How to Create a Performance Improvement Plan Employees Will Appreciate

A performance improvement plan (PIP), much like a performance review, is one of those things employees dread. Here, we discuss why that is and the steps needed to write a good PIP.

Updated March 30, 2020

Question: What’s one phrase that has the ability to sow terror in the hearts of many employees?

Answer: Performance improvement plan.

Many employees regard the performance improvement plan, or PIP for short, as a "herald of doom." They would rather not go through the process if they can help it, primarily because of the long-standing belief that at the end of the PIP period, they’ll probably be out of the door and out of a job instead of set up to improve in their role.

While PIPs can result in employee dismissal in some cases, there’s a good side to them that benefits both the company and the employee. For some employees, simply knowing what they must do to improve is all they need to get back on track.

Overview: What is a performance improvement plan?

For many in the workforce, getting fired from a job is a life-changing event. On the business side of things, replacing a recently fired employee can be costly, especially if you factor in separation costs, replacement expenses, and lost productivity.

Instead of firing underperforming employees straightaway, many companies set them up with a performance improvement plan.

In a nutshell, a PIP is a people management or human capital management tool. It's generally a formal document that combines processes and practices to help staff, whether contract employees or otherwise, turn their performance around and regain their good standing with the company.

The performance improvement plan template one company follows is typically different from another, even when they’re operating within the same industry.

That’s because PIPs are created to suit individual employee issues, as well as coincide with a company’s unique business development needs.

Ideally, the employee improvement plan should state the following:

  • Recurring or continuous performance or behavioral issues
  • Attainable goals for the employee
  • A specific timeline for completing the plan, usually between 30 and 90 days
Screenshot of a performance improvement plan for HR professionals.

Here’s a performance improvement plan sample from Smartsheet.com

A formal PIP works best for employees with the greatest chances of improving — data a good HR analytics tool can typically provide. The goal is to help employees identify and rectify their weak points, then go back to work with a renewed sense of focus and purpose.

What to keep in mind when developing a performance improvement plan

An employee put on a PIP is like someone on probation; the individual will be closely monitored and their progress (or lack thereof) will be measured. It’s no surprise that even just the thought of undergoing a personal improvement plan can be anxiety-inducing for many employees.

A PIP entails some difficult conversations, including the possibility of termination, reassignment, or demotion if objectives are not met. As such, it’s critical that managers keep the following considerations in mind when implementing PIPs:

1. Necessity of the plan

Before handing out PIPs, managers should ask themselves:

  • Is a PIP necessary to get an employee to reform their ways and perform better? There’s a stigma attached to performance improvement plans, and coaching just might be the better approach.
  • What exactly is the PIP for? To genuinely help the employee or simply to start the termination process? If it’s the latter, human resource experts contend that there is no use for a PIP. In fact, according to the Society for Human Resource Management, when used as a tool for employee termination, "it signifies to all employees that no such help is available," making the PIP "more of a detriment than an aid."

2. Employee input

A performance improvement plan works best with the employee cooperating throughout the process. This can be done with the manager co-creating the PIP with the employee, who should be given the chance to have their say. Forcing the PIP on them will likely result in them resenting it.

The manager doesn’t have to include every employee suggestion in the PIP, but taking their opinions and recommendations into consideration should help with creating a plan that specifically addresses what the employee needs.

3. Communication

Performance improvement plans have a bad reputation. That’s because some companies only use them as documentation to protect them from a possible lawsuit or, in some cases, delay making any personnel or workforce planning changes. Others treat them as the first step in the firing process.

When you implement a PIP, the last thing you want is for employees to be surprised. You need employee buy-in for a PIP to be successful. This means they should know that a PIP is coming, as not knowing could only make matters worse.

PIPs can cause fear and anxiety, and employees generally cannot perform their best when stressed.

