The importance of performance management processes
When selecting for redundancy, if an employer wants to rely on performance as a criterion for selection, they will need to have robust performance management and appraisal processes in place, and adequate paperwork documenting performance ratings, in order to avoid claims for unfair dismissal.
It's a rare manager who doesn't have to deal with capability issues at some stage. The temptation is often to bury your head in the sand and ignore an employees shortcomings until matters come to a head. Managers may be reluctant to deliver criticism on a face-to-face basis, perhaps because of a fear that the employee might react badly, become defensive or even respond negatively to the whole process of appraisal. This approach, however, leaves employers poorly placed to defend subsequent employment tribunal claims. Training for management and human resources officers is essential to ensure that internal procedures and legal minimum standards are understood and applied. Getting it wrong could expose the company to a number of employment claims with potentially serious financial consequences.
How can employers set performance standards?
The key to successful performance management is recognising that it's about people. In essence, it involves getting the best from employees. Employees who are informed of the standards of performance which are expected of them will have a clear understanding of the goals they must achieve. This clearly Benefits both employee and employer.
Employers can put in place a number of measures to reduce the risk of poor performance occurring. These include:
- rigorous and well-thought-out recruitment and promotion procedures and criteria which focus on the qualities, skills or qualifications which the successful candidate will need to do the job
- employees should be issued with job descriptions which make it clear what will be required of them in the role
- the use of induction programmes to ensure that employees have the knowledge and skills (particularly IT skills) which they need and know who to talk to if they need training or guidance
- employers can consider using probationary periods to identify potential problems at an early stage
- employers should keep training under review to ensure that it is meeting the needs of the organisation
- regular and well-documented appraisals will help to identify problems before they become serious, enable performance issues to be tackled in a constructive manner, and provide a paper trail for subsequent management decisions on pay, promotion, discipline and dismissal.
Consequences of failing to manage performance
Aside from the obvious costs to the business arising from employing under-performing staff, and the effect on morale of other employees who may feel they are having to 'carry' less able colleagues, there will usually come a time at which an employer will reach the end of the line with an under-performing employee and wish to terminate their employment. This may be due to the poor performance itself, or due to redundancy.
Where poor performance is identified, employers must have an effective strategy in place for managing it. It's particularly important for employers to recognise and be able to distinguish between poor performance due to conduct issues (the employee who is unwilling to perform to the required standards) and poor performance due to capability issues (the employee who is unable to perform to the required standards, whether as a result of incapacity, lack of training or lack of qualifications).
Misconduct is usually far more straightforward to deal with than capability. A one-size-fits-all disciplinary policy is unlikely to be inappropriate. Employers should have separate policies for dealing with misconduct and poor performance. Where an employer disciplines or dismisses an employee due to poor performance, the employer may potentially face unfair dismissal or discrimination claims.
What constitutes 'fair' dismissal?
Capability is a potentially fair reason for dismissal. Notwithstanding this, employers are still required to act reasonably in all the circumstances. This means that the employer must follow a fair procedure before dismissing.
In a redundancy situation, if an employer wishes to rely on poor performance as a criterion for selection, the employer will need to be able to show that poor performance had been properly identified.
Effective performance management procedures
An effective performance management policy should incorporate both informal and formal procedures for dealing with poor performance. The informal stage could, for example, involve an informal discussion with the employee's line manager. In contrast, the formal stage should include steps to:
- inform the employee of the concerns about their performance
- identify any reasons for the employee's poor performance, including any training required
- warn the employee that improvement is required and the timescale within which that improvement is required. The warning should state for how long it will remain 'live'. It should also warn the employee of the possible consequences of continued poor performance, including the possibility of dismissal or other penalty.
What does performance management policy look like?
An employer's performance management policy should also take into account the revised ACAS Code of Practice on Disciplinary and Grievance Procedures, which replaced the statutory discipline and dismissal procedures in April 2009. It applies to both misconduct and poor performance situations, and is clear that, where an employer has a separate capability procedure, the basic principles of fairness should still be followed.
- raising and dealing with issues promptly
- acting consistently
- carrying out any necessary investigations
- informing an employee of the complaint against them and providing them with an opportunity to state their case
- allowing an employee to be accompanied at any formal hearing
- allowing an employee to appeal any decision made.
It's not just issues of unfair dismissal which should concern a company. Other, potentially more serious claims, can also arise out of a failure to manage performance properly and effectively. A failure to carry out regular appraisals by trained managers exposes the company to equal pay claims, and claims for discrimination with potentially unlimited compensation.
It's essential that a company is clear about the reasons it has for managing performance in a particular way, including decisions relating to promotions and pay rises, and that it has a genuine business reason for taking the decisions made.
Where an employee is having difficulty performing to the required standard due to health issues, whether as a result of frequent absence or physical or mental difficulty in performing certain tasks, it is important for the employer to consider whether the employee may have a disability under the Disability Discrimination Act 1995.
A disability is defined as a physical or mental impairment which has a substantial long-term adverse effect on the person's ability to carry out normal day-to-day activities. If the employee has a disability, and there are aspects of the employee's working conditions which put them at a disadvantage, the employer will be under a duty to make such adjustments as are reasonable to ameliorate that disadvantage.
What does an effective appraisal look like?
The main purpose of an appraisal procedure is to assist employees to improve their performance. The appraisal should be designed to include some or all of the following elements:
- a review of the employee's past performance
- discussion of the employee's strengths and weaknesses
- discussion of any problems and constraints, with a view to identifying solutions
- a review of the extent to which the employee has achieved set targets
- discussion of appropriate targets for the forthcoming year
- identification of training and development needs in relation to the employee's current job
- identification of training and development needs in relation to a job that the employee may do in the future
- a review of the employee's long-term potential.
If appraisal is linked to the organisation's pay review process, discussions may become focused on pay instead of performance. Pay reviews are therefore best kept separate from performance appraisals. The line manager may be tempted to use the appraisal interview to raise disciplinary matters. If there is a problem with an employee's conduct or performance, the matter should be raised with the employee at the time the problem arises, and not stored up for the annual appraisal interview.
However, good feedback, including the giving of constructive criticism, is essential to an employee's development and is a fundamental element of effective appraisal interviews.