What Is a Performance Improvement Plan? Full Guide and Tips

Many managers use performance improvement plans to share constructive feedback and communicate expectations with their team members. These plans contain specific instructions on how employees can improve their performance and succeed in their current roles.

A performance improvement plan can mutually benefit companies and employees when done well. This article will answer several of the most commonly asked questions about employee development plans before walking you through how to create plans for your employees.

What is a performance improvement plan?

A performance improvement plan (PIP) is a one- to two-page formal document outlining specific concerns or gaps in an employee’s performance. The plan can also reintroduce department expectations and provide key goals or measures of success to mark improvement or progress. The plan is a guide for the employee to help them clearly understand where to focus and how to go about making changes and improvements.

As you create a performance improvement plan, make sure you’re specific about the time frame when you expect to see changes in the employee’s actions or deliverables. Explain what performance would necessitate further corrective intervention, such as employee misconduct or continued failure to meet expectations.

How performance improvement plans can benefit employees and companies

Performance improvement plans can positively benefit employees and companies. In some organizations, all employees receive performance management plans even when current actions and output are satisfactory. These plans function as a structured method for all workers to continue to develop in their positions.

Many employees have negative perceptions of performance improvement plans. They believe a PIP is issued as a disciplinary measure due to poor performance or misconduct. This perspective represents a limited view of the purpose of performance improvement plans.

Employees shouldn’t think they’re in trouble if their supervisor gives them a performance improvement plan. The goal isn’t to make the employee feel inadequate but to realign expectations between both parties to ensure continued progress and growth.

Some potential benefits for employees include:

• Clear expectations. Performance improvement plans can clarify the employee’s primary job requirements. Employees can understand what steps they must take to meet the required standards.
• Support and guidance. Performance improvement plans also introduce resources to help employees grow and resolve performance issues. Examples may include additional training, coaching, and feedback from supervisors.
• Future career advancement. As employees resolve job issues and improve their skill sets, they’re more likely to receive consideration for future promotion and advancement opportunities.
• Confidence. Employees may feel more confident in their production as they resolve issues and contribute more to the company.

In addition, some advantages for companies when sharing performance improvement plans include:

• Increased productivity. Performance improvement plans can enhance employee productivity and efficiency, benefiting the entire organization.
• Retention. You may have skilled employees who struggle in one or two specific areas. Performance improvement plans can help employees limit deficiencies that detract from their talents and reduce their value to the company, which could otherwise lead to termination or quitting.
• Maintain resources. Termination and hiring someone new are expensive in terms of finances and time lost. Performance improvement plans can help you keep contributors from leaving the company and avoid costs associated with turnover.
• Morale. As employees improve their work performance, their enthusiasm may increase—and so may your team’s morale.
• Legal documentation. The plan can function as evidence if disciplinary action such as demotion or termination becomes necessary.

When should performance improvement plans be used?

Some companies issue performance improvement plans to all employees, and others may create PIPs for employees in new jobs during onboarding. That said, many organizations only use PIPS as needed for struggling employees.

We cover some circumstances when a PIP could be helpful:

• The employee hasn’t responded to prior feedback. If you’ve shared constructive feedback with an employee during a performance review and still aren’t seeing change, a performance improvement plan may have value.
• You’ve noticed a steep decline in productivity. If an employee’s quality or productivity recently dropped off, it might be time for a performance improvement plan.
• The employee’s disposition or actions are impacting others. Negativity is contagious. Consider a performance improvement plan if you sense an employee’s conduct is adversely affecting fellow team members.
• Specific goals aren’t met. If you have companywide or departmental goals an employee isn’t reaching, you can’t let the behavior go unaddressed.
• A specific task is causing trouble. If an employee fails to perform a job essential for their role, you can use a performance improvement plan to increase their skills.  
• You perceive a need for greater engagement. If an employee is not focused on the actions required in their job, you may need to use a performance improvement plan to get them back on track.

The PIP process should address where the employee has fallen short in the past and provide clear, actionable steps for the employee to follow to meet expectations in the future.

How to create a performance improvement plan in 6 step

An effective performance improvement plan clarifies where employees have fallen short and clearly explains what future goals and standards they must meet. Consider each of the following six steps as you create a plan for your employees.

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1. Clarify current performance

Express your perception of the employee’s current level of performance. Include metrics and data where possible. Perception can be biased, but measurable stats provide concrete evidence of employee productivity and quality. Focus on areas where the employee is underperforming since these will be key for the rest of the plan.

