Employee Underperformance: The Employer Should Work on Improvement

Payroll & HR | 16.04.2024

by Azets Finland

With an employment contract, the employee and employer commit to certain obligations mutually. Usually, things go quite smoothly. But what if the employee’s work performance does not meet the agreed-upon standards? This could be a case of underperformance.

The Finnish Employment Contracts Act does not directly address underperformance. But the employer should be aware that the Employment Contracts Act states that they are responsible for ensuring that the employee can perform his duties even when the company’s operations, the work to be done, or work methods are changed or developed.

The causes of underperformance must therefore be identified and then considered, for example, what kind of methods can be used to improve performance and in which situation expert help is needed. It is especially important to remember that, according to the law, an employee cannot simply be dismissed without warning.

What is underperformance?

Underperformance ultimately means that the employee’s work contribution does not quantitatively or qualitatively match what can be considered agreed upon. Technically, the matter is this simple. But what about in practice? Underperformance can be that a person deliberately performs poorly and, on the other hand, that the employee produces poor results unintentionally, even though they try their best.

The causes of underperformance must be identified

Basically, people want to succeed in their work and receive good feedback. Initially, expectations often meet, but tasks can change over time so that the employee no longer has a clear picture of what is expected of them.

Other factors affecting underperformance include, for example, challenges can be too few or too many, the significance of organizational changes has remained unclear to the employee, and the task no longer meets the person’s development wishes. But perhaps one of the most difficult situations is when a person just loses their motivation, but there is no clear reason for it.

 If poor performance is due to a lack of competence, competence is sought to be improved by offering the employee support through increased guidance, induction, instructions, and if necessary, training.

However, if a person deliberately performs poorly (does not bother, is not motivated), their performance should be managed with an intensified performance management process.

What underperformance is not?

  • Sudden life changes
  • Excessive workload
  • Inadequate resources
  • Changed working environment
  • Acknowledging incompetence and seeking help
  • Decreased performance due to inappropriate behaviour or harassment.

Underperformance is not synonymous with mistakes or a decline in the quality of work. Before addressing an employee's actions, it's essential to evaluate the problem and consider various factors that may contribute to it. Work quality can sometimes decline due to illness, burnout, or other significant life changes. If there's a suspicion of decreased work capacity, the employer should guide the employee to occupational health services.

How to handle underperformance?

Managers may find it challenging to address underperformance, often due to kindness, caution, or subtlety. However, it's crucial to resolve the issue, as even one employee's underperformance can impact the entire team's productivity and jeopardize the company's future. The manager's role is to help the employee regain their focus—by pausing, listening, guiding, and providing positive feedback.

Addressing underperformance is essential not only for the employer but also for the employee, as people fundamentally want to succeed in their work and receive positive feedback. Additionally, trust in leadership and the workplace deteriorates if the supervisor does not intervene.

1. Giving Feedback

The significance of feedback in performance management is crucial, and feedback discussions can be categorized into two levels:

 Daily feedback as part of daily management: In practice, this involves interacting with the employee—greeting them, exchanging pleasantries, inquiring about tasks and the work environment, appreciating even small accomplishments, and observing changes in behaviour.

 Initiating a conversation: When daily feedback doesn't yield results, it's time to initiate a conversation. The catalyst for these feedback discussions may be a perceived emerging issue or changes in the employee's work compared to the past, such as frequent absences or declining work efficiency.

Successful feedback discussions begin with preparation and good timing: Before the meeting, take a step back and consider why you are having the discussion and what you aim to achieve. Start the conversation by asking about their well-being or directly expressing concern. Create a safe and confidential atmosphere during the discussion. Be present, listen to the employee, and ask clarifying questions. Collaboratively think about solutions.

2. Instructions and Training

Instructions and training are paramount when underperformance is mainly due to the employee not knowing what is expected of them or lacking necessary skills. It's crucial to note that instructions should be consistent for everyone, with minimal personal differences among supervisors. Additionally, adherence to instructions should be reasonably monitored, and there should be a justifiable reason for deviations.

