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6 Steps to Create a Performance Improvement Plan (PIP)

Updated: Jun 4

Sooner or later, every manager has to contend with an employee who fails to meet expectations. Perhaps their performance has dropped, they have been assigned new tasks and are unable to handle them, or they handle their tasks, but their behavior is disruptive to others.


Many companies turn to a warning system, followed by termination in these cases. However, this response lacks nuance and does little besides imposing the threat of penalty to resolve the situation. Is there another way?


Indeed, an alternative exists; the Performance Improvement Plan.


What Is a Performance Improvement Plan?

A performance improvement plan, or PIP, is a framework and strategy designed to guide an employee with performance or behavioral issues toward resolving those issues. It is:

  1. A formal document, not an informal agreement or discussion.

  2. A set of goals and deadlines, with specific timelines for improvement.

  3. A framework for resolution of the issues, on both success or failure.


PIPs are used to help struggling employees realign themselves, learn what skills or techniques they may be missing, and restore their good standing position with the company.


Upon the successful resolution of a performance improvement plan, the employee is absolved of risk; conversely, if they fail to produce results, the plan offers a resolution to the problem in other ways.


Some may view a performance improvement plan as the first step to firing an employee with cause, by putting them “on notice” such that any failures can then be recorded and used against them. While some companies use them in this manner, a real PIP has significant benefits beyond “an excuse to terminate an employee.” Moreover, since most of the country uses at-will employment, such excuses are not typically necessary.


A performance improvement plan should instead be viewed as a good thing. It’s an opportunity for growth, training, and alignment of skills and behavior, not a looming threat of termination. It’s a sign that the company views the employees as valuable enough to invest in and keep them around.


An employee who has proven they can handle some tasks, but not others, may be demoted but kept on staff, where they can be effective but not disruptive. Others whose talents push them in one direction may find that they are transferred to a department more in line with their abilities upon resolution of their PIP. The best performance improvement plans, in fact, often have potential outcomes other than “return to the norm” and “termination.”


Creating and implementing a good performance improvement plan is a six-step process.


Step 1: Determine If a PIP is Warranted

As mentioned above, a performance improvement plan is meant to be a tangible framework for improvement and realignment with business objectives. It is not meant to be little more than a paper trail for impending termination. Thus, HR needs to determine whether or not a PIP is warranted.


Questions to ask can include:

  1. Is the employee’s behavior or productivity in question? Some issues may not have a root cause in behavioral or productivity adjustments and thus cannot be addressed with a PIP.

  2. Is the issue new, or has it been mentioned in past performance evaluations? The longer it has been going on, the more likely it is that past attempts have been made and failed. However, it’s also possible that the employee did not know they had a problem until now.

  3. Is the employee’s manager dedicated to helping the employee improve and succeed? A manager at the end of their rope, frustrated with an employee who doesn’t listen to feedback, may not be capable of managing a PIP properly.

  4. Can a framework with tangible goals help improve the situation? Sometimes a problem is outside the control of the employee, manager, or business. Other times, it relates to behavior that cannot be fixed with a PIP.

  5. Has a factor been overlooked that can explain the problem? For example, if an employee took time off for illness and missed critical training, the issue can be solved by recognizing and providing the missing training instead of a PIP or as part of a PIP.

  6. Is there a valid and warranted excuse for this behavior? For example, personal, family, or health issues can cause problems in the workplace. Accommodation or understanding may be more valid than a PIP in these cases.


This analysis aims to determine whether or not the issue can likely be solved with a performance improvement plan or if it would simply waste time, and termination is a better option.


Additionally, a PIP should never be a surprise. It is a formalized “last resort” for the employee. Before reaching this point, their manager should attempt to work with them in varying degrees of formality to identify, address, and solve their problems.


Step 2: Decide on Potential PIP Outcomes

Typically, the best outcome of a performance improvement plan is a return to form. The employee should, through the framework, be able to adjust their behavior such that they can accomplish tasks, avoid unnecessary conflict or abrasive behavior, or otherwise adapt to the requirements of their job. However, this is not the only possible outcome of a PIP, nor is it the only “good” outcome.


The “failure” outcome of a PIP is, obviously, termination. If an employee proves that they are not capable of adjusting their behavior to suit the goals and needs of the business, then terminating their employment is the best option for the business.


There is also the option for the employee to dispute or refuse the PIP. In some cases, this can bring to light a failure of management, another team member stealing credit for the employee’s work, or another systemic issue. Otherwise, it can be a sign of refusal to improve or adapt and result in termination.


That said, two other potential outcomes can be viable for both the business and the employee.

  1. The first option is a demotion. The employee may have been hired for a role they were not genuinely fit to handle, or they were promoted beyond their means. In many cases, such an employee struggles to find their place and may benefit mentally and in career terms by reducing their role and responsibility. This realignment of responsibility with skill level may be disheartening for the employee, but it’s still better than firing them.

