Performance Improvement Plans: Tools for Growth or the Firing Squad?

Right or wrong, Performance Improvement Plans (PIPs) are gaining traction—not necessarily as a pathway for employee growth but as a strategic tool for reducing headcount. Though intended to provide structured opportunities for improvement, PIPs are often criticized as thinly veiled mechanisms to prepare employees for termination while shielding companies from potential lawsuits.

What Is a PIP?

A Performance Improvement Plan typically involves a detailed list of goals that an employee must achieve within a set timeframe, often 30 to 90 days. These goals are frequently challenging and designed to address specific performance shortcomings. If the employee fails to meet the requirements, termination usually follows.

While some argue that PIPs are a fair chance for employees to rectify performance issues, critics view them as a formality to justify firing.

The Rising Use of PIPs

Data shows a marked increase in the use of PIPs and similar performance measures. In 2020, for every 1,000 workers, 33.4 faced documented performance issues. By 2023, that number rose to 43.6, according to HR Acuity. This uptick reflects economic pressures, post-pandemic corrections, and the growing demand for efficiency in the age of artificial intelligence.

During the pandemic, many companies relaxed performance standards to fill positions quickly. Now, these same organizations are re-evaluating their workforce, often finding employees unfit for evolving roles.

Are PIPs Fair or a Firing Tool?

Supporters of PIPs claim they provide transparency, consistency, and a roadmap for improvement. Yet, stories from employees suggest otherwise. Many feel blindsided by unclear expectations or see the PIP process as a setup for inevitable failure.

Patrick McGah, a former research scientist at Amazon’s drone division, described being placed on a PIP without clear guidance on improvement.

From a legal perspective, PIPs protect companies. They create a documented trail of efforts to improve employee performance, a valuable shield against wrongful termination claims. If using a PIP, it should not be pretextual and should indeed offer a path to improvement.

Alternatives to PIPs

Some companies, particularly in tech, bypass the traditional PIP process altogether. Instead, they offer employees two options: commit to a PIP or accept a severance package. This approach is gaining popularity because it avoids the prolonged stress of a PIP and allows both parties to move on amicably.

Perhaps a more favorable approach, other firms favor real-time feedback over formal plans. Regular conversations and clear, actionable goals can address performance issues without eroding trust.

The Bottom Line

Whether PIPs are a genuine chance for improvement or a tactical prelude to dismissal depends on how they are implemented. For employees, understanding the nature of the PIP and having a strategy—whether to stay or move on—is key to navigating this challenging situation. For companies, the challenge lies in balancing fairness with the realities of workforce management.

Does your organization utilize PIPs? What has your experience been? Email me at mcorrado@aseonline.org.

By Mary E. Corrado, courtesy of SBAM-approved partner, ASE.

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