Great Lakes Wire

Performance Improvement Plans (PIPs) are increasingly being used by companies, not only as a means to help employees improve but also as a strategic tool for workforce reduction. Originally designed to offer structured opportunities for improvement, PIPs have been criticized for serving as a mechanism to prepare employees for termination while protecting companies from potential lawsuits.

A PIP typically involves setting specific goals that an employee must achieve within a set timeframe, usually between 30 to 90 days. If the employee fails to meet these requirements, termination often follows. While some view PIPs as fair opportunities for employees to address performance issues, others see them as mere formalities that justify firing.

The use of PIPs and similar performance measures has increased significantly. According to HR Acuity, in 2020, 33.4 out of every 1,000 workers faced documented performance issues; by 2023, this number rose to 43.6. This increase is attributed to economic pressures, post-pandemic corrections, and the demand for efficiency driven by artificial intelligence advancements.

During the pandemic, many companies relaxed performance standards to fill positions quickly. Now, they are reassessing their workforce and often finding employees unfit for evolving roles.

Supporters argue that PIPs provide transparency and consistency while offering a roadmap for improvement. However, some employees report feeling blindsided by unclear expectations or perceive the process as setting them up for failure. Patrick McGah, a former research scientist at Amazon’s drone division, described being placed on a PIP without clear guidance on how to improve.

Legally, PIPs serve as protection for companies by creating a documented trail of efforts made to improve employee performance—valuable in defending against wrongful termination claims. It is crucial that PIPs are not pretextual and genuinely offer paths toward improvement.

Some tech companies are bypassing traditional PIPs altogether by giving employees two options: commit to a PIP or accept a severance package—a method gaining popularity due to its ability to avoid prolonged stress and allow both parties to part ways amicably.

Alternatively, other firms prefer real-time feedback over formal plans. Regular conversations with clear goals can address performance issues without damaging trust.

Ultimately, whether PIPs serve as genuine opportunities for improvement or preludes to dismissal depends on their implementation. Employees need strategies either way—whether staying or moving on—and companies must balance fairness with workforce management realities.

Mary E. Corrado contributed this article courtesy of SBAM-approved partner ASE.