Formally performance managing chronic underperformers

It is a common scenario for teams everywhere – one employee is a chronic underperformer and refuses to respond to persistent informal performance management or coaching. Do you think that employers and teams should have to conduct rigid and formal performance management periods to dismiss chronic underperformers?

In Mr Robert Etienne v FMG Personnel Services Pty Ltd [2017] FWC 1637, (“Etienne v FMG”), the FWC ‘stood up for common sense’ and rejected an applicant’s contention his dismissal was unfair because he had not been given formal warnings or a formal performance management period. Helpfully for employers and teams struggling with chronic underperformers, the Fair Work Commission (“FWC”) has recently ruled there may be no need for formal performance management periods following an informal performance management/coaching process.

What were the problems with Mr Etienne’s performance?

Mr Etienne:

• Persistently made transactional mistakes, and
• Consistently underperformed in the aspect of his role which required him to manage a relationship with a major client.

These mistakes often put the employer (FMG) at significant financial and commercial risk. For example, Mr Etienne’s:

• Underperformance when managing FMG’s relationship with a major client, led to the client refusing to communicate with him; and
• Recurrent mistakes when managing the Perth Inventory Box could lead to suppliers not being paid (which could lead to interest accruing against FMG, and inefficiencies as these mistakes had to be searched for and resolved).

How did the employer ‘informally performance manage’ Mr Etienne?

For 10 months, FMG attempted to improve Mr Etienne and explain his performance issues to him so that he could improve. Furthermore, that during a 10 month period, FMG was providing Etienne’s daily one-on-one coaching sessions on an informal basis. After a year of desperately trying to help Mr Etienne’s improve his performance, FMG concluded there was no way he had the attitude or ability to improve his performance.

After attempting to commence a formal performance management period (which MR Etienne claimed to have been shocked by) FMG terminated Etienne for persistent underperformance.

Why did the FWC uphold the dismissal?

The FWC noted that a formal performance management period would always assist an employer to have evidence showing coaching and performance management occurred. However, Deputy President Binet emphasised that so long as the informal performance management process and coaching could be proved, then “it need not occur in a formal…manner in order for an employer to rely on it as the basis for the termination [for] poor performance”. Accordingly, the following steps taken by FMG supported the decision to reject Mr Etienne’s application:

• FMG provided thorough on the job training when the ex-employee started in the role;
• FMG ensured Mr Etienne was “familiar” with company policies and procedures which were relevant to his role;
• FMG had taken reasonable steps to make Mr Etienne aware of his underperformance;
• FMG provided daily, one-on-one training sessions to Mr Etienne;
• FMG had done all that it could to help (including rearranging the seating in the office, so that Mr Etienne was seated next to the supervisor and could ask questions as required); and
• FMG was able to prove Mr Etienne’s ongoing underperformance put FMG at risk of significant financial and commercial risk.

What are the takeaway points for employers?

We consider the key ‘takeaway’ from Etienne v FMG is how to run an informal performance management period. This will involve:

• Providing thorough on the job training when the employee starts their position;
• Ensuring the employee is familiar with relevant company policies and procedures;
• Take steps to make the employee aware of his/her underperformance, why it is an issue, and how it can be made better in the future;
• Provide regular, periodic one-on-one coaching sessions (similar to the weekly meetings used in a formal performance management process); and
• Unlike FMG, don’t risk relying upon verbal evidence along – we recommend ensuring your informal management process is documented in file notes (such as a table recording dates and details when the employee is counselled about underperformance).

For straight forward advice on what informal performance management period is necessary for your particular employee, or ‘on the ground assistance’ performance managing chronic underperformers, please call Workplace Wizards on 0411 503 744.