Example statements may include:

• “The employee frequently arrives late to work, resulting in inconvenience for employees on the prior shift and overtime costs for the company.”
• “The employee’s work often contains factual and grammatical errors that create a poor perception among potential clients.”
• “The employee lacks the technical skills necessary to fulfill a [specific] key component of their role. Certain tasks are delayed or not completed at all.”

2. Determine the ideal level of performance

Explain what you expect to see from the employee moving forward. Some human resources teams find creating a rubric with exceptional, satisfactory, and poor standards helpful. Encourage employees to make it their goal to move toward the ideal level of performance in each category.

Considering the above examples, we show how you might reshape the current reflection of performance into an ideal standard:

• “The employee will arrive at work on time every day. If they must arrive late due to unforeseen circumstances, they should communicate with their supervisor in advance.”
• “The employee should set aside sufficient time to review work before submitting. Little to no revision of submitted work should be necessary.”
• “The employee should understand how to perform key job functions at an above-average level. If they don’t know how to do something, they should ask for help rather than relying on their own judgment.”

3. Work with the employee to create actionable steps to improve performance

Make clear what the employee needs to do to raise their performance to match company expectations and standards. Set deadlines for each goal to let employees know when you expect to see progress or improvement.

Ensure all steps are actionable and easy to measure objectively. Consider researching SMART goals and using the information to create specific, measurable, and achievable goals.

Potential goals could include these types of statements:

• “Using root cause analysis, the employee should understand and correct reasons for chronic lateness. The employee will report to their supervisor immediately upon arrival at work to confirm promptness and go over tasks for the day.”
• “The employee will review each project twice before submitting it to find and fix errors, thus ensuring quality. They may also consider using an online application to check for spelling and grammatical errors.”
• “The employee will complete two online training modules this quarter designed to improve their technical skills. They will schedule a meeting with their supervisor to discuss what they’ve learned.”  

4. Meet with the employee and gather their feedback

At your first meeting with the employee, share your observations and feedback on their job performance and explain why change is necessary for the future.

Make them aware of what actions they’ll need to take to improve and when they must complete these actions. Establish a frequency of process checks. Be upfront about steps you’ll take if the employee doesn’t meet expectations.

This is also an excellent time to allow employees to share their thoughts on their job performance and the new plan you’re sharing with them. Ask open-ended questions to learn how employees feel about their roles and production. Allow them to speak about any tools or resources that might help them excel in their role.

Adjust the PIP as needed, incorporating useful suggestions they may have. Get their commitment to proceed with the final plan. Generally the supervisor and employee will both sign the document, and each retain a copy.

5. Measure performance improvement progress

Set up metrics to track employee growth and measure improvement over time. Choose the right number and type of metrics to ensure you’re measuring key statistics related to the employee’s role.  

Some metrics you can track in an employee performance improvement plan include:

• Attendance. Employees must be at work consistently (and on time) to do their jobs effectively and make progress for the company.
• Customer reviews. Tracking an employee’s customer reviews can help you understand when employees deliver excellent service and when their interactions leave something to be desired.
• Employee productivity. Employees with a deeper sense of purpose and greater job satisfaction can have higher output.
• On-time completion rate. You can use this metric to evaluate how frequently employees complete projects when they’re due. Dig deeper into missed deadlines to understand why the employee isn’t finishing their work on time.
• Quality of work. Look for ways to measure the quality of an employee’s output, such as defects per unit or customer acceptance rate.

6. Conduct follow-up meeting(s)

Schedule times to meet with your employee and discuss their progress. Meetings should continue until you’re satisfied with the employee’s improvements and production.

Ask these types of questions during check-ins:

• What sort of progress are you making toward your goals?
• Where have you experienced success so far?
• What challenges have revealed themselves?
• What additional resources or support can help you reach these goals?
• Do we need to adjust the plan to help you better reach these goals?
• How will you continue to work on these goals?
• How is the PIP affecting your job performance?
• What can I do to help you reach these performance goals?

Don’t forget to validate the employee’s efforts and celebrate any milestones they achieve during these check-ins. Recognition can motivate your employee to continue moving forward while strengthening the relationship that you share.

Performance improvement plan example

Consider this example of a performance improvement plan for an employee who hasn’t met their sales quota for the last few months. This performance improvement plan template should give you a better idea of how you might customize an action plan based on their job performance or specific issue.

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Related: 4 Great Performance Improvement Plan Examples

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When done well, performance improvement plans can provide tremendous value for employees and companies.  They’re an excellent tool for supervisors and managers to communicate standards and expectations with employees. Employees can better understand what supervisors hope to see going forward, and they can adjust their actions to achieve improved job performance.

Hire a performance management specialist today to get started.

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