3. Reorganizing Tasks

Reorganizing tasks or even assigning entirely new responsibilities is a viable solution. This change can be implemented through mutual agreement with the employee, or in extreme cases, it may become a justification for termination. In such cases, the employer has an obligation to explore whether there are alternative positions available within the organization.

4. Written Warning

Persistent underperformance can be considered a breach of contract, where the employee fails to fulfil their part of the employment agreement. In such cases, it may be necessary to consider issuing a written warning. This becomes particularly relevant when the cause of underperformance is the employee's inadequate motivation to perform their duties. A written warning should clearly state that if the problems persist, the employer may decide to terminate the employment.

5. Performance Improvement Process (PIP)

After issuing a written warning to an employee, it is essential to monitor their performance and provide necessary assistance and support, especially if the underperformance is due to the employee's inadequate skills. In smaller companies, such a specific process is often not separately designed. In larger corporations, particularly those operating internationally, the term PIP, or Performance Improvement Process, may be used, or some other designation.

PIP usually implies that the company has a clear monitoring model. After issuing the warning or even before, the employee is typically engaged in:

  • Identifying the problems that have arisen.
  • Discussing the employer's expectations for the employee's future performance.
  • Specifying concrete actions expected from the employee (e.g., regular reporting).
  • Defining a timeline within which the employee should achieve improved performance.

A warning is usually appropriate when implementing PIP, even if the issue is not a lack of motivation on the part of the employee. This is because individual-based termination without warning is a rather complex process in Finland. The threshold for issuing a warning is significantly higher when dealing with an employee's inadequate motivation.

6. Termination Based on Underperformance

Termination should never be the first time an employee learns that the employer is dissatisfied with their performance. Even prior to dismissal during the trial period, the employer should always engage in a discussion with the employee before resorting to more severe sanctions.

Sometimes problems persist even after addressing them appropriately with the employee and implementing all possible measures to improve performance. In such cases, the employer may need to consider terminating the employment.

It's crucial to emphasize that termination based on underperformance is an individual-based termination under Section 2 of Chapter 7 of the Employment Contracts Act. This should not be confused with a situation where the employer can no longer offer work to the employee, which constitutes an economic, production-related, or organizational restructuring termination under Section 3 of Chapter 7 of the Employment Contracts Act.

Terminating employment based on underperformance is perhaps the most challenging form of individual-based termination. Therefore, it should never be done without consulting an expert. The costs of an unlawful termination can be substantial for the employer.

When an employer considers termination based on underperformance, several factors need to be considered:

  • Are the goals reasonable?
  • Can the employee's performance be reliably compared to that of other employees?
  • Has the employee received adequate support after receiving a warning?
  • Has the monitoring period been sufficient for the employee to genuinely demonstrate improvement potential?
  • What kind of written evidence can the employer gather (e.g., meeting minutes, reports)?
  • Could the employer offer alternative employment as an alternative to termination?

If, because of this consideration, the employer decides on termination, it should be carried out within a reasonable time after the given period for the employee to improve their performance has elapsed. One month can be considered a good "rule of thumb."

Preventing the risk of underperformance begins with high-quality recruitment

Thoroughly crafted job descriptions, roles, and responsibilities clarify the employer's and the applicant's expectations and needs. Developing recruitment processes with the support of our HR consultants is crucial.

When providing the applicant with an open and truthful overview, not only of the position but also of the organization, culture, and expectations towards the employee, the job is more likely to align with the applicant's skills, potential for development, and interests. After the employment begins, thorough onboarding ensures that the employee understands the tasks, goals, and expectations clearly.

This approach reduces the risk of underperformance and establishes a strong foundation for a successful employment relationship. It is also crucial to maintain ongoing communication and clear dialogue with the employee throughout the employment to detect potential issues early on and address them appropriately. This way, alignment between the employee's and employer's expectations is maintained, and uncertainties that could lead to underperformance are avoided.

Should you have questions or need support, our experts in employment law, recruitment, and management can assist in resolving even the most challenging situations.

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