What is Performance Management?

A Performance Management System (PMS) aims to maximize employees’ performance and productivity to ensure that the goals of an organisation are consistently being met. It is the company’s total approach and strategy towards performance improvement.


How do you Manage Employee Performance?

Performance appraisal frameworks are effective to “formalise” manager-employee check-ins and for organization-wide alignment. They are ultimately cyclical and integrated with other areas of HR and should include the following five components:


Defining performance

To effectively manage performance, it is important that the standard of performance has been clearly defined and set out to the employee. This may be through their employment contract, job description, and goal setting e.g., Key Performance Indicators (KPIs). Ongoing performance reviews are a means to revise goals and reinforce behavior and output expectations. It is important for employees to understand how they fit into the company and contribute to its success, so company goals should ultimately cascade and form/ align to goals at an individual, team, and department level.


Facilitating performance

The Performance appraisal framework can also be used to identify gaps in skill level and development. Having the means to identify this early on, can assist a manager to address gaps before they ultimately take issue. Being able to identify is one aspect of this – however, then managing the gap is imperative. This can be done through initiating consistent feedback, coaching, training, and development programs to (re)ignite employee engagement and improve performance.


Encouraging performance

This is an important HR Area to assist in the fine balance of delivering negative and positive feedback and ultimately reinforces the “right” behaviours for an improved culture that drives towards success.


Measuring performance

Having a clearly defined PMS and appraisal process allows a business to better measure overall performance, at all levels of the company. Having insight into skills and abilities can ensure that the business is implementing effective career development initiatives.


Feeding back performance information – Career Planning and Development

This is imperative for creating a culture of “shared accountability” for employees’ career development and progression.

Ultimately a business wants to strive to avoid underperformance in a company by implementing the above proactive strategy. However, there are an array of other factors (which will be addressed below) which can result in an employee underperforming. Therefore, managing poor performance is another important component of an overall performance management strategy and system. This incorporates activities such as informal and formal disciplinary procedures to modify and improve inappropriate behaviour or inadequate work performance.


Why is Performance Management Important?

When implemented effectively, a PMS can be central to an organisation gain a competitive advantage.

Managing performance, well, results in:

  • Improved employee work performance
  • Goal alignment at all levels of the organisation
  • Identification of “top talent” as well as lower performers
  • Improved employee morale and engagement
  • Improved customer satisfaction (where applicable)
  • Achieving a clear link between performance and reward (i.e. pay)
  • Improved management, supervision, and leadership skills


Hence, it is important for a business to prioritise its PMS to drive the company’s mission, improve workplace culture, and ability to track and monitor development activities for ongoing improvements.


What is the Process when Managing a Poor-Performing Employee?

An important aspect of managing poor performance is, in the first instance, identifying whether the issue is poor performance or misconduct (including serious misconduct as defined by the Fair Work Regulations 2009). The main difference between these is the level of control the employee has over their actions. Poor performance is the employee trying their hardest to achieve yet is unable to do so due to a lack of necessary skills, or ability to perform their required tasks. For example, this could include frequent mistakes, not following assigned tasks through, attitude to work, lack of apparent skill, consistently not achieving realistic and agreed goals.

Ask yourself, could further training and support help this staff member to overcome the identified issue? In the case of misconduct, the employee will have the ability to perform, yet willfully choose not to. The behaviour is not performance-based. Examples may include arriving late to work, poor presentation, misuse of company resources, abusive behaviour. Serious Misconduct is deliberate behaviour that could threaten employees, suppliers or customers’ health and safety or the reputation, viability or profitability of the business. Examples of serious misconduct include theft, fraud, assault, sexual harassment, intoxication and refusal to carry out a lawful and reasonable instruction that is consistent with the continuation of the employee’s contract of employment.

Once it has been determined that the employee is in fact underperforming, it is then important to consider what causal factors may be contributing to the problem, to consider how to best address the poor performance. Factors may be employee issues or organisation issues, or in some circumstances, both! Common problem areas may include:

  • Employment Conditions
  • Recruitment/ Selection Issues
  • The Work Environment
  • Unclear Job Role
  • Stress
  • Work Organisation
  • Workgroup or peer group problems
  • Communication Issues


What is the Process to Undertake When an Employee is Underperforming?

