In the messy business of getting rid of employees, the PIP is having a moment.
A performance improvement plan is usually a list of tough-to-achieve goals to be completed within 30 to 90 days. Can’t shape up? You’re out.
The percentage of workers who are subject to performance actions, including PIPs, is on the rise. In 2020, 33.4 people for every 1,000 workers had documented performance issues, according to software firm HR Acuity, which conducts an annual survey. In 2023, 43.6 workers out of every 1,000 were involved in formal performance procedures. That includes PIPs and performance counseling, among other measures.
PIPs are intended to bring consistency and fairness to the way employees are judged and managed. Their stated goal is to lay out a path to improved performance—and sometimes it works. That said, many workers and even managers say they’re used primarily to provide legal cover from employment lawsuits or to cut costs without announcing layoffs.
Here is a field guide to PIPs.
A PIP is…
“An oxymoron,” says Anna Tavis, a human resources executive who worked at the financial giant AIG and other companies. “I spent 15 good years on Wall Street and other places. It’s a cover up. It’s window dressing. None of these performance improvement plans lead to improving performance.” In most cases, says Tavis, now at New York University, “it’s an excuse to walk you out of the door and say, ‘We gave you an opportunity. You didn’t perform, and off you go.’”
“It’s just a legal thing to make it so that we warned you that you’re going to be fired,” says Howard Lerman, the former chief executive of software company Yext who now runs a tech startup called Roam that makes software to create virtual offices. “I will always fire someone right away because it is better for us and it is absolutely better for them.”
Larry Gadea, founder of software maker Envoy, uses PIPs at his 250-person company and said PIPs often arise because managers fail to set clear expectations early on. He estimates that 10% to 25% of employees who get put on PIPs survive the process, a figure that several other CEOs and HR professionals echoed. “A lot of the time, they’re done,” Gadea said of underperformers. “They’re burned out, they need a break. And now you’re asking them to work harder.”
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