A Comprehensive Guide to Managing Employee Underperformance Fairly and Effectively
When a team member isn't meeting expectations, it's your responsibility to diagnose why and fix it - and the sooner, the better. Most of the time poor performance isn't due to poor motivation or a bad attitude. It's because a manager hasn't set the employee up for success.
There are five core reasons why an employee is failing to perform: they don't know what they're supposed to do, they don't know how to do it, they don't know how they're doing, they don't know how they could improve, or they're not particularly motivated to do it.
Start With A Diagnosis, Not A Verdict
Before taking any action, understand the real situation. Underperformance is not a single problem. It's a group of problems, and if you assume they're the same thing, your reaction will be off base.
The most helpful distinction is between "can't do" and "won't do." If it's a "can't do" problem, this means the employee lacks the necessary skills, training, tools, or resources for the job. If it's a "won't do" problem, the job, tools, and training are there, but the drive, motivation, attitude, or engagement isn't. These two root causes demand different actions. Sending someone to a training course isn't going to make them care if they already don't. Putting an employee with potential but a lack of support on a warning isn't going to help, it's just going to make the lack of support even more obvious to them.
You don't need to be a detective to figure out the root problem - often, all it takes is a direct, private conversation with open-ended questions. What does the employee think is the problem? Is there an issue they're not bringing up? Perhaps they feel confused about something. Or maybe there's something personal affecting their work.
A word to the wise: active listening is key here - not in the touchy-feely psychotherapy sense, but in the simple human sense of making sure you're gathering information, not venting frustration. If you're talking more than the employee during this conversation, you're not gathering information.
A good question to add before you blame an employee for underperformance is: "Did you really make expectations clear?" People tend to overestimate how obvious they are when communicating, and even put the most well-intentioned employee in a situation where they seem indifferent just because they haven't explained what they want in simple terms. A significant amount of underperformance casework, honestly analyzed, reveals no fault on the part of the employee, just ambiguous job descriptions, shifting priorities, or KPIs that nobody ever spelled out.
Set Real Expectations Using Measurable Benchmarks
Unclear expectations lead to performance issues in the future. When it is mentioned in the job description that someone "supports team goals" or "drives results", you have not defined what success means for them.
Key Performance Indicators give you a solid foundation to have those discussions. They don't need to be overly complicated, but they should be unique to each role. For example, a customer service rep could have a performance indicator related to response time and customer satisfaction. A sales rep could have pipeline value and closing ratio. A project coordinator could have deadlines and quality of deliverables. The employee should feel confident in answering the question "am I doing a good job?"
The SMART framework (Specific, Measurable, Achievable, Relevant, Time-bound) is the solid starting point, as these goals are difficult to challenge during performance conversation since they are measurable. If they don't meet any of these criteria, it's easier to dispute their performance and harder to make a decision. If you are starting a performance review, and your KPIs do not pass the SMART guidelines, that's what you should focus on first.
Address Issues Early, Not At The Annual Review
One of the most frequent degradation patterns is the waiting manager. They see a problem in February, decide to "wait and see," and then raise it in the performance review in December. By that time, the employee has delivered almost a year of substandard work, is shocked to hear about it, and has no chance to self-correct early on.
You should address minor slips in real time. Having a short, frank discussion the same week you observe the issue is almost always more efficient than having a formal meeting six months later. It doesn't need to be a long conversation - a couple of minutes to share what you've seen, describe the impact, and ask what's happening is sufficient. At this stage, your goal is to correct, not to punish.
This early, unofficial approach will also lay the foundation for your culture of accountability. When your people know that feedback and signals of whether they are on track occur in real time and not just in a yearly performance review, they stop fearing the review itself and start seeing both the positive and the negative feedback simply as an ongoing part of their role. This is the type of climate you want: one in which employees feel secure enough to seek your feedback early on rather than hoping that they are not being noticed.
Structure Feedback As A Two-Way Conversation
When it is time for a more formal performance discussion, the structure of the conversation is important. If a manager walks into the room with a list of an employee's failures, and then proceeds to list those failures one after the other, that's not a feedback discussion - that's reading an indictment. The employee is immediately put on the back foot, and it's hard to have a productive discussion once that happens.
