How to Manage an Underperforming Employee: Where to Start

Abstract

This article is about a problem most managers face sooner or later: how to manage an underperforming employee. Three pieces of research bear on it. Four studies on managers' beliefs (Heslin, Latham and VandeWalle, 2005) found that people who believe attributes can change were more likely to notice both good and poor performance. A self-persuasion training shifted beliefs and increased the improvement that participants recognised. A review of about 35 years of goal-setting research (Locke and Latham, 2002) reports that specific, difficult goals generally lead to higher performance than "do your best". A study of 102 employees (Kinicki and colleagues, 2004) found that a chain of cognitive variables fully explained the link between receiving feedback and responding to it. These are associations and experiments in specific groups, not in finance teams. The three steps at the end are practical readings, not tested methods, and this article is not HR, legal or medical advice.

The analyst who missed two quarters

A senior analyst has missed targets for two quarters in a row. You have mentioned it twice, once in a corridor and once at the end of a one-to-one. HR now asks for a plan.

When you try to write one, you notice something uncomfortable. You stopped giving this person the interesting work some weeks ago. You are no longer sure what you would say if someone asked what has improved.

How to manage an underperforming employee: what the research says

The research cited here does not test a performance process. It describes what a manager's beliefs do to what the manager sees, what clear goals do to performance, and how employees respond to feedback over time. The studies were of mixed groups, and none was limited to finance. The next three sections cover what each one found. None of them tested the three steps at the end.

What four studies found about a manager's beliefs

Heslin, Latham and VandeWalle (2005) report four studies on implicit person theory, which is the belief about whether personal attributes such as personality and ability can change. People with a more incremental belief, that attributes can change, were more likely to recognise good performance relative to the behaviour they had first observed. They were also more likely to recognise poor performance. Their judgements were not anchored by first impressions of the employee.

In the fourth study, people who held fixed beliefs were randomly assigned to a self-persuasion training or to a placebo control. The training shifted their beliefs toward the incremental view, and the shift lasted over six weeks. Trained participants then recognised more improvement in employee performance than the placebo group. This is summarised from a repository abstract.

Read the analyst through this. A manager who believes that people can change may notice improvement that a manager with fixed beliefs does not see. This is an inference. The summary here is based on a repository abstract, the samples were not finance teams, and the studies do not say that beliefs alone decide the outcome.

What 35 years of goal-setting research found

Locke and Latham (2002) review about 35 years of research on goal-setting theory. They report that specific, difficult goals generally lead to higher performance than instructions to "do your best". Goals work by directing attention, increasing effort and sustaining persistence.

The review covers the factors that change the effect, including commitment to the goal, feedback and the complexity of the task. It also covers how goals relate to satisfaction, how goals mediate the effects of incentives, and where the theory has limits. This is summarised from the published abstract.

Read the two mentions in the corridor through this. "We need to see an improvement" is close to "do your best". A specific target with a date is the kind of goal the review is about. This is an inference. The review is of goal setting in general, and it does not address performance problems in particular.

What a study of 102 employees found about responding to feedback

Kinicki and colleagues (2004) tested whether a chain of cognitive variables explains how employees respond to performance feedback. They used a model of the feedback process by Ilgen, Fisher and Taylor (1979) as their framework. They surveyed 102 employees two weeks after their performance appraisals, and measured performance 11 months later, at the end of the review cycle.

The analysis supported the constructs and the relationships among them. The cognitive variables fully explained the link between receiving feedback and responding to it. This is summarised from the published abstract.

Read the analyst's reaction through this. What the person makes of the feedback may shape the response more than the feedback itself. This is an inference. The abstract summary used here does not name the variables, and the study did not test what a manager can do about them.

How to manage an underperforming employee: three steps

None of these is a tested method, and none was studied in finance teams. They combine what the research points to with ordinary practice. Where a step goes beyond the research, it says so.

1. Write the expected result in one sentence with a date, and ask the person to say it back. Make the target specific enough that both of you would agree whether it was met. Locke and Latham (2002) report that specific, difficult goals generally lead to higher performance than "do your best". This is an inference, and no study cited here tested this step. For instance: "By the fifth working day each month, every bank reconciliation is complete, with no unexplained item older than 30 days."

2. Check your own view with a list. Write down what has improved in the last four weeks, however small, and what you have stopped giving the person. Heslin and colleagues (2005) found that managers' beliefs about change affected what they noticed. This is a judgement, and no study cited here tested this step. For instance: "The accrual schedule was on time twice. Two queries were answered the same day. I have not asked for their view on the new template."

3. Agree dated check-ins with one specific question. Keep them short and regular, and keep notes you both can see. Kinicki and colleagues (2004) followed performance over a review cycle, and this step keeps the feedback and the response in view over time. This is a judgement, and no study cited here tested this step. For instance: "Every Friday at ten, five minutes: which items are open, which are blocked, and what do you need from me?"

If the first conversation is the hard part, How to Give Feedback to an Employee Who Gets Defensive is about that. For a structure to prepare with, there is Difficult Conversations: A Framework for Honest Communication. If you are deciding how much to direct and how much to ask, see Directive vs Empowering Leadership: When to Tell or Ask. When trust is part of the problem, How to Build Trust in a Team: What the Research Supports may help.

Questions People Ask

How do I know if it is skill, will or something else?

The studies cited here did not test a way to tell. Unclear goals, workload, health, personal circumstances and a poor fit with the role can all look like low performance from the outside. Asking the person, and checking the goal, are practical first steps.

Should I put them on a performance improvement plan?

The research cited here did not test performance plans. Follow your organisation's process, involve HR early, and keep your records factual. This article is not HR or legal advice.

How long should I give an underperforming employee?

The studies cited here did not test this. Kinicki and colleagues measured performance at the end of a review cycle, which describes their design and is not a recommended period.

Can coaching help me manage an underperforming employee?

Coaching is educational support for work patterns. It can help you notice what you expect, what you avoid saying and how you respond when progress is slow. It is not treatment and not HR advice. No study cited here tested coaching.

When it is more than underperformance

Low performance is one thing. It is more when it comes with signs of illness or distress, a bereavement, caring responsibilities, or a complaint about bullying or harassment. In those cases involve your HR team and occupational health before you go further, and if you are the one affected, talk to your doctor or a qualified mental health professional. This article is not HR, legal or medical advice. Coaching is educational support for work patterns. It is not treatment and not a substitute for it.

Sources

• Heslin, P. A., Latham, G. P., & VandeWalle, D. (2005). The effect of implicit person theory on performance appraisals. Journal of Applied Psychology, 90(5), 842–856. DOI: 10.1037/0021-9010.90.5.842 (Summarised from a repository abstract.)

• Kinicki, A. J., Prussia, G. E., Wu, B., & McKee-Ryan, F. M. (2004). A covariance structure analysis of employees' response to performance feedback. Journal of Applied Psychology, 89(6), 1057–1069. DOI: 10.1037/0021-9010.89.6.1057 (Summarised from the published abstract.)

• Locke, E. A., & Latham, G. P. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57(9), 705–717. DOI: 10.1037/0003-066X.57.9.705 (Summarised from the published abstract.)