I wrote a bit in a previous essay, on how and why companies fire people, about why “Performance Improvement Plans” (PIPs) don’t actually have the titular effect of improving performance. Their well-understood purpose is not that, but to create “documentation” before firing someone. Why do they exist? Because companies prefer them over severance payments. Severance isn’t a legal obligation, but it’s something companies do to eliminate risks associated with firing employees. Despite what is said about “at will” employment, termination law is so complex (as it needs to be) and with so many special cases that, except in ironclad cases, the employer is at some risk of either losing the case, or of winning but damaging its reputation in the process. Perhaps more importantly, because lawsuits are expensive and time-consuming but PR attacks are cheap, severance payments exist to prevent disparagement by the employee. (Warning: never explicitly threaten to disparage a company or reveal damaging information in severance negotiation. That’s illegal. Don’t threaten legal action either, because it will get the opponent’s attorneys summoned and they are better-skilled as negotiators than the people you’ll be dealing with before you do so. Best, for a start, is to list what the company has done wrong without suggesting your course of action, whether it be a lawsuit, disparagement, or a talent raid. If you want to disparage your ex-employer should the negotiation fall through, that’s fine. Threatening to do so in the context of financial negotiation is illegal. Don’t do it.) Predictably, companies would prefer not to cut severance checks for fired employees, and to mitigate the risk that they are pursued afterward. That’s where the PIP comes in. It’s “documentation” that the employee was fired for performance reasons, intended to make him think he has no recourse.
If an employee is fired for objective, performance-based reasons, then he has no legal claim. He couldn’t do the job, which means he’s eligible for unemployment insurance but not a judgment against the employer. This is relatively easy to prove if the work is objectively measurable, as in many blue-collar jobs. However, most jurisdictions also enable an employee to seek recourse if he can establish that a lower performer was retained. If Bob is fired for producing only 135 widgets per hour (compared to a requirement of 150) while Alan, the boss’s son, keeps his job while delivering 130, then Bob can contest the termination and win. But if Bob was the only person below that standard, he can’t. Also, if Bob can establish that his low performance was caused by bad behavior from others, such as his manager, or that he was unfairly evaluated, he has a claim. This defense rarely works in objective, physical labor, but can be played pretty easily in a white-collar context (where work performance is more sensitive to emotional distress) and, even if the employer wins the lawsuit, it comes off looking bad enough that companies would prefer to settle. It is, of course, impossible to objectively define productivity or performance for white-collar work, especially because people are invariably working on totally different projects. What this means is that an “airtight” performance case for a termination is pretty much impossible to create in a white-collar environment. This is what severance contracts, which usually entail the right to represent oneself as employed, a positive reference, and enough money to cover the expected duration of the job search, are for: to give the person what’s necessary to transition to the next job, and to leave the person feeling treated well by the company. PIPs are seen as a “cheaper” way to get rid of the employee. Instead of cutting a 3-month severance check, keep him around on make-work for a month and then cold-fire him.
I’m not a lawyer, but I don’t think that a PIP does much to reduce lawsuit risk, because wrongful PIPs are just as easy to initiate as wrongful terminations. Most PIPs contain so many factual inaccuracies that I wouldn’t be surprised to learn that they weakened the employer’s case. So why do they really exist? It’s not to improve performance, because by the time the employee and manager are documenting each other’s minor mistakes in event of a lawsuit, the relationship is long past over, nor is the real purpose to strengthen the employer’s case in court. The actual purpose of the PIP is to reduce the likelihood of ever going to court by making the target feel really, really shitty.
People tend to pursue injustices when they perceive a moral superiority between themselves and an opponent: the pursuer feels right, and the opponent was wrong. On an emotional level, the purpose of severance payments is to make people feel good about the company, so people look back on their experience and think, “It’s unfortunate that it didn’t work out, but they treated me well up to the end, it didn’t hurt my savings, and I got a better job”. They won’t react, because they don’t feel wronged. The purpose of the PIP is to go the other way and make the employee feel bad about himself. That’s all. Most PIPs are so badly drawn as to be useless in court, but if the employee is made to feel like a genuine loser, he might slink away in shame without raising a challenge– either in court or in the public opinion. Regarding the latter, the PIP makes it seem as if the company “has something” on the employee that could be used against him in the future. “Don’t ask for severance and we won’t show this PIP to anyone.” That, by the way, is extortion on the part of the company, but that’s a discussion for another time.
