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Should You Use Performance Improvement Plans?

September 20, 2022 Talent Management
Kaya Ismail
By Kaya Ismail

Underperformance has long been a concern for companies. But in a challenging labor market with a limited pool of skilled candidates, leaders having to navigate this tight rope may find value in Performance Improvement Plans (PIP).  


"A performance improvement plan aims to improve an employee's performance so they can successfully complete their duties," said Kimberley Tyler-Smith, VP of Strategy and Growth at London-based Resume Worded. 


In short, PIPs detail the issues and the solutions that can help struggling employees improve in their work. They are often used when other, more informal methods fail, though some companies may be quicker to pull the trigger and put PIPs in place.

The Why (and Why Not) of Performance Improvement Plans 

PIPs have shown great value for improving productivity no matter the root of the issue — from disengaged employees and inadequate training, to miscommunications, outdated processes or ill-suited technology. They help clarify what managers and leaders expect out of their team members and bring potential solutions for achieving success at the company.

But despite offering many benefits, performance improvement plans may not be the best response for all employees whose work is suffering. Some, for instance, may be experiencing a temporary dip in performance due to a personal issue they have not shared with their employer.

A person's performance may also be lagging due to recent changes in technology that are requiring adjustment over time. Even the smallest of change, especially when it impacts a daily process, can bring about a level of disruption that affects overall output.

A team conflict can also be possible reason for decreasing performance. The addition of a new employee may cause friction or require others' attention as they train and support the onboarding of the new colleague.

In any of these situations, PIPs may not be the best approach. They may, in fact, only worsen the issue. Companies contemplating using a performance improvement plan would be well-served to first make sure there are no external factors causing the dip in productivity.

Related Article: A Modern Approach to Measuring Employee Performance

3 Advantages of Performance Improvement Plans

There are several reasons for using PIPs, but here are three of the main advantages of the approach:

1. Goal-setting: Employees can only deliver on or beyond target if they know and understand what that target is. This means, they need goals to be clearly defined from the start. 

Joe Du Bey, co-founder and CEO of San Francisco-based Eden, says companies need to very explicitly communicate their expectations, when employees fall short of those expectations and how they can remedy those shortcomings. In his view, continuous feedback and praise are key to employee — and company — success, and that's where PIPs shine.

2. Retention: A disengaged workforce can stem from many factors, but lack of communication is often found as a culprit for companies dealing with high turnover rates. In some of those cases, a PIP can help turn around subpar performance by realigning communications, thus helping retain current employees.

3. Culture: PIPs are known to create a culture of performance accountability. This culture can help companies build a more unified culture that has a positive impact on success.

Related Article: Digital Workplace Governance Is About Engaging, Not Controlling

3 Disadvantages of Performance Improvement Plans

As mentioned earlier, PIPs have the ability to bring great value to companies — but they also have potential downsides to consider before implementing them blindly.

1. Disengagement: Some employees may feel trapped or resentful by PIPs. Today's workers tend to place great value on workplaces that give them sufficient freedom and flexibility to innovate and grow. In those cases, employees who are handed a performance improvement plan may temporarily improve their performance, but they might also view it as a sign to move on.

"In many organizations, employees fear being placed on a PIP — which can have devastating effects on employees," said Tyler-Smith. 

2. Increased Stress: PIPs can introduce unnecessary stress to the workplace. Minutely measuring a person's output and progress toward a precise goal can create unsustainable pressure over time and cause the plan to backfire. The employee's performance may drop instead of improve.

This problem can be exacerbated if the PIP is targeted at one or a select group of employees — instead of being applied broadly within the company. Managers who treat employees differently may build resentment and friction within their team, which can have a massive negative impact on performance.

3. Marginal Impact: Not everyone is on board with the benefits of PIPs, and some argue that the plans have little to no significant impact on retention after all. Therefore, managers who use PIPs for the first time may want to consider their level of investment in the plans and adjust expectations as needed.


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