Performance Management – How to do it right

This time of year is typically when both employers and employees buckle down for mid-year performance appraisals. It can be a stressful time for some for many reasons. From an employer perspective, performance management and annual or bi-annual reviews instill dread as managers are tasked with conducting individual performance reviews. However, despite the angst and stress that accompanies performance reviews, not much else is achieved as a result of the review, other than to tick the relevant box stating they have been done. This surely cannot be the purpose of performance reviews. It certainly does not constitute appropriate performance management and the consequence of failing to have hard conversations can be costly.

So then, what is performance management and how should it be done? Firstly, let us say that performance management, if done properly and appropriately can be a very powerful tool to ensure sustained growth, profitability and a stable and happy workforce. The positive results from proper performance management are numerous and far reaching, so why then do so few organisations get it right, and far too often get it horribly wrong?

The simple answer to this issue, is that just like anything done well, it needs time and effort and often small servings of bravery and honesty. In this article, we set out what we consider is the essence of proper performance management and what should be done by all organisations that wish to get the best out of their employees. We will also examine what should not be done, but what, all too often, passes for “performance management”. In addition, we look at a few insightful case studies where employers have carried out proper performance management and why this can be so effective.

What is performance management?

Proper performance management is the appropriate and constructive provision of feedback and guidance to employees for the purpose of ensuring employees are meeting the expected requirements of the role for which they were employed. Implicit in this statement is the very need to ensure that the following criteria are met prior to the employment of the relevant employee:

• The manager actually knows what the position requirements are and the necessary skills and competencies essential for the proper performance of the role; and
• The manager hires a candidate that has the relevant skills and competencies to suit the position.

It is almost impossible to ensure an employee will be successful in a role if they are not the appropriate person for the role because they lack the essential skills needed to be successful in the position. Such competencies should include soft skills such as interpersonal skills, confidence, presentation skills, cultural fit and the like.

Unfortunately, all too often the actual requirements of the position are not clearly defined or understood and it is inevitable that there will be a level of frustration when the employee then does not meet the managers internal expectations. Therein lies the key to appropriate performance management – ensuring both employee and manager are aligned as to the requirements of the role, the performance expectations and the deliverables. How best then to make this happen?

Appropriate Performance Management Steps

1. Know the duties, skills and expectations, required for the position.
2. Ensure the employee hired is the right person to fulfil the requirements for the role.
3. On commencement of employment, ensure that the employee is made aware of the expectations, requirements and duties he or she is expected to fulfil. This means that the employee and manager should formally meet in the first days of employment to discuss this and set the ground rules, targets and expectations of the position and the manager.
4. To ensure that the employee remains on task, the manager and employee should meet on a regular basis and at least fortnightly to discuss how the employee is travelling, to discuss any issues and to ensure that both employee and employer remain on the “same page”. These regular meetings should be conducted in a collegiate and non-threatening manner with the express purpose of providing the employee guidance and an opportunity to raise matters of concern. Likewise, it should be an opportunity for the manager to raise issues early so they can be addressed with a minimum of fuss or anxiety.
5. If the manager notices a recurring issue, it is appropriate for this to be addressed in these regular meetings. In this way, it is likely the employee will either address the issue or explain why he or she is having difficulty with meeting the requirement, and this can then be addressed.
6. If it becomes apparent that despite these regular meetings, the employee is not performing, or there is an ongoing conduct issue, then it is appropriate to move into a more formal warning procedure, during which the employee is informed that their performance or conduct is unsatisfactory and despite the numerous attempts to address it informally, this has not occurred. The employee should be provided a written warning as a result of this meeting.
7. Depending on the company’s performance management procedures, if there is still no improvement in the performance or conduct of the employee despite the formal warning, then a further formal meeting should be held with the employee to provide the employee with a further warning and depending on the circumstances a final warning.
8. These formal meetings should not replace the regular fortnightly meetings. However, the regular meetings should re-enforce the formal warning and be an opportunity for the manage and employee to discuss how to assist the employee to meet the relevant performance requirements.
9. If the employee continues to fail to perform, it is at this point that the company may move to termination.
10. Half yearly and annual performance reviews should be used to reset the benchmark for the coming year. It is an opportunity to assess whether the employee has met the targets and goals set in the previous performance review. It also should be the opportunity for the manager to set the expectations, targets and goals required of the employee as well as form the basis for the regular fortnightly meetings, such that the both manager and employee are aligned as to what is required to achieve the goals set in the review. It should not be the occasion during which issues with the employee’s performance or conduct are raised for the first time.

