A survey from the Society for Human Resource Management (SHRM) reveals that it costs an average of $4,129 to hire an employee. The average time to fill a position is also 42 days. With so much time and money being spent up front, terminating an underperforming employee is not always in your best interest.
A common alternative to terminating an employee is a Performance Improvement Plan (PIP). It's an effective tool to getting employees on track, and should include the following.
Performance Gap Statement
A performance gap statement spells out the difference between the actual and desired performance. It should be relative to your official job description, if one exists. Otherwise, you should ensure that the information is in keeping with your company's written and verbal communication.
Whenever possible, your performance gap statement should include specific language that spells out the deficiency. For example, you could state that an employee failed to meet production by (x) percent.
This is the longest section of your performance improvement plan, and is where you will provide information on what, how, and when certain things are to happen. It should include several subsections such as the following.
· Specific Goals
This is where you will list specific areas in which you desire improvement. These could be performance-based items such as increased sales, or behavioral issues like tardiness and absenteeism. While you may have more than one goal, some of them are bound to be more significant than others. Accordingly, you should also prioritize them so that your employee knows which ones he or she should focus on most.
· Quantification of Goals
Don't just list goals for someone to work on without stating exactly how you plan to measure the progress. Instead, give specifics such as increasing sales volume by 20% or reducing downtime by 10%. Quantifying your goals will provide numerous benefits such as:
- Ensuring that everyone is on the same sheet of music.
- Allowing your employee to better assess his or her progress.
- Alleviating the frustration that might occur if a worker is not provided with clear expectations.
- Providing adequate documentation in the event disciplinary action or termination becomes necessary.
Quantifying goals will make it easier to write performance reviews in the future. That's because you will have already measured someone's progress, and can therefore state it more definitively. You can also refer to your PIP, and will not have to sift through dozens of other records in order to identify how well someone has done.
· Timeline for Reaching Goals
After quantifying your goals, you will then want to provide a timeline for reaching them. When stating multiple goals, it may not be possible for your employee to achieve all of them at once. As such, you should consider each one separately, and come up with individual timelines for each one.
In many cases, it can make more sense to set miniature goals in addition to overall expectations. As an example, you may wish to have a sales rep increase sales by 5% per month, with the end goal being to have grown sales by 20% at the end of four months.
You should never implement a PIP and then just forget about it. Frequent follow-ups are the key to ensuring that your plan remains on track. List the frequency of your follow-ups in this section as well. Consider reviews more frequently in the beginning, and then gradually give more time in between each one once you begin to notice improvement.
· Available Resources
Here is where you will list the available resources for helping your employee succeed. These could be internal resources such as an employee handbook or mentor. They might also consist of outside ones like online training courses or seminars.
In addition to listing resources, you may also want to establish guidelines for accessing certain ones. For example, you might prefer that a worker take an online training course only when it does not interfere with any other job requirements.
The purpose of a performance improvement plan is to get underperforming employees up to speed. So naturally there must be some consequences for failing to meet the requirements set forth in the plan. Those consequences will be listed here, and may include things such as:
- Position reassignment
- A failure to be considered for future promotions
- Temporary suspension
- A reduction in hours and/or salary
- Termination (with or without the right to rehire)
Signature and Date
A PIP is an official document that should be acknowledged in writing. Therefore, you will need to leave room for a signature and date from both parties.
Initial for Verification
It is always a good idea to give your employee a copy of the performance improvement plan. Not only will it give that person something to refer to, but it also ensures its contents cannot be misconstrued. The latter could be important should you ever find yourself faced with court action. Below the signature blocks, include a statement for the individual to initial stating that he or she has received a copy of the PIP.
Feedback and Summary Section
This section is solely for your own personal use, and will likely consist of blank space that you can fill in as needed. Utilize it when making periodic reviews so that you can annotate how things are going. If you need to make changes to the PIP, you can record them here as well. Finally, when the plan is complete you can use this section to write your own feedback as to how well the PIP was implemented and what its final results were.
Help with Developing and Implementing a PIP
The above information can better help you develop a performance improvement plan. Even so, it cannot guarantee that such a plan will fully comply with all applicable state and federal laws. That is an area in which outsourcing your human resources functions can prove very helpful.
Here at Luxa, we are a U.S.-based firm who can assist you with tasks related to human resources, accounting, payroll, and more. To learn more about our services, please contact us.