Performance management should be a driver of individual and business success. Yet, when mishandled, it can lead to disengagement, underperformance, and costly legal action. Managers who treat it as a once-a-year HR task—rather than an ongoing business priority—risk serious commercial damage. Here's what managers must know to run a robust performance management process, avoid common pitfalls, and protect the bottom line.
1. Clarity and Consistency Are Non-Negotiable
Effective performance management begins with clarity. Employees need to understand what’s expected of them. SMART objectives (Specific, Measurable, Achievable, Relevant, Time-bound) provide structure and align performance with organisational goals.
Consistency is just as important. If managers treat similar performance issues differently across the team, it can lead to claims of unfair treatment or discrimination. Clear standards and equal application are essential to credibility and fairness.
2. Make Feedback Ongoing and Constructive
Gone are the days when performance was reviewed only annually. Regular feedback—both formal and informal—is vital for driving improvement and keeping employees engaged. Managers should provide feedback that is timely, specific, and focused on behaviours, not personality.
Subjective or vague criticisms undermine the process. Training managers to provide evidence-based, actionable feedback fosters trust and drives results.
3. Document the Process
Good documentation isn’t red tape—it’s a business safeguard. Accurate records of goals, feedback, performance concerns, and improvement plans help build a defensible case if formal action becomes necessary.
A key example of what can go wrong is the case of Rentokil Initial UK Ltd v Miller (2012). The company dismissed an employee for poor performance but failed to document performance standards or provide proper support. The tribunal found the dismissal unfair and awarded over £26,000 in compensation. A lack of clear expectations and documentation proved costly.
4. Support Before Sanction
Too often, underperformance is met with disciplinary action before any attempt to support the employee. This approach is both unfair and legally risky. Managers should investigate whether the issue stems from unclear goals, lack of training, personal challenges, or other underlying causes.
Performance Improvement Plans (PIPs) offer a structured way to support employees. They should be time-bound, specific, and include the help the organisation will provide. If performance doesn’t improve, a PIP provides the necessary paper trail to justify further action.
5. Train Managers to Manage Performance
Managers are often promoted for technical skills, not people skills. Without proper training, they may avoid difficult conversations or handle them poorly—undermining both morale and legal compliance.
Performance management training should include process, documentation, and the soft skills required to coach, give feedback, and lead improvement discussions with empathy and fairness.
The Commercial Risk of Getting It Wrong
Neglecting performance management doesn’t just affect output—it invites serious legal and financial consequences. Employment tribunals regularly uphold claims of unfair dismissal where employers fail to follow a fair, well-documented process.
In BS v Dundee City Council (2013), the court found that the council had failed to properly investigate underperformance or consider alternatives to dismissal. The result: a compensation award of over £100,000, alongside reputational damage and internal disruption.
Even without tribunal claims, poor performance management causes lost productivity, high turnover, and poor business results.
We know that as a manager or business owner, you're wearing many hats—juggling day-to-day operations, growing the business, and leading your team. Staying on top of employment law changes and managing performance fairly and legally shouldn’t be another burden.
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