Chapter 10
Managing Employee Performance
Author Chapter Notes
The focus of this chapter is on how to handle performance issues as they come up in the
workplace. While we do not discuss specific strategies for dealing with every situation,
this chapter presents a model to review performance issues in a fair manner. We will also
discuss progressive discipline and the importance of training managers on the discipline
process.
This chapter also discusses some employee rights. For example, we will introduce unions
in this chapter and also discuss privacy rights.
Section 1 Learning Objectives
1. Explain the type of performance issues that occur in the workplace, and the internal
and external reasons for poor performance.
2. Understand how to develop a process for handling employee performance issues.
3. Be able to discuss considerations for initiating layoffs or downsizing.
Section Notes
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Types of performance issues include:
o Constantly late or leaves early. While we know that flexible schedules
can provide a work-life balance, managing this flexible schedule is
key. Some employees may take advantage and, instead of working at
home, perform nonwork-related tasks instead.
o Too much time spent doing personal things at work. Most companies
have a policy about using a computer or phone for personal use. For
most companies, some personal use is fine, but it can become a
problem if someone doesn’t know where to draw the line.
o Inability to handle proprietary information. Many companies handle
important client and patient information. The ability to keep this
information private for the protection of others is important to the
success of the company.
o Family issues. Child-care issues, divorce, or other family challenges
can cause absenteeism, but also poor work quality. Absenteeism is
defined as a habitual pattern of not being at work.
o Drug and alcohol abuse. The US Department of Labor says that 40
percent of industrial fatalities and 47 percent of industrial injury can be
tied to alcohol consumption. The US Department of Labor estimates
that employees who use substances are 25–30 percent less productive
and miss work three times more often than non-abusing employees.
© Laura Portolese Dias 2011, published by Flat World Knowledge
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Please keep in mind that when we talk about substance abuse, we are
talking about not only illegal drugs but prescription drug abuse as well.
In fact, the National Institute on Drug Abuse says that 15.2 million
Americans have taken a prescription pain reliever, tranquilizer, or
sedative for nonmedical purposes at least once. Substance abuse can
cause obvious problems, such as tardiness and absenteeism and
nonperformance, but it can also result in accidents or other more
serious issues.
o Nonperforming. Sometimes employees are just not performing at their
peak. Some causes may include family or personal issues, but
oftentimes it can mean motivational issues or lack of tools and/or
ability to do their current job.
o Conflicts with management or other employees. While it is normal to
have the occasional conflict at work, some employees seem to have
more than the average owing to personality issues. Of course, this
affects an organization’s productivity.
o Theft. The numbers surrounding employee theft are staggering. The
American Marketing Association estimates $10 billion is lost annually
owing to employee theft, while the FBI estimates up to $150 billion
annually. Obviously, this is a serious employee problem that would
need to be addressed.
o Ethical breaches. The most commonly reported ethical breaches by
employees include lying, withholding information, abusive behavior,
and misreporting time or hours worked, according to a National
Business Ethics study. Sharing certain proprietary information when it
is against company policy and violating noncompete agreements are
also considered ethical violations. Many companies also have a
nonfraternization policy that restricts managers from socializing with
nonmanagement employees.
o Harassment. Engagement of sexual harassment, bullying, or other
types of harassment would be considered an issue to be dealt with
immediately and, depending on the severity, may result in immediate
termination.
o Employee conduct outside the workplace. Speaking poorly of the
organization on blogs or Facebook is an example of conduct occurring
outside the workplace that could violate company policy. Violating
specific company policies outside work could also result in
termination. For example, in 2010, thirteen Virgin Atlantic employees
were fired after posting criticisms about customers and joking about
the lack of safety on Virgin airplanes in a public Facebook group. In
another example, an NFL Indianapolis Colts cheerleader was fired
after racy Playboy promotional photos surfaced (before she became a
cheerleader) that showed her wearing only body paint.
There are internal and external factors that can influence performance. By
hiring the right person from the start, we can limit some of the internal factors.
o Career goals are not being met with the job.
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o There is conflict with other employees or the manager.
o The goals or expectations are not in line with the employee’s abilities.
o The employee views unfairness in the workplace.
o The employee manages time poorly.
o The employee is dissatisfied with the job.
External factors might include:
o Employees don’t have correct equipment or tools to perform their job.
o The job design is incorrect.
o External motivation factors are absent.
o There is a lack of management support.
o Employees skills and job are mismatched.
Discipline is defined as the process that corrects undesirable behavior. The
goal of a discipline process shouldn’t necessarily be to punish, but to help the
employee meet performance expectations. Guidelines on creation of rules and
organizational policies include:
o All rules or procedures should be in a written document.
o Rules should be related to safety and productivity of the organization.
o Rules should be written clearly, so no ambiguity occurs between
different managers.
o Supervisors, managers, and human resources should communicate
rules clearly in orientation, trainings, and via other methods.
o Rules should be revised periodically, as the organization’s needs
change.
o Performance appraisals provide rules and guidelines for a specific job.
Hence, this process is important in further defining the discipline
process.
The Performance issue model includes:
o Mandated issues are the most serious and must be addressed right
away. Sexual harassment might be an example.
o Single Incident is a situation that has happened once, but does not
appear to be a habit. These types of situations are best solved with a
conversation with the employee.
o Behavior Pattern sometimes occurs when a single incident isn’t
addressed immediately. A pattern refers to continued unacceptable
behavior.
o Persistent Pattern occurs after an employee has been corrected for a
behavior pattern, but the behavior continues. At this point, more
serious intervention might be necessary.
Managers should be trained on proper documentation of performance issues.
Documentation might include:
o Date of incident
o Time of incident
o Location (if applicable) of incident
o A description of the performance issue
o Notes on the discussion with the employee on the performance issue
o An improvement plan, if necessary
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o Next steps, should the employee commit the same infraction
o Signatures from both the manager and employee
Weingarten rights refers to the right of a unionized employee to have union
representation at the investigative interview.
The steps in the progressive discipline process include:
o First offense: Unofficial verbal warning. Counseling and restatement
of expectations.
o Second offense: Official written warning, documented in employee
file.
o Third offense: Second official warning, improvement plan (discussed
later) may be developed. Documented in employee file.
o Fourth offense: Possible suspension or other punishment, documented
in employee file.
o Fifth offense: Termination and/or alternative dispute resolution.
The seven steps of just cause are a good way to determine whether a proposed
disciplinary action is firmly and fairly grounded. They include notice,
reasonable rules and orders, investigation, fair investigation, proof, equal
treatment and penalty
ADR is when an unbiased third party looks at the facts in the case and tries to
help the parties come to an agreement.
Peer resolution system. In this