Instead, lay out what you've seen that is of concern. Make it specific, and avoid characterizations or interpretations. After you've done that, invite them to explain the situation from their point of view. In many cases, you will hear something that you didn't know, that changes the context. Maybe there's a bottleneck they're reluctant to bother you with. Maybe there's a conflict in the workload you haven't seen. Maybe there's a personal issue that is leading to diminished concentration and therefore performance.
If personal circumstances do come up, that's also an opportune time to mention your Employee Assistance Program, if you have one. These provide confidential resources for mental health, financial stress, and anything else going on in a person's personal life that may affect performance. Mentioning them and perhaps suggesting that the employee get in touch is a low-pressure way to acknowledge that everyone has a life outside the office, without turning a productive discussion about performance into an unproductive counseling session.
When To Escalate To Formal Discipline
Informal coaching handles a lot of situations. But when the same issues persist after several conversations, or when the behavior is serious enough to skip the informal stage entirely, you need a structured escalation path.
This is where progressive discipline in the workplace becomes essential. A progressive discipline framework provides a transparent sequence of consequences - typically moving from a verbal warning, to a written warning, to a final written warning or suspension, and ultimately to termination if the issue isn't resolved. Each step is documented, the employee knows exactly where they stand, and there's a clear record that the company provided fair warning and opportunity to improve before taking more serious action. That documentation trail isn't just good management - it's the legal protection that stands between your organization and a wrongful termination claim.
Only 22% of employees strongly agree that their performance is managed in a way that motivates them to do outstanding work (Gallup). That number points to a systemic failure in how performance is communicated and managed, not just individual bad actors. A structured escalation process, communicated clearly and applied consistently, is one way to close that gap.
Using A Performance Improvement Plan Properly
A Performance Improvement Plan outlines what should be done for an employee to achieve acceptable performance standards within a specific time, usually ranging from 30 to 90 days. It's not designed to be a punitive measure although it often ends up being one. A PIP, when used appropriately, is an organized step with defined objectives, specific support the organization will deliver, and a reasonable timeframe in which to measure success.
A PIP should be the final official step in a process where earlier attempts by the company to support an employee in improving their performance have not been successful. It should not be a knee-jerk reaction to a single bad week. Ideally, the employee will not be surprised when a PIP is presented to them. They should know it's coming, and likely why. The PIP format confirms what has already been said and heard - what minimum levels of performance are required, what maintenance of those levels will also require, what help the person can expect from the organization, and where things will stand if there isn't marked improvement.
If you're going to ask someone to do new things, you also have to commit to helping them do it. Training, access to specific information, coaching, access to better equipment, or more frequent check-ins should be part of the PIP if any of these are lacking. If the only change during a PIP is that the employee gets written up more often or given harsher reviews, don't be surprised when the improvement you're looking for doesn't occur.
If It Comes To Termination, Do It With Care
If a termination is warranted, the employee should not be surprised. If you have had the early, informal "Hey, how's everything going?" and "This issue needs to improve" conversations, followed by specific examples and warnings about the consequences of not correcting the behavior or performance, they should know what's coming. This is why those informal but structured conversations are so vital. Remove the surprise, make them aware that the issues are ongoing and that you've not seen enough improvement, so that when the day comes, they knew this was the potential outcome.
Then you hold the formal meeting. For a termination, there should be a formal documentation-and-decision meeting, not necessarily separate but still a formal sit-down. Be prepared with their file, which should include dated notes from the prior conversations, making it clear who was present, where the conversation took place, and what was said. If they are on a PIP, you should have your PIP paperwork, which should also have a signature acknowledging receipt. You should have copies of write-ups or any previous warnings.
Then you will need two documents. The first is a statement of termination, which should be short and could be as brief as "We discussed these issues, we have issued these write-ups or warnings, and today we feel there has not been enough improvement so we will be terminating your employment." The second document is a checklist. You, the employee, and an HR representative all sign it and keep a copy: Did you receive your last paycheck? Did you return your key? Did you return all company property?
Managing Underperformance Is A Leadership Skill, Not A Task
Managers who do this well are not always those who have been through the most HR training. They are managers who see performance conversations as a fundamental part of their role rather than an unpleasant one to put off. They diagnose before they start treatment. They set out their stall early. They nip things in the bud where they can and escalate fairly when they can't.
And this is what helps to protect your organization. But it's also what signals to your wider team the sort of place they work at - the kind of place where everyone is expected to deliver, and the kind of place where everyone is given the best possible chance to do so, too, before things get more serious.
