Performance Management Guide

  1. What is Performance Management? (1)
  2. What is Performance Management? (2)
  3. What is Performance Management? (3)
  4. Why Performance Manage?
  5. Performance Management Cycle (1)
  6. Performance Management Cycle (2)
  7. Performance Management – Legal Framework (1)
  8. Performance Management – Legal Framework (2)
  9. Performance Management – Legal Framework (3)
  10. Performance Management – In Practice
  11. Performance Management Procedure (1)
  12. Performance Management Procedure (2)
  13. Performance Management Procedure (3)
  14. Performance Management Procedure (4)
  15. Performance Management Procedure (5)
  16. Performance Management Procedure (6)
  17. Performance Management Procedure (7)
  18. Performance Management – Appendix 1

What is Performance Management? (1)

Q. What is “Performance Management”?

A. ‘a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved’. It is ‘a strategy which relates to every activity of the organisation set in the context of its human resource policies, culture, style and communications systems. The nature of the strategy depends on the organisational context and can vary from organisation to organisation’

ARMSTRONG, M. and BARON, A. (2004) Managing performance: performance management in action.

What is Performance Management? (2)

It should be:

  1. Strategic – the broader issues and longer-term goals
  2. Integrated – it should link the business, people management, individuals and teams
  3. Continuous – not just when poor performance occurs

It should incorporate:

  1. Performance improvement – throughout the organisation, for individual, team and organisational effectiveness
  2. Development – unless there is continuous development of individuals and teams, performance will not improve
  3. Managing behaviour – ensuring that individuals are encouraged to behave in a way that allows and fosters better working relationships

What is Performance Management? (3)

PM is a tool to ensure that managers manage effectively by ensuring their teams:

  • Know and understand the business’ objectives
  • Know and understand what is expected of them
  • Know how their role fits with the business
  • Have the skills to deliver on these expectations
  • Are supported by the organisation to develop the capacity to meet these expectations
  • Have the opportunity to discuss and contribute to individual and team aims and objectives
  • Accept responsibility for (their) improvement
  • Know what happens if they fail

Why Performance Manage?

The costs to the company of under performance:

  • Poor performance:
    • lost time/profits, etc
    • management time in PM procedures
  • Under utilisation/over-staffing
  • De-motivation of failure:
    • for the individual; and
    • for others

Performance Management Cycle (1)


Performance Management Cycle (2)


  • The PM process may not work; and/or
  • The employee is nevertheless still not up to standard

It is at that stage that a formal disciplinary or performance procedure is used to remedy the poor performance

First question: is it “capability” or is it “conduct”?

  • Poor performance can be either be because of:
    • effort; or
    • skills and ability

The potentially fair reason:

  • (Mis-)conduct is for deliberate lack of effort
  • SOSR for poor relationships with colleagues
  • Capability (as distinct from qualifications) is for lack of skills and ability

Unless there is wilful poor performance the procedure to follow (in a disciplinary/capability procedure) is the same. We will look at capability.

Unfair Dismissal

  • Capability is one of five potentially fair reasons (s98 ERA)
  • Assessed in relation to “skill, aptitude, health or any other physical or mental quality”
  • (s98(3)(a), ERA)
  • Capability therefore covers 1) performance, 2) health
  • Only “potentially fair” >> Will depend on:
    • (a) whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably in treating it as a sufficient reason for dismissing the employee, and
    • (b) shall be determined in accordance with “equity and the substantial merits of the case”
  • So how does this translate into practice?
  1. Employer must establish the reason for dismissal (evidence of poor performance required) and a reasonable belief in the employee’s incompetence.
  2. The ET must decide whether the employer’s decision to dismiss the employee fell within the band of reasonable responses that a reasonable employer in those circumstances and in that business might have adopted (Iceland Frozen Foods Ltd v Jones [1993] ICR 17).
  3. This should not involve the tribunal substituting its view for that of the employer (Foley v Post Office; Midland Bank plc v Madden [2000] IRLR 82).

Performance Management – In Practice

Overview of capability procedure (incorporates ACAS Code)

  • Informal support and coaching
  • Oral warning
  • Formal procedure
  • Improvement or written warnings (ACAS recommends at least two)?
  • Improvement, alternatives to dismissal or dismissal (Iceland Frozen Foods)?

Performance Management Procedure (1)


  • Invite, with notice, to a formal performance meeting
  • Explain the process is now formal
  • Purpose – to address [the specific] performance concerns
  • Right to be accompanied
  • Warn of risk of dismissal

Performance Management Procedure (2)

1st Meeting

  • Explain why performance is unsatisfactory (will follow-on from informal meetings)
  • Ask why performance hasn’t improved (despite oral warning)
  • Explain what is required
    • Objective (SMART – see Appendix 1); and
    • Process (including potential consequences)
  • Discuss training/support
  • Confirm in writing and monitor until next meeting on []

Performance Management Procedure (3)

2nd Meeting

  • Review process and assess progress
  • Consult over perceived/actual performance against objectives
  • Options
    • new/revised objectives (up or down)
    • training
    • redeployment/demotion
    • written warning
  • Confirm in writing and monitor until next meeting on []

Performance Management Procedure (4)

Subsequent meetings

  • Review process and assess progress
  • Options
    • new/revised objectives (up/down)
    • training
    • redeployment/demotion
    • written/final written warning
    • dismissal on notice
  • Confirm in writing [and monitor until next meeting on []

Performance Management Procedure (5)

Decision to dismiss

  • Warnings and dismissal will be assessed against “band of reasonable responses”
  • Factors that a Performance Management process will be assessed on:
    • Clear explanation of what was required
    • Clear explanation of the consequences of failure
    • Offering an opportunity and support to improve
    • The real reason for dismissal
    • Consistency

Performance Management Procedure (6)

Day to day

  • Effective use of probationary periods (new employees/new roles)
  • Two year UD qualifying service
  • Longer formal warnings (e.g. 12 months)
  • (Bi-) annual appraisals with SMART objectives
  • Monthly reviews on progress – recorded (either meeting notes or email)
  • Continuous appraisal
  • Training for managers
  • PM as an objective in managers’ performance
  • Consider transferability
  • Good recruitment
  • Management buy-in
  • Settlement Agreements

Performance Management Procedure (7)

Is performance the real issue?

  • Ill-health/disability
  • Childcare/caring responsibilities
  • Wrong skill-set
  • Stress
  • Poor management
  • Harassment/bullying

Performance Management – Appendix 1

Appendix 1 – Objectives

  • Specific
  • Measure
  • Achievable
  • Relevant
  • Time bound

This publication is intended for general summary guidance. It is not and should not be considered legal advice. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.