To prevent unwanted surprises from happening, scheduled performance appraisals or regular feedback sessions should communicate to underperforming employees that a PIP might be coming their way if improvement isn’t recorded soon.

Also, your employee handbook should clearly explain your company’s policies and procedures for underperformance.

Store the handbook in the HR software your employees are using — or the company’s intranet, if you haven’t implemented a human resource tool across the company yet — so employees can access it any time they need to revisit company guidelines.

How to write a performance improvement plan

As a manager, there are a ton of things you must do. But no matter how busy you get, poor performance by employees — whether regular, contractual, or those in at-will employment arrangements — shouldn’t be swept under the rug, especially when it’s affecting team morale, work quality, and agreed-upon timelines.

If you think a performance improvement plan is the answer to disappointing performance and unprofessional behavior, here are the general steps to follow:

Step 1: Identify the problem

Obviously, there can’t be a PIP without a performance or behavioral problem to correct. Pinpoint where the employee is falling short. An efficient way to do this is by looking at relevant HR metrics in your people analytics system.

Tips for identifying the problem:

  • Be thorough: Identify what needs to be improved and put these things in writing. Include as much detail as you can, including the specific events exhibiting the performance or behavioral problem.
  • Listen to the employee: There may be a valid reason behind the employee’s poor performance. Perhaps it’s a dispute with a supervisor or a teammate that’s causing them to lose focus. Taking the time to listen may help you uncover bigger problems within the team or even the entire organization.
  • Work with HR and decide whether a PIP is the way to go: Managers must check with HR for input into whether a PIP is the right call for certain scenarios.

Step 2: Develop an action plan

Now that you’ve identified the problem, you need a solution. When discussing the PIP with the employee, the manager should be accompanied by a third party, ideally an HR representative, to prevent bias and maintain objectivity.

This also assures employees that the PIP is being implemented to help them, and isn't the first step in firing them.

Tips for developing an action plan:

  • Be very clear about the PIP’s goals: Create goals that are fair, realistic, and measurable. Clearly specify what’s required. In no uncertain terms, outline the plan’s desired outcome. Include statistics, the job description, and other relevant information to help the employee visualize the objectives and how to accomplish them.
  • Be specific about timelines: Include specific tasks or the action items for completion within 30, 60, or 90 days — or perhaps a year, if it takes that much time to accomplish a goal.
  • Explain how employee performance will be measured: Be transparent. Let the employee know the evaluation method you will use to review their progress.
  • Ask for the employee’s input: Collaborate with the employee to find ways to solve problems and hone their strengths.

Step 3: Implement the plan

Once the action plan has been finalized, have the employee review and acknowledge it by signing.

Tips for implementing the plan:

  • Hold the employee accountable: While you’re responsible for your direct report as the manager, you should also hold them accountable for their actions and the results of those actions.
  • Follow up rigorously: In order to not waste everyone’s time and energy, be serious about monitoring employee progress. Stick to the review timelines set forth in the previous step. Set up meetings to discuss how the employee is faring against established goals.
  • Document everything: Keep a record of all discussions, observations, and performance results in your workforce analytics system. If the plan doesn’t pan out and the ultimate negative decision has to be meted out, you have a formal record that demonstrates the employee was given ample time and opportunities to improve.
  • Standards are there for a reason: Make the employee understand that expectations and standards are not negotiable. Curb the desire to allow them latitude when they fail to meet expectations.

Develop a performance plan that helps your employees improve

As they stand today, PIPs are not necessarily the performance tools employees are keen to embrace with open arms. In order for employees to see them for what they truly are, it’s important for managers to avoid using PIPs as weapons against employees.

Instead, help your team members realize that PIPs are a strategy to assist employees in improving and are not a policy element in a disciplinary process.

If, at the end of the PIP period, the employee's performance is still not in line with expectations and you decide it's time to let the individual go, be sure to consult with HR and your company’s employment experts to confirm you’re following applicable employee termination, demotion, or transfer laws.

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.