The 7 Step Process For Managing Underperforming Employees

Being a great manager can be challenging when everything is going right, and can be down right difficult when things are going wrong. Learning how to manage underperforming employees is a great skill to help you level up. By applying our simple, seven-step process, you’ll be on your way to management stardom.
The 7 Step Process For Managing Underperforming Employees
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It’s inevitable. No workplace is immune. There will come a time (and there will likely be many times) when you need to address performance with an employee. Understanding how to manage underperforming employees is a critical aspect of leadership. Whether you are a small business owner, an executive, a manager, or an HR professional, it’s important that you have a plan when it comes to managing underperforming employees.

Over time, speaking with other professionals and through much trial and error, we’ve come up with a seven step process to do this right. By following these seven steps, you’ll be able to adopt a framework that serves your company for a long time.

Why is it important to manage underperforming employees?

Underperforming employees can hurt your business in a variety of ways. First, by definition, underperforming employees are falling short of their individual performance expectations. Because of laziness, lack of skill, lack of desire, lack of direction, or simply lack of focus, they’re not getting their job done. This might cause someone else on the team to have to pick up the slack, or it might just bring the team down altogether.

The second most important reason to quickly manage underperforming employees is that they can become a metaphorical cancer for your company’s culture. If one employee gets away with poor performance for an extended period of time, it’ll signal to other employees that they can do the same. Instead of cultivating a culture of high performance and productivity, your employees may slowly fall into the trap of mediocrity.

To avoid either of these scenarios, it’s important to keep an eye on the performance of each individual. While we do not encourage excessive micro-management, we do think it’s important to hold consistent one-on-one meetings with employees to check in and see how they’re doing.

In these meetings, you should get a good understanding of who’s hitting performance goals, and who’s falling short. Once you identify employees who are consistently falling short of their goals, it’s time to step in and use our seven-step framework to help manage these underperforming employees.

Seven Steps on How to Manage Underperforming Employees

Employees are humans, and humans are complicated. Each one of us is different. We respond to different motivations and we all have feelings that can either be inspired or hurt. While there may not be a universal framework that works perfectly for everyone, we think that by following the steps below, you’ll have a rock solid foundation to managing underperforming employees.

  1. Acknowledge the problem
  2. Gather information
  3. Speak directly with the underperformer
  4. Create a plan together
  5. Document your conversations
  6. Follow up regularly
  7. Make a decision

Step 1: Acknowledge the problem

The first step in learning how to manage underperforming employees is by first acknowledging that there’s a problem. Unfortunately, this isn’t as common as we’d like to think. Many employees fly under the radar for a long time, often because the company doesn’t have a formal review process to monitor performance.

Once you recognize that an employee is underperforming, you have to fight the urge to think that the problem will simply resolve itself. This rarely happens. If there’s a real pattern of poor performance, jump on it as soon as you can. If not, it will only get worse.

Step 2: Gather information

After acknowledging the problem, it’s time to poke around and gather some data. Before taking your concerns directly to the employee, do a little digging. Why is there a problem in the first place? Is it because the employee wasn’t properly trained? Is the employee not a good fit for their current position? Could their talents be better used elsewhere?

We find it beneficial to put in some work to form a hypothesis around why the employee is struggling. That way, when you address the problem with the employee, you can tell them what you’re seeing and what you’re thinking. This will either give them the opportunity to validate your hypothesis, or they’ll take the conversation another direction and help you understand the real problem behind their struggle.

"Put in some work to form a hypothesis around why the employee is struggling."

Additionally, this might give you some time to reflect on what you, or their manager, or another company leader might be doing to impede the progress of the employee. Poor performance is rarely a one-way street. Usually there are other characters in the story that contribute to the employee’s current state.

Step 3: Speak directly with the underperformer

Once you’ve gathered enough information to have a reasonable discussion, take your concerns to the employee directly. Do so privately and confidentially. Make them feel comfortable and help them see that you’re here to help. After all, none of us should want an employee to fail. If that were the case, we never should have made the hire in the first place. Go in with a positive attitude and seek for understanding.

