Business Toolbox

Q: What is the difference between formal and informal performance management processes?

A: Identifying the nature and cause of underperformance is essential in determining whether informal or formal action is the most appropriate action.

Informal performance management is not as structured as a formal process and may be more casual in nature. A formal process, however, involves having multiple formal meetings with an employee and developing a performance improvement plan (PIP).

Informal action may be taken when minor underperformance is detected to try to prevent the issue from reoccurring. For minor concerns or early-stage underperformance, informal approaches such as casual comments or counselling may be effective.

Although informal, these interactions are still important and should be documented to ensure continuity and provide a reference point if the issues persist, and if formal intervention becomes necessary later on.

When informal efforts do not lead to an improvement, or if the underperformance is significant, a formal PIP can be used. This involves a structured approach, outlining clear performance goals, mapping out the support to be provided, and a defined timeline for achieving the required improvement.

Q: What does a formal performance improvement plan typically look like?

A: A performance improvement plan (PIP) is typically a formal process that helps bridge the gap between an employee’s current performance and the required performance.

Prior to implementing a PIP, the employer will have a formal meeting with the employee to discuss the current level of performance and why it is not satisfactory, and what is required of the employee. An employer should also make the employee aware of the potential outcomes of not successfully completing the PIP, such as action including written warnings and action up to and including termination.

A PIP will generally outline:

• The goals that have been set for this employee to achieve the required performance standards.
• The support the company will provide to help the employee achieve the appropriate level of performance.
• The timeframe the PIP will be in place and how often periodic reviews will be completed.  Consider the realistic time required for improvement when setting timeframes. Generally, a PIP will run for four to six weeks.

A PIP can be an effective way to support employees in improving their performance, but it does require thorough planning and consistent follow-up.

Q: What do I need to consider prior to terminating an employee for underperformance?

A: Before making any decision to terminate an employee, it is important to consider:

• Has the employee been notified of the performance issues?
• Has an informal or a formal process been followed?
• Are there any risks to the business, such as unfair dismissal?

When deciding whether to proceed with termination, carefully consider whether:

• Poor performance constitutes a valid reason for dismissal.
• If the employee was aware of the reason.
• An opportunity to respond to recent instances of poor performance was provided.
• A support person was not unreasonably refused to attend the meeting prior to termination.
• If the employee had been warned about the unsatisfactory performance.

If considering termination, formal performance management is usually recommended, please contact the Employment Relations Helpline on 08 9365 7660 or [email protected] for tailored advice.

Q: How do I determine if an action requires performance management or disciplinary action?

A: The key difference between performance management and disciplinary action is the nature of the issue.

Performance management addresses underperformance, where the issues typically involve ‘skill not will’. It can manifest in various ways such as:

• Low productivity
• Inability to meet quality standards
• Inability to meet deadlines
• Lack of attention to detail resulting in errors

In contrast, disciplinary action addresses misconduct, where an employee behaves in a manner that is inconsistent with the employer’s policies, procedures, code of conduct, values, or contract of employment. Some examples of include:

• Repeated lateness
• Excessive phone usage
• Not following lawful and reasonable directions
• Breaches of workplace policies

To ensure an effective outcome, performance management and disciplinary processes should be handled separately. Combining the two can lead to confusion, may overlook the underlying issue and potentially lead to a successful unfair dismissal claim against the business if termination was the outcome.

For guidance on how to navigate each process appropriately, please contact the Employee Relations Helpline on 08 9365 7660 or [email protected].