How to Manage Employee Underperformance

Managers in the tech sector, like any other, sometimes need to address underperformance by company employees, or members of their team.  Reasons for employee underperformance can be complex and varied, but left unchecked, poor performance by employees can erode office morale and team dynamics; which is likely to impact adversely on your business’ standing – and ultimately - your bottom line.  

For these reasons, underperformance needs to be identified early, and appropriate action taken to address it.  This article provides a “users guide” to Managing Underperformance.  It helps explain what is meant by underperformance and why it happens.  It then set out an easy to follow five-step plan to help employers and employees address the issues.

What is underperformance?

Underperformance or poor performance can be exhibited in the following ways:

• unsatisfactory work performance, that is, a failure to perform the duties of the position or to perform them to the standard required;
• non-compliance with workplace policies, rules or procedures; and
• disruptive or negative behaviour that impacts on clients, co-workers and others.

It is important for managers and decision-makers to understand that underperformance is not the same as misconduct (see further discussion on this distinction below).

What are the reasons for underperformance?

There are many reasons why employees may underperform. Common reasons include:

• they don’t understand what is expected because goals, expected standards or workplace policies are not clear (or have not been set);
• there is a mismatch between employees’ capabilities and the job they are tasked to do, or an employee does not have the knowledge or skills to do the job expected of them;
• employees do not know they are underperforming because there is no monitoring or feedback on their performance;
• lack of personal motivation, low morale in the workplace and/or poor work environment;
• personal issues such as family stress, physical and/or mental health problems;
• cultural differences and attitudes to work; or
• workplace bullying.

Underperformance should be dealt with promptly and appropriately because employees may be unaware they are not performing well and so are unlikely to change their performance without intervention being taken. Best practice employers understand that issues that are not addressed promptly also have the potential to become more serious over time.

Identifying poor performance

Managers and supervisors should be trained to identify and manage poor performance before it becomes ingrained. Indicators of underperformance include poor quality outputs, a lack of interest and engagement with organisational goals and objectives, disruption to, or interference with other colleagues’ work, missing deadlines, negative feedback from customers, regular absenteeism, and repeated, non-constructive disagreements with other members of the team.

Managing underperformance

Where performance or conduct concerns arise, the first thing to consider is whether they should be dealt with through the underperformance process; or the organisation’s misconduct or disciplinary processes.

Allegations of misconduct will trigger an investigation to determine whether disciplinary action is appropriate.

Allegations of poor performance will focus on performance issues and are usually managed through informal counselling and monitoring – and where that fails to realise the required improvement – a formal Performance Improvement Plan (PIP) (See the Fair Work Ombudsman for a sample template).

Where both problems are identified, they should be investigated separately. An employer can be liable for harsh, unjust or unreasonable dismissal under the Fair Work Act 2009 (Cth) (FW Act) if they treat poor performance as misconduct, and a dismissal emanates without a warning of poor performance. Wrongful categorisation of poor performance can also lead to claims of unlawful adverse action, breach of contract, bullying; and potential claims under workers’ compensation laws.

The difference between poor performance and misconduct was explained by the Full Bench of the Fair Work Commission in Read v Gordon Square Child Care Centre Inc (2013) 228 IR 375; [2013] FWCFB 762 in the following terms:

• performance is more likely to relate to capacity than to conduct, and refers to the way in which an employee renders performance of their work (such as quality, care and diligence);
• misconduct is more likely to relate to conduct rather than capacity. On the fact of the matter before it, a refusal to perform work was misconduct rather than unsatisfactory performance; and
• there is sometimes an overlap between the two.

In cases of serious misconduct, rather than underperformance, employers should seek professional advice from an employment law specialist about how to proceed before taking action.

Documenting the performance management process

Where underperformance is identified, it should be addressed early, and the process should be documented and recorded in writing to reduce legal risks.

Where informal counselling fails to see satisfactory improvement in performance a formal performance management process should be commenced.  It is recommended that this be documented in a Performance Improvement Plan (PIP).

A PIP should clearly identify what the expected outcomes are for acceptable performance, and meetings should be held at regular intervals (typically weekly) to review and monitor progress towards those outcomes.  These outcomes should be SMART– Specific, Measurable, Attainable, Relevant and Timely.

If performance still fails to improve

Where an employee’s performance fails to improve despite counselling, mentoring or other measures, and after a reasonable period of time - this may either be weeks, or months, depending on the circumstances - a warning letter should be given to help the employer establish that the employee was warned about their unsatisfactory performance. The warning letter must detail the areas of performance which are unsatisfactory and should make clear that the employee’s employment is at risk unless the issue is addressed.

Where ongoing mentoring and review through a PIP, and a warning letter still fail to result in the expected improvement in performance, it is recommended that legal advice be obtained from an employment law specialist to establish whether there are valid grounds for termination in order to minimise the risk of unfair dismissal, or adverse actions claims being brought against the organisation.

Dealing with employee underperformance?

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