Another function PIPs provide is that they cover up the reasoning for a termination. Some percentage of terminations are either for objective performance or ethical reasons where it’s obvious that the person had to be fired. The employee has no legal case, and would embarrass himself even to bring the matter up. Those cases are uncommon in technology, where performance can be very context-sensitive but truly incompetent people are just rare. Some other percentage of terminations occur for discrimination, or for legally-protected retaliatory reasons. Those are also rare, noting that “retaliation” in the legal context has a specific, conservatively-interpreted meaning. The vast middle (between the “performance” and “retaliatory” extremes) are what we might call political terminations. There’s some disagreement about how people should be working or how priorities should be set, and there’s possibly a personality conflict, and a person either with power or with access to those in power decides to remove a “troublemaker”. In this middling 80 to 90 percent, it’s impossible to pick apart who’s in the wrong. The employee? The manager? The team? The HR department? Possibly all of them, possibly none of them, usually some of them. Sometimes these disagreements are remediable, and sometimes they get to a point where (right or wrong) the employee must be let go. A severance payment allows the company to do this in a way that leaves most parties (except the finance department, annoyed at paying 3 months’ salary to fired employees) satisfied. The alternative is the PIP, which involves pretending the problem is an objective performance issue, and hoping the employee will believe it.
A PIP is unfair to pretty much everyone– except the finance department, which can claim it “saved money” on severance payments. As I’ve said, PIPs are pretty much final: they destroy the relationship. The PIP’d employee has to come to work for a manager who, in his mind, has just fired him. The manager has to go through the motions of this kangaroo court, and his ass is on the line if he makes any mistake that increases the firm’s legal risk (which is not hard to do) so he resents the employee in a major way. The rest of the team has to put up with a disgruntled employee who is now pretty much useless, splitting his effort between the PIP make work and his job search. In short, someone in HR or finance gets to look good by “saving” a few thousand dollars while externalizing the costs to the target’s team.
A PIP is threatening to fire someone, and threats are almost always counterproductive on either side of a negotiation. By the time a PIP is even on the table, the employee should just be fired. Same day. Write a contract that gives him a severance check in agreement not to sue or disparage the company, and let everyone move the fuck on. No CYA “documentation”. You’ve made your decision to separate. Now execute it, but do it well and do it fairly.
I’m going to step away from all this nastiness for a bit, because the vast majority of employees aren’t intentional low-performers, most managers aren’t jerks, and I’d like to believe that most companies aren’t driven by bean counters in HR suites. Let’s take a positive spin: what should a manager do if he genuinely wants to improve an employee’s performance, behavior, or impact? Although formal PIPs are toxic, the continual process of improving performance is one in which manager and employee should always have an interest, whether that employee is a 1st- or 7th- or 10th-decile performer. Who doesn’t want to become better at his job? What managers don’t want their teams to be better? Performance improvement is actually something people should be doing at all times, not just in times of crisis.
First, it’s important to get terminology right. Many technical organizations like to be “lean” or “flat”, which means that a manager has 10 to 50 reports instead of the traditional 3 to 5. If a manager has more than five reports, he can’t possibly evaluate them for performance. There isn’t a known performance problem. There’s a known impact problem. It might be, and might not be, a problem of individual performance. If it’s not, and the problem is presented as a “performance” issue, the employee is going to hate the manager’s guts for (a) not seeing what is really going on, and (b) throwing him under the bus before understanding the issue.
Managers are typically afraid to investigate the real causes of impact problems. There are two reasons for this. The first is that the cause is almost always unpleasant, once discovered. The employee might simply be unable to do the job, which means he must be fired. Not pleasant. The cause of the problem might be something like a health problem. Even more unpleasant, and it legally complicates any termination process. Most often, the cause of the problem– the “blocker”– is either a mistake made by the manager or a problem caused by someone else on the team, usually a person of high influence whom the manager likes– a “young wolf”. That’s extremely unpleasant, because it requires the manager either to admit his own mistake, or to do a lot of work to rectify the problem. For this reason, managers typically don’t want to peer under this rock until their bosses, or the HR department, force their hand. Most managers aren’t malevolent, but they’re just as lazy as anyone else involved in the grueling, unpleasant work based largely on addressing and fixing failed relationships, and they’d rather the problem just go away.