  2. The second option is a transfer to another department. For example, perhaps an employee is put on a PIP for consistently being unable to meet sales goals in their role as a sales representative. However, throughout their employment, they have discovered a passion for data analysis and the back-end office worker that facilitates the success of the sales staff. The PIP can identify these skills and lead to transferring the employee to a role where they are a better fit for the company.


The key is not necessarily to set a goal for the PIP; it’s to provide and watch for the possible outcomes. The employee should also know that the PIP is not a binary “improve or be terminated” program, which gives them more opportunity and flexibility to succeed.


Step 3: Build the PIP Framework

Next, it is time to draft the PIP agreement.


A PIP should:

  1. Be SMART: That is, Specific, Measurable, Achievable, Relevant, and Time-Bound. In other words, the goals must be tangible, the deadlines for achievement set down, and everything must be measurable and achievable.

  2. Include a space for a specific description of the issue, including documented instances of failure to meet expectations, which expectations need to be met, and how. For now, this can be blank or a template, as we’re only developing the framework for a PIP in general.

  3. Include guidance on how to adjust behavior to improve, and offer resources and opportunities for training and other information necessary to make that improvement.

  4. Set a schedule for check-ins with the manager overseeing the PIP, to keep on track of progress (or lack thereof). Depending on the situation, this manager may need to be someone outside of the department to avoid conflicts of interest.

  5. A listing of the PIP outcomes, including the requirements for achieving them, as necessary.


You can see examples of what PIPs look like here. As you can see, a PIP doesn’t need to be an exceptionally long or complex document. In fact, the more complex the scenario, the less likely a PIP is to be applicable to the solution.


Step 4: Fill Out and Review the PIP to Remove Bias

Armed with a template PIP, you can now fill it out and make it relevant to the individual employee with issues. Fill out the area that needs improvement, the goals for improvement, the timeline, any resources you can provide to assist, and the deadline with possible outcomes.


Before approaching the employee about the PIP, the document should be reviewed to remove any potential bias against the employee. This “sanity check” helps avoid problems such as:

  1. A manager with a grudge sets unsustainable or unachievable goals.

  2. A PIP aims to “solve” issues that cannot be solved through training, like emotional, health, or other problems.

  3. A PIP that demands success when no support was given to reach it. A common example is an issue where improper onboarding led to an employee not knowing what they should be doing. A PIP is not the ideal solution to this situation.


Additionally, it may be helpful to review the overall workplace and see who has received PIPs in the past, looking for trends that could be construed as discriminatory. While this should not be the case, there’s always the risk of individuals in power with biases causing issues.


Step 5: Implement and Monitor the PIP

The meeting wherein an employee is presented with a performance improvement plan is never fun, but it’s a necessary first step. It should be stressed that a PIP is positive; it means the company wants to give the employee an avenue to improve and a chance to do so, rather than terminate them. The employee should also be made aware of the tangible goals, desires, and steps included in the PIP and given a copy of the document themselves.


This time is also an opportunity to discuss the situation in candid terms. In some cases, this may be where an employee can present their case and the evidence that exonerates them.


Depending on further analysis, this may be the opportunity for the PIP to be withdrawn pending further investigation or adjusted to consider new factors.


As the PIP is implemented, perform regular check-ins to ensure the employee is progressing and that any questions are answered and any resources are provided. A performance improvement plan is, after all, designed to facilitate success, not enforce consequences for failure.


Step 6: Review and Conclude the PIP with Relevant Action

As the PIP progresses and nears its conclusion, decisions must be made. If the employee has improved, the PIP can be closed with no further issues on their file. If the employee shows improvement, but not to the point required, some leeway may be granted, alternative avenues for improvement can be offered, or the employee’s position may be adjusted. And, of course, if the employee fails to improve or regresses, proper action can be taken, and termination proceedings can begin.


Bear in mind that adjustments to the PIP can be made at any point in the proceedings. You may discover, for example, that the outcomes you’re measuring are not actually within the employee’s control and that punishing them for failing to meet them is unnecessarily harsh.


The PIP can be closed as a success even in such instances if the employee demonstrates improvement in other areas or if such improvement is not necessary.


Upon closing the PIP, proper action must be taken. If the framework indicates that the only valid response is termination, and the employee has shown no other argument for an alternative, then proceed. After all, a performance improvement plan is predicated on that middle word: Improvement.


Do you have any questions about the performance improvement plan or if your company should implement it for an employee? If so, please feel free to leave a comment down below, and we’ll get a conversation started. As mentioned, a performance plan may not be helpful in every situation, and it’s important to understand how and when to use it. We would be more than happy to assist you in understanding it better however we possibly can!

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