During this conversation, we recommend that you lead out with what you’re observing. Rather than ask a question like, “why aren’t you doing more?” or, “why aren’t you hitting your goals?”, start by explaining to them what you’re observing.

Share your hypothesis about why you think they’re underperforming. Explain that you’ve been observing this behavior for some time and that you didn’t want to make any snap judgments before addressing the issue directly with them. Once you’ve explained your observations, give the employee time to explain their side of the story.

The goal here is to get both parties on the same page. Ultimately, you’ll need to agree on what the reasons are behind the poor performance and whether or not change can be made. In most cases, it can be.

Eddy makes it easy to manage people from hire to fire.

Step 4: Create a plan together

Now that you’ve reached some sort of consensus on what the issues are, it’s time to make a plan. Begin this planning process with encouragement. Help the employee know that you believe in them and that you believe they can turn things around. Give the employee a reason to believe that if they follow the plan, they’ll remain in good standing with the company.

Next, begin laying out the details of a concrete plan that both sides can agree on. Define the changes you’ll need to see in the employee, and specify measurable goals or metrics that need to be achieved so that you can track their progress.

Of course, you shouldn’t set the bar obscenely high. Just because the employee has underperformed doesn’t mean that they need to dramatically overperform in order to keep their job. If the employee feels like the goals or metrics defined in the plan are completely unrealistic or out of reach, they’ll likely just start looking for a new job as soon as the meeting ends. Settle on something you both agree to.

Step 5: Document your conversations

After having the conversation with the employee and after creating a plan to move forward, we highly recommend documenting these conversations and keeping a record of them for the future. You may even share these documents with the employee, so they have a copy of the plan that you both agreed upon.

Documenting sensitive conversations like these is critical. It can prevent you from getting wrangled into unlawful termination lawsuits down the road. If you can show that the employee willingly agreed to certain terms and that those terms were fairly executed, it’ll be hard for them to make a case against your company if you have to terminate them in the future.

"Documenting sensitive conversations like these is critical. It can prevent you from getting wrangled into unlawful termination lawsuits down the road."

Step 6: Follow up regularly

Now that the plan has been set, it’ll be up to you to follow up. Create daily or weekly meetings with the underperforming employee to keep tabs on their work. Track their progress against the agreed-upon benchmarks. Offer encouragement, support, and resources whenever you can.

As time goes by, you’ll begin to see whether or not the employee is going to be able to make the changes necessary to keep their job. If you’re seeing them work hard, hit their goals, and change their attitude, then reward them with positive reinforcement, praise, and encouragement.

If the employee isn’t making progress, has regressed, or has a poor attitude about your follow-up meetings, then be up-front and clear about the consequences of not turning things around. Some employees will test you to see if you’re really serious about firing them. Let them know that they won’t have a future at the company unless they can perform and follow the plan. It’s best to be candid and honest.

Step 7: Make a decision

After a certain amount of time (which will probably be determined by the plan you create with the employee) the moment will come when you have to make a decision. You’ll need to decide if the employee has shown that they’ve earned their place.

Hopefully, this decision will be fairly straightforward. You’ll review what the employee agreed to in the plan, and you’ll see if they reached the target metrics. If they surpassed them, hit them, or came really, really close to them, then you should be proud. You took an employee who was underperforming and helped to bring them back to a level where they’re pulling their weight again.

If the employee missed the mark and did not turn their performance around, then it’s probably time to part ways. This should not come as a surprise to the employee, as they were well informed of the expectations that had been set. 

When letting an employee go, be courteous and polite. Just because things didn’t work out at your company doesn’t mean they don’t have the talent, personality, or skillset to be great somewhere else. Terminating an employee is hard, and there’s a right and wrong way to do it. Make sure you do it right.

Poor performance often begins with poor onboarding. Here’s a 10-step onboarding guide to get employees better prepared for their job.

Becoming great at managing underperforming employees

Like anything else, managing underperforming employees will take some practice on your part before you’re really good at it. This is a skill, and even if you follow our framework, things may not work out perfectly.

With that said, by following the seven simple steps we’ve outlined here, you should be able to train your entire organization on how to properly manage underperforming employees. There should be consensus across the board on how to go about turning things around.

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