The second reason why managers rarely investigate low-impact employees is the convexity of the impact curve; in a typical organization, a 10th-decile employee might be a “10x” performer– that is, as valuable as ten average employees– while 8th decile is 3x, 6th is 1.5x, 4th is 0.5x, and 2nd is 0.25x. A manager gains a lot more by encouraging a 7th or 8th-decile performer to move up one decile than by bringing someone from the bottom into the 3rd- or 4th-decile. Of course, it’s possible that uncovering the “blocker” might move someone from the bottom into the upper-middle or even the top, but people are naturally distrustful of sudden moves. Even if removing the blocker puts the employee in the 9th or 10th-decile for personal performance, he’s extremely unlikely to do better than even the 4th-decile for impact, because his sudden change will be distrusted by the rest of the organization. Managers can’t easily mentor or sponsor people in this position either, since the rest of the team will see it as “rewarding failure” for the low-impact employee to receive disproportionate managerial attention or support. Right or wrong, most managers aren’t willing to risk their credibility in order to move someone from low impact to high.
So what should a manager do if he genuinely wants to improve an employee’s impact or performance? Let’s first address what not to do, aside from what has already been covered. First, written communication about any performance or impact issue is an absolute no-no. It’s an aggressive move, and will be taken as such. Sure, it reduces the employer’s leverage in severance negotiation. Who cares? That’s good for the finance department, but bad for the relationship between the employee and his manager, his team, and the company, and those relationships are what actually needs repair. If this is improvement process is done properly, then the severance conversation might never happen, which is what everyone should be aiming for. HR wants to cut people loose and to do so cheaply, but the manager should, at this point, still be trying not to have that happen in the first place.
Second, managers should never disparage their employees, and should defend them to others. Any concerns should be addressed one-on-one and verbally. Managers tend (surprisingly) to be insecure, because they can steer the team but don’t drive it, and because they need high credibility with their team in order to be effective. This is precarious and leaves them with less power than one might expect. On the other hand, most managers have this credibility. They should use it to keep the employee’s reputation intact so that, if they do successfully intervene with the troubled employee and bring his performance up to par, his impact can also rise to that level.
There are two kinds of low-impact employees. The first are those whose approach is ineffective, and the second are those who aren’t managing themselves properly (i.e. aren’t getting any work done). For the first, the best words to use are “I wish you were doing this differently.” It’s firm, but objective. The manager isn’t saying, “You’re a fuckup”, which is going to lead to “No, I’m not”. He’s saying, “I understand what is effective and what is not in this organization, and you’d be more effective if you did this”. Since he’s the manager, that statement should (and almost always will) be taken seriously. The second case is harder, because it’s impossible to state the problem without offending the employee. It’s hard to uncover the cause of a motivational crisis when the Rules of Work require the employee pretend there isn’t one. This requires a “Tell me what you need” discussion. It feels difficult, because it seems like there’s a power inversion. There isn’t. There’s mutuality. The employee’s job is to figure out what he needs from the manager in order to succeed at the company, to deliver if these requests are honored, and to consider finding another job (internally or externally) if they can’t be met. Unlike PIPs and ceremony, it actually works, but it’s not a rapid process. HR wants to turn “low performers” into mid-grade meat or to ship them out within half a quarter. A “Tell me what you need” discussion occurs over months. Why? Because the real causes of a low-impact employee are usually too complex to be remedied in 30 or even 90 days. For example, if the cause is a bad technical decision made from above that damages his ability to have an impact, it requires shifting the employee to a place where he’s less affected by it or can shine in spite of it. If it’s bad behavior from someone else on the team, I have to paraphrase Linus Torvalds: you now have two managerial problems. It’s fucking hard, but it’s what managers are supposed to do. It’s their job.