However, if an organisation adopts the approach set out above it is extremely unlikely that they will need to exit an employee for unsatisfactory performance. It is far more likely that the employee will rectify any deficiencies if given the appropriate support and guidance. If it is apparent however that the employee lacks the necessary skills and competencies, they will usually make the decision to leave long before the need for termination arises. In any event, if the employer does need to move to termination, if the manager has adopted this approach (and kept comprehensive records of all issues raised) the company will be able to defeat any potential proceedings brought by the employee after termination.

What Performance Management is Not 

Appropriate and constructive performance management does not include:

• Withdrawing opportunities from an employee;
• Restricting what tasks are given to an employee for fear they may not perform them adequately;
• Belittling employees in front of others, or berating them for failing to perform;
• Providing subtle references to concerns regarding performance;
• Giving feedback over a coffee in circumstances where the employee is not aware that the discussions are meant to constitute a warning;
• Placing additional pressure on an employee to perform without a clear understanding of the barriers (if any) to performance;
• Requiring an employee to meet unexplained or inappropriate expectations without support or appropriate guidance; or
• Informing an employee that they are not performing but without providing specific examples or constructive assistance as to the manner in which the employee can improve.

The Benefits of Performance Management Done Right

It stands to reason that if an employee knows what is expected of them, is capable of achieving those expectations and receives the support and guidance of their manager, they are far more likely to be engaged and actually achieve the goals and requirements of their role. In turn, it is self-evident that this will result in a high performance culture which will drive profitability. The corollary of course is that an environment of high levels of stress, a passive aggressive management style and no clear direction will result in high levels of turnover, low engagement and significant wasted management time. It is also in these environments that bullying claims and stress related personal leave are the norm.

If managers spend a small amount of regular time meeting and talking with their subordinates in a constructive and collegiate environment, they will by default be performing appropriate performance management. The real benefit however, is that they will not even realise that this is what is occurring and in the process, they may in fact become your organisation’s most valuable asset.

In the decision of Robert Etienne v FMG Personnel Services Pty Ltd [2017] FWC 1637, the Fair Work Commission (“Commission”) recognised that regular informal discussions regarding performance will suffice in meeting the procedural requirements to defend an unfair dismissal claim. However, in the case of Blagojevic v AGL Macquarie Pty Ltd; Mitchell Seears [2018] FWC 2906 (“AGL”) the Commission noted that employers should ensure that:

• the performance management actions are a genuine attempt to improve performance;
• that expectations of employees are clearly communicated; and
• that policies adequately set out an approach to be taken by supervisors in relation to underperforming staff, including by providing them with opportunities to improve prior to taking formal action.

In AGL, Mr Blagojevic, an experienced and long serving employee, had received high praise and consistently performed well in his annual reviews.  However, in 2017 his supervisor placed him on an initial and then a revised Performance Improvement Plan (“PIP”). This action had a devastating effect on Mr Blagojevic, who did not believe his behaviour to be deficient in a way that justified the decision to place him on a PIP. Moreover, he disputed the matters claimed to be within the scope of his duties and contended that many of the work actions were impossible for a person in his role to execute. The continued imposition of the PIP on Mr Blagojevic contributed to a decline in his mental health. For these reasons, Mr Blagojevic contended that the imposition of the PIP on him was not reasonable management action carried out in a reasonable manner and commenced a bullying claim. The Commission considered all of the circumstances surrounding the PIP. In that regard, the Commission determined there was intelligible justification for placing Mr Blagojevic on the PIP. The Commission further observed that it was reasonable for an employer to manage its concerns in relation to a particular employee’s performance, provided those concerns are genuinely held and there is intelligible justification for the management actions taken. In conclusion, the Commission found in AGL that Mr Blagojevic’s supervisor had complied with the employer’s policies by providing Mr Blagojevic with coaching prior to the PIP. In addition, even though the PIP adversely affected Mr Blagojevic’s health, his supervisor continued to show genuine concern for his improved performance and as such, did not constitute bullying. It should be noted that AGL was unsuccessfully appealed and the Full Bench of the Commission dismissed the case on the basis that it agreed with the approach taken by the primary judge.

Accordingly, if done right and with “intelligible justification”, investing in proper performance management makes good business sense as it can not only address the issues at play but equally safeguard an employer from legal claims which all too often arise as a result of badly executed performance management. In the lead-up to performance appraisal season, we encourage our readers to really think hard about having difficult conversations with employees and how best to have them.

If you wish to discuss any aspect of this article or require our specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.