consider the surrounding circumstances and what improvements you're asking the employee to make when deciding on a fair and reasonable period.

"If you are selling nuclear power plants, 30 days may not be enough time to have a meaningful outcome. If you are a clerk in the mail room, 30 days may be more than enough time," David told Business News Daily. "Each situation is different and must be structured fairly."

You should also establish certain points throughout the plan to check in with the employee about his or her progress, Lasater said. If the employee is not meeting the criteria specifically mentioned in the plan, this should be discussed with the employee during the check-in meetings, she said. 

"Give specific information on how often the manager and employee will meet to discuss the employee's progress while on the performance improvement plan," she said. "It's important for the manager to stick to the plan. The manager's commitment to meeting with the employee on a regular basis emphasizes to the employee that the manager is committed to the [his or her] improvement."

Part 4: Outline the consequences

Your PIP must be crystal clear on what happens if the set expectations aren't met. This may be a loss of certain privileges, temporary job suspension or, as is most common, termination of employment.

While the employee does need to understand the gravity of the situation, focusing too heavily on the negative consequences will only further discourage and demotivate him or her. Instead, David said your employee should understand that you are implementing the plan because you are genuinely invested in his or her success at the company.

"Make it clear that your intent is that through this process, they will be able to be a part of the team going forward," he told Business News Daily. "The PIP has to be specific and allow for a reasonable chance for success."

Next steps: Should the employee be let go?

If, at the end of the PIP period, the employee has successfully met the plan's expectations, move forward and continue to make him or her feel like a valued member of the team. David reminded managers to keep the lines of communication open, and advised scheduling a follow-up meeting to ensure that the employee is still performing at satisfactory levels.

However, if the employee has still not made any marked improvements (or has only gotten worse), you may be faced with the difficult decision of letting him or her go. Before any dismissal, you should discuss the progress that was made or not made by the employee with HR, and review the plan documentation to make sure it supports a "for cause" termination, Cyrus said.

"The decision will become clearer to the manager and should not be a surprise to the employee," Lasater added. 

If it is determined that termination is the right answer, David noted that your decision must be final and agreed upon by management and HR.

"If you did your job properly as a manager in the development of the PIP, you must be prepared to abide by what consequences were defined in the PIP for failure," he said.

It's never easy to fire someone, especially if you have a good personal relationship with that person. However, by completing a PIP, you offered the employee assistance in improving and gave him or her the opportunity to course-correct. For the good of the organization, you must let the employee go, and hopefully gain some insights about how to prevent similar issues with existing and future employees.

Image Credit: Mathias Rosenthal/Shutterstock
Nicole Fallon
business.com Member
Nicole received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. Nicole served as the site's managing editor until January 2018, and briefly ran Business.com's copy and production team. Follow her on Twitter.