Depending on the nature and seriousness of the underperformance, it may be adequate to address underperformance via informal strategies before embarking on a formal disciplinary process with the employee.

So far as possible, a manager should maintain a written record/ file note of any discussions had with the employee on areas of underperformance. This may be used for future reference, should further performance management be undertaken.

An overview of managing underperformance (generally to be undertaken by an employee’s line manager) may include the following steps:

  • Identify the issue – what is the performance gap?
  • Commence informally counselling the employee

Within this the manager should:

  • Outline the specifics of the behaviour to the employee – how this is affecting their work and output and potentially impacting on others, too.
  • Outline the expected behaviour standard – use specific examples BUT do not compare their performance to another employee’s
  • Display empathy, active listening, and an understanding
  • Set and agree to a check-in date
  • Encourage open lines of communication and iterate confidentiality


Monitor performance

A manager should:

  • Provide regular, constructive feedback
  • Engage the employee through a cooperative approach
  • Identify training and development needs and arrange appropriate on-job training, deliver active coaching, and support

If it becomes apparent that informal strategies have not improved an employee’s work performance to a satisfactory standard, formal disciplinary processes for managing underperformance should be initiated.


Introduce a Performance Improvement Plan (PIP)

Depending on the severity, you may also issue a written warning at this stage.

This is to be done via a formal meeting with the employee, whereby the outcome may be a written warning as above. This meeting should reference the informal counselling undertaken in steps 1-3 and outline the specifics of the performance issues… this is when the file notes will come in handy! The employee should be provided with an opportunity to respond. An adequate, written notice will need to be provided to the employee in advance of the meeting being held.

It is important in all performance management that a manager and businesses ensure that they follow the principles of procedural fairness to minimise the risk of an unfair dismissal claim and the costs associated. These include:

  • Lack of bias
  • Enquiry into matters in dispute
  • Opportunity to respond to allegations
  • Evidence to support a decision


How to put an Employee on a PIP?

In addition to the written warning issued, a PIP should be provided to the employee. A PIP is a document that sets out what the performance issue is and what they need to do to improve it. The purpose of the document is to outline:

  • Date of formal discussion
  • Reasons for discussion – what the issue is, what the expected standard is
  • The manner in which the employee is expected to improve their performance
  • The time period for the employee to improve his or her performance


Key Steps to take:

  • Monitor Performance
  • Review PIP

It is important to undertake this, even in the instance it has been monitored/ observed that the desired improvements have been made. The employee should be issued brief documentation confirming this which may be as simple as dating and signing off on the PIP, providing a brief final comment. In this instance, no further action will be required to be undertaken.

  • Final Written Warning

If performance has not improved to the required standard, within the time period set out in the PIP a second disciplinary meeting should be held. This meeting may result in a final written warning given to the employee. The conduct and preparation of the meeting should mirror the process as set out above (refer to step 4). At the completion of this meeting, the employee should be left with no doubt that failure to overcome the issue will result in the termination of their employment. It is important to note that warnings have a limited “life span”. For example, this may mean that a final warning cannot be given to an employee if more than 6 months have elapsed between the first and final warnings. It is important to hence set the timeline for the PIP, keeping this in mind. A new review date should be set.

  • Monitor performance
  • Termination

If the employee fails to modify their performance or behavior after the final warning, within the agreed timeframe, termination should be initiated.

The importance of timely, sincere, and personal and professional recognition has been heightened in recent times as employers deal with the challenges that COVID-19 and hybrid working have brought. A PMS will be best received where an employee feels as though their input and role is recognised and managers and organisations have a genuine care for their career development. It might be worth considering;

  • How effective and efficient are your current management practices?
  • How do employees and managers feel about the process?


As outlined above, the benefits of an effective PMS and implementation of the “right” strategy, are far-reaching and will be worth it!



About Employment Innovations

Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.



The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.