How to Effectively Manage an Employee’s Performance
By Matthew Larsen & Kristen Woo, Fasken
Many employers have heard of performance management, but they might not know how to do it effectively or why it can be important. The purpose of this article is two-fold: first, to explain the purpose of performance management, and second, to provide tips on how to effectively implement a performance management program.
The Value of Performance Management
By providing clear instructions, regular feedback and quantifiable goals, performance management places an obligation on an employee to take steps to improve their performance. If done effectively, it may help improve an employee’s performance.
If the employee is not showing improvement, termination may seem like the logical next step. However, in many cases, courts have found that subpar performance is not sufficient grounds to terminate an employee for ‘just cause’. If an employer does not have ‘just cause’ for termination, the employee will be entitled to notice or pay in lieu of notice (what is often referred to as severance). Depending on the contract (or lack thereof) and the employee’s length of service, this entitlement can be as high as 24 months (or in some exceptional cases, more than 24 months).
For an employer faced with a poorly performing employee, it can feel like they are stuck between a rock and a hard place – tolerate poor performance or risk a costly wrongful dismissal claim. Performance management may provide the employer a way out. An employee’s performance may improve. If an employee’s performance fails to improve by the end of a performance management program, the employer may be justified in terminating the employee’s employment for just cause.
Best Practices for Performance Management
If an employer wants to rely on performance management to establish just cause for termination, it is essential that a performance management program be properly implemented. Here are some best practices for carrying out effective performance management:
- Provide a series of written warnings to the employee that include:
- expected performance standards – standards should be individually attainable (for example, the company’s overall financial performance would not be a reasonable standard);
- precise areas of performance that require improvement;
- exact deadlines by which the employee must meet the performance standards; and
- notice that the employee’s failure to meet the performance standards will result in termination of employment. This last part is absolutely essential. The employee must be aware that failure to meet the performance standards will place their job in jeopardy.
- Meet regularly with the employee to discuss their progress, but avoid micromanaging or checking in with the employee so frequently (more than once a week) that the employee feels harassed or attacked by management.
- Provide coaching, training, and strategies to support and help the employee. Ask the employee if they need any additional support.
- Document everything! This includes the dates of coaching and training sessions, and notes and documents from those sessions. It is important to retain performance evaluations, prior written warnings, and notes from meetings with the employee.
- Give employees a reasonable amount of time (a minimum of one month) to improve. Employers cannot require immediate improvement or terminate for cause if the employee is in the middle of a performance improvement plan.
- During the performance management process, the employee should not be demoted, whether that is by changing their position or reporting relationships, taking away their duties or responsibilities, or reducing their compensation. Disciplinary suspensions of non-unionized employees are uncommon; they are permitted only where there is an express term in the employment agreement allowing for disciplinary suspensions.
- If the employee’s performance improves, do not terminate the employee for just cause.
- Performance management can be a useful Human Resources tool to address performance issues in the workplace.
- Just cause is a high standard. Even when an employer follows all of the above steps, a court may still decide that termination for cause was not a proportionate or fair response to the employee’s shortcomings, and may find the employer did not have just cause to terminate the employee’s employment.
- Effective performance management is a time-consuming process. Given the time consuming nature of an effective performance management program, where an employer has a contract with a favourable without cause termination clause, the simpler (and less risky) approach may be to terminate the employee without cause and provide them with notice or pay in lieu of notice. Unlike with just cause, performance management is not required before terminating an employee without cause. Moreover, a without cause termination often reduces the risk of litigation.
Matthew Larsen is a partner, and Kristen Woo is an associate in the Labour, Employment and Human Rights practice group at the law firm Fasken. Fasken is one of Canada’s leading business law firms, with more than 700 lawyers, spread across 7 offices in Canada and 3 offices around the globe. More information can be found at www.fasken.com.
This column is intended to convey brief, timely, but only general information and does not constitute legal advice. Readers are encouraged to speak with legal counsel to understand how the general issues noted above apply to their particular circumstances.