As published in Employment Today magazine
When it comes to performance management, many employers fall short of meeting their obligations, says Bridget Smith. She explains how to ensure that genuine performance concerns are not lost in a debate about the lawfulness of the process.
The law in relation to performance and, in particular, managing poor or non-performance within the workplace, isn't an area in which there have been significant recent developments. Indeed, the leading case is still widely regarded as being the 1993 decision of the Employment Court in Trotter v Telecom New Zealand Limited.
Many will be aware that the Court in that case held that non-specific feedback about poor or non-performance is insufficient and a fair and reasonable employer is required to provide feedback that makes it clear to the employee factors such as: what the issues are; what is required in order to improve performance; and to provide a reasonable period of time, or periods of time, in which to improve that performance.
But, despite the law being relatively settled, many employers still fall short of meeting their obligations. The most common mistake is moving pre-emptively to a direction to 'take the highway' (out of the organisation), forgetting the vital first part—the opportunity to improve the employee's performance and to achieve high performance, or at least adequate performance.
If asked, a high number of employers would undoubtedly answer that they are familiar with their obligations when managing poor or non-performance within the workplace. However, whether those actions would withstand scrutiny by the Employment Relations Authority or Employment Court is unfortunately often another matter. Databases are full of Authority determinations where an employer terminated an employee's employment on the basis of non-performance without giving an adequate opportunity to improve. This raises the question: how long is too long, and how long is long enough?
The standard of performance to avoid performance management or disciplinary consequences is an objectively reasonable standard of performance, as opposed to high performance. Whether the employee is performing at an objectively reasonable level will be a question of fact and the Authority or Court will generally allow the employer a certain amount of latitude in assessing that, provided the concerns are broadly reasonable. Instead, the Authority will focus on whether a fair process has been followed.
Opportunity to improve
The key thing to remember with performance management is that, unlike serious misconduct, an employee is entitled to an opportunity to improve—a chance to meet the employer's standards once they have been made aware of the issues of concern. Inherent in that is the requirement that the employee understands how they are not performing and what improvements are necessary to perform at the required level.
Unfortunately, the common law illustrates that many employers make their mistakes in performance management at the outset. While that isn't necessarily fatal to the process (as errors can often be corrected), it can make things more difficult—as getting off on the wrong foot often does. For example, if an employer moves straight to a disciplinary process without the initial lower level steps, an employee may form the view (correctly or incorrectly) that the employer has resolved to terminate their employment. Whether or not that is actually the case can become a moot point and, often, the genuine performance concerns can become lost in a debate about the lawfulness of the employer's process.
Where the employer has genuine concerns, the goal is to follow a process which deals with those in the lowest risk way possible.
It is somewhat of a truism to say that it is fundamental to any employment relationship that the Employment Relations Act 2000 specifies that the parties to the employment relationship must deal with each other in good faith.
Employers ought to be aware that the obligation of good faith requires the parties to, amongst other things, be responsive and communicative in their dealings with each other. What this means in practice is that where an employer has concerns about an employee's performance, those concerns ought to be raised with the employee informally in the first instance, to see if the issues can be resolved at a low level.
If that is not possible, the employee is entitled to be put on notice that low level informal performance counselling has not resulted in the desired improvement in performance and that the employer is now moving to a more formal performance management process. If there is further non-performance, it is likely to result in the employer commencing a formal disciplinary process.
Without that line in the sand being drawn (and all too frequently it isn't), the employee has no idea that the status quo in terms of low level informal performance counselling won't just continue. In fairness, if the situation has developed to the extent that disciplinary consequences are the next step, the employee is entitled to be put on notice of that.
Moving to a disciplinary process and implementing a performance improvement plan doesn't need to be complex or complicated. The obligations on an employer are, in fact, quite straightforward. The employee is entitled to know how their performance is falling short of expectations and what is necessary to improve to the required level. Importantly, the employee is also entitled to a reasonable opportunity to demonstrate an improvement in performance.
Expectations should be agreed with the employee, as should the timeframe for improvement. The employee should be offered additional training or support, if necessary. Again, it will be a question of fact whether such support is necessary and could assist the employee in improving his or her performance.
Most disciplinary processes follow a first warning, final warning, termination pattern, but any process should comply with any relevant policies or procedural obligations in place within the workplace. A quick check of the relevant documents (employee's employment agreement and any policy or procedure documents) is a must before commencing any process as that is the standard the employer is required to comply with.
Managing poor or non-performance is important within the workplace as a non-performing employee can have a wide-ranging impact on his or her colleagues. The worst case scenario is employee dissatisfaction, when other employees feel they have to work harder to cover for a colleague or that the expectations on them are greater. No one wants to feel like they're being paid the same, or worse still paid less, to work harder or better.
Equally, employees expect and indeed are entitled to an opportunity to improve their performance. Performance issues may be circumstance specific—a dip in performance caused by outside factors—or it may be a case where the employee simply isn't up to the task. Either way, the issues should be able to be effectively addressed, at low risk to the organisation.
The message to the employee is that the employer has a business to run and requires employees to operate at a certain level in order to support that. If the employee isn't doing that, for whatever reason, they will be given an opportunity to meet those standards, but they ought to be clear. If they can't meet the standards, they may not be able to continue in their role.