Managing Performance - Part One: The Challenges of Managing Underperformance

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By Deborah Lindemann

As an employer, you may fantasise about having staff who are over-performing in all areas of their work, and have fantastic attitude and work ethic, leaving you to get on with what you do best - running your business.  Or better still, they are so good they are running your business for you. But we know this is often not a reality, in fact, from our own experience and from the experience of most business owners and people managers we talk to, a consistent picture forms: you will, in all likelihood, be able to name at least one person in your business who just isn’t performing in the manner you want them to.

Underperformance can take many forms. The first and most obvious is where the employee doesn’t perform tasks to the required standard, or perform them at all. Another is where they might get the job done, but they do it ‘their way’, and don’t comply with your businesses standard operating procedures, policies or other guidelines and instructions. Similarly, an employee might get the job done, and potentially be an excellent operator, but they do not demonstrate appropriate behaviour and attitudes towards others – colleagues, suppliers or clients. Any form of underperformance will result in a negative impact on your business - loss of efficiency, loss of productivity, loss of reputation in the market, or a poor workplace culture, - and inevitably, at some point these negative impacts will affect your bottom line. The old adage “You’re only as good as your worst employee” is as relevant as ever.

In small businesses, we find there are two typical approaches to dealing with underperformance. The first one is the pragmatic business owner who emphatically decides they can’t afford to carry any deadweight, and the employee has to go. Right now. The other is where the employee, who along with performance weaknesses, has strengths upon which the business owner is reliant, or where there is a close or long-standing relationship. In these cases typically the business owner will just put their head in the sand and tolerate the underperformance - to the detriment of their business and other staff members.

The issues with the first approach are threefold. Firstly, business owners often underestimate the cost associated with replacing staff - loss of productivity, loss of corporate knowledge, and recruitment costs. In addition to the principles of natural justice and fairness, these turnover costs alone mean decisions to terminate should not been taken lightly. Secondly, business owners often do not recognise extant work-flow, communication, resourcing, and cultural issues within their business which may be the cause, or a significant contributor, to the underperformance. In these cases, unless the issue is identified and dealt with, the likelihood of a repeat occurrence of underperformance with the next recruit is very high. Thirdly, rash decision making can increase the risk of becoming embroiled in an employee relations dispute with the employee. It is important to be measured in your decision making and actions, taking into consideration fairness and relevant employment legislation.

The impacts of the ‘head in the sand’ approach are no less significant. Firstly, tolerating underperformance means you are condoning it. By condoning it, you have established a new standard, a new level of ‘acceptable.’ This makes the underperformance more and more difficult to deal with as time passes. Furthermore, as time passes, the new level of ‘acceptable’ is often adopted by other staff leaving you with a broader systemic issue. Secondly, you and others in your business are probably compensating through time and effort for the employee’s underperformance. This means you have efficiency losses, reputational risk, and potential negative on-flow effects to other high-performing staff, resulting in inter-relational issues and poor morale. Having a colleague who is not pulling their weight, and this not being addressed by management, is a very powerful de-motivator. 

Managing underperformance effectively is critical. But how should underperformance be managed? Unfortunately, there is no one-size-fits-all solution. However, there are number of important elements which are relevant to any underperformance challenge you may face. We call these elements the 4 C’s: Clarity, Communication, Cause and Consequence. Applying the 4 C’s provides you with a practical and risk minimising approach to assist you tackle underperformance and secure the best outcomes for your business. We put the spotlight on the 4C’s in Part 2 and 3 of this series on managing underperformance. Stay tuned for our next posting.