The goal of these discussions shouldn’t be to “improve performance” in some abstract, meaningless way. Turning an ineffective employee into a 3rd-decile nobody is wasted effort. You’ve turned someone you were about to fire into someone just effective enough to be hard to fire (without pissing others off). It’d make more sense to release him and hire someone new. So that goal makes no sense. The goal should be a process of discovery. Can this person become a major asset to this organization? If no, terminate employment, even if you really like him. Be nice about it, write a severance check, but fire and move on. If yes, proceed. How do we get there? What are the obstacles? If his reputation on his team is lost, consider a transfer. If he discovers he’d be more motivated doing a different kind of work, get him there.
This said, there are two “big picture” changes that are required to make managerial environments more stable and less prone to inadvertent toxicity and unexpected surprises. The first is that managers need to be given proper incentives. Rather than being rewarded for what they do for the company, managers are typically rewarded or punished based on the performance of their team, and their team alone. What this means is that managers have no incentive to allow outgoing transfers, which are good for the employee and the company but can be costly, in the short term, for the team. With these perverse incentives, it seems better for the manager to hit a high-potential, 3rd-decile performer with an intimidation PIP and capture the short-term “fear factor” bump (into the 4th- or 5th-decile) than it would be to let him find a role where he might hit the 8th decile or higher. Managers should receive bonuses based on the performance of outgoing transfers over the next 12 months, and these bonuses should be substantial, in order to offset the risk that managers take on when they allow reports to transfer.
The second problem is with the “lean” organizational model where a manager has 10 to 50 reports. It’s not that hierarchy is a good thing. It’s not, and a company that doesn’t have a large degree of extra-hierarchical collaboration (another process that most companies fail to reward) is doomed to failure. The problem is that conceptual hierarchy is a cognitive necessity, and a company that is going to attempt to assess individual performance must have processes that allow sane decision-making, which usually requires an organizational hierarchy. A manager with 25 reports can see who the high- and low-impact people are, but rarely has the time to assess causes on an individual basis. He has to delegate assessment of individual performance to people he trusts– his lieutenants who are usually, for lack of better terminology, brown-nosing shitheads. This is a classic “young wolves” problem. These lieutenants rarely act in the interest of the manager or organization; on the contrary, they’ll often work aggressively to limit the impact of high-potential employees who might, in the future, become their competition. This is what makes “too nice” management fail, and it’s like the problem with right-libertarianism: a limited, hands-off government, managed poorly, allows an unchecked and more vicious corporate power to fill the vacuum. “Flat” organizations encourage unofficial hierarchies in which young wolves thrive. It’s better to have more hierarchy and get it right than to let thugs take over.
Another major problem is that the managerial role is overloaded. The manager is expected to be a mentor, a team-builder, and a boss, and those roles conflict. It would be hard to balance these obligations over a small number of reports, but with a large number, it’s impossible. Paradoxically, managers also have too much power and too little. They can make it impossible for a report to transfer, or destroy his reputation (since they always have more credibility than their reports) so they have unlimited power to make their reports’ work lives hell– in technology, this pattern is called “manager-as-SPOF”, where SPOF means “single point of failure”, meaning a potentially catastrophic weak point in a system– but they almost never have the power they actually need to get their jobs done. One example is in performance reviews. Managers are completely fucked when it comes to performance reviews over low-impact employees. Writing a negative one is just as bad as a PIP, and makes it incredibly difficult for that employee to transfer or advance, even several years after the review. Writing a good review for a low-impact employee sends the wrong message, which is that his low performance is the norm, or that the manager is inattentive. Since most employees don’t like being low-impact and would rather have management take attention toward resolving their blockers, this also breeds resentment, in the same way that incompetent teachers who compensate using grade inflation are disliked. Another example is in termination. Managers would rather terminate employees with a few months’ severance than go through the rigamarole of a PIP. It saves them the extra work and their teams the morale costs, and it has the same conclusion (the employee leaves) at, overall, less cost to the company. No sir, says HR: gotta write that PIP.
I haven’t done this matter justice, and I’ll probably have to come back to it at a later time, but I hope I’ve established not only the mechanisms by which managers might actually be able to improve the impact of their reports, but also the organizational problems that make it inevitable that there will be low-impact people, since the ultimate goal is not to “improve low performance” after there’s a problem, but to prevent low impact from happening in the first place.