Managing underperforming employees: A step-by-step guide

Every organisation wants a high-performing team, but the reality is that not every employee will meet expectations all the time. Managing underperformance is one of the trickiest parts of a leader’s role and a critical aspect of effective performance management. It requires a careful balance between supporting improvement, maintaining fairness, and protecting the business from potential legal risks.

Handled well, it can lead to positive change and renewed motivation. Handled poorly, it can damage morale, create resentment, and even lead to costly tribunal claims.

At SafeHR, we help businesses navigate these situations in a way that is structured, fair, and legally compliant. Here’s a step-by-step guide to managing underperforming employees effectively.

1. Identify the signs of underperformance early

The sooner you spot an issue, the easier it is to address it before it becomes entrenched. Underperformance can take many forms, including:

• Consistently missing targets or deadlines.
• Poor quality of work or frequent errors.
• Lack of engagement or motivation.
• Inappropriate behaviour towards colleagues or clients.
• Repeated lateness or unexplained absences.

SafeHR recommends keeping performance records and monitoring trends. This ensures that concerns are based on evidence, not assumptions or hearsay.

2. Understand the root cause

Performance issues are not always about capability or attitude, they can be caused by a range of factors:

• Lack of training or resources: The employee might not have the tools or knowledge they need.
• Personal circumstances: Health problems, caring responsibilities, or other personal challenges can impact performance.
• Unclear expectations: If goals and standards aren’t clearly communicated, employees may not know they’re falling short.
• Workplace culture or management style: Issues with team dynamics or leadership can affect output.

Before taking action, have an open and honest conversation to uncover the underlying cause. This not only demonstrates fairness but also ensures you target the real problem.

3. Give clear feedback and set expectations

When addressing underperformance, clarity is key. Arrange a private meeting to explain your concerns and share specific examples of where expectations have not been met. Avoid vague statements like “You need to do better” and instead provide measurable details.

SafeHR suggests using the SBI method (Situation–Behaviour–Impact):

• Situation: Describe when and where the issue occurred.
• Behaviour: Explain exactly what the employee did or didn’t do.
• Impact: Share the consequences for the team, business, or customers.

End the conversation by setting out clear expectations for improvement and agreeing on realistic timescales.

4. Create a performance improvement plan (PIP)

A Performance Improvement Plan is a formal document that outlines:

• Specific areas where performance is lacking.
• The standards or targets that must be achieved.
• Actions the employee should take.
• Support the business will provide (training, mentoring, resources).
• Timescales for review.

PIPs show that you’ve given the employee a fair opportunity to improve and can be crucial evidence if you later need to take formal disciplinary action.

5. Provide support and training

Support isn’t just a legal requirement, it’s also good management practice. Depending on the root cause of the underperformance, this might involve:

• Offering additional training or coaching.
• Assigning a mentor or buddy.
• Adjusting workloads or priorities.
• Providing flexible working arrangements.

SafeHR clients often use our HR software for small businesses to track training, log review meetings, and store all relevant documentation securely in one place.

6. Monitor progress and give regular feedback

Don’t wait until the end of a PIP to provide feedback. Schedule regular check-ins to:

• Review progress towards agreed targets.
• Recognise improvements, however small.
• Address any continuing challenges.
• Adjust the plan if necessary.

Consistent communication helps keep employees engaged and reassured that you’re invested in their success.

7. Take formal action if necessary

If, despite support and clear expectations, there’s no improvement, you may need to move to the formal disciplinary process. This should follow both your internal policies and the ACAS Code of Practice to ensure fairness and legal compliance.

Steps typically include:

• A formal investigation.
• Written notification of concerns.
• A disciplinary meeting with the right to be accompanied.
• A written outcome that may include a warning or, in serious cases, dismissal.
• The right to appeal.

SafeHR can guide you through each stage, ensuring all actions are documented and legally sound.

8. Keep it fair, consistent, and legal

Managing underperformance can feel personal, but it’s essential to remain objective. Apply the same standards to everyone and avoid singling out individuals without cause. Consistency not only protects you legally, it also strengthens trust within your team.

Document every stage of the process, from initial conversations to final outcomes. This paper trail is essential if the situation leads to a grievance or tribunal.

9. Prevent future underperformance

Once the issue is resolved, whether through improvement or other outcomes, consider what lessons can be learned to prevent future problems. This might include:

• Setting clearer goals during onboarding.
• Providing more regular training.
• Improving communication channels.
• Conducting more frequent performance reviews.

By taking proactive steps, you can build a high-performance culture where employees feel supported, engaged, and motivated.

Final thoughts

Managing underperforming employees isn’t easy, but with the right approach, it can lead to growth, stronger relationships, and improved business performance. The key is to act early, stay fair, provide support, and follow a clear, compliant process.