A perspective on Performance Improvement Plans

Each year employers invest time and money to hold performance reviews and performance evaluations to assess the performance of the employee and not in the least to link an incentive to that score. An incentive can be for example a year-end performance bonus or a salary increase with the purpose of motivating the employee to meet the company goals and expectations and not least the employee’s personal performance goals. 

When the performance of the employee does not match the expectations and is lacking, the next steps of the Employer in terms of guidance and coaching depend on the specific circumstances of the case. In a ruling from 2019 (ECLI:NL:HR:2019:933) the Supreme Court of the Netherlands provided new perspectives that an employer should take into consideration when presenting the employee with a personal improvement plan. These can be summarized as follows:

• the nature, content, and level of the position;
• the education and experience of the employee;
• the nature and degree of the employee’s unsuitability;
• the duration of the inadequate performance from the moment the employee was informed of it;
• the length of the employment relationship;
• what has already been undertaken in the past to improve performance;
• the extent to which the employee is receptive to criticism and committed to improvement;
• the nature and size of the employer’s business.

Based on these aspects the Employer can agree upon a personal improvement plan with the employee tailored to the specific circumstances of the case.

In the case in which the Supreme Court ruled in 2019 the employee, a Management Consultant, performed well during the first three years of employment. In the fourth year the employee did not reach the sales target, and the employer discussed her performance and behavior at work. After two years of performance below expectations, the employer discussed specific issues with the employee and requested the employee to draft a personal improvement plan.  The employer found that the PIP lacked specific action on how the employee planned to reach the sales targets and how she planned to improve her performance based on the feedback she received. The Employer then decided to request the dissolution of the labor agreement based on disfunction and disrupted labor relationship. The first court granted the dissolution of the labor agreement, and in appeal the Appeals Court agreed, considering that it is incumbent on the employee to identify the areas in which the employee falls short and that the employee should contribute ideas on how improvement can be achieved and the timeframe to reach the goals as a means of improving the performance in the position of the employee, taking the relevant competencies into account. The Supreme Court ratified the decision of the Court of Appeal. 

The takeaway is that as an Employer, you can take necessary steps to guide an employee to improvement. But for positions that depend more on the performance of their tasks and responsibilities, it is very important to consider and include in this process the insight and introspection of the employee him- or herself on what is necessary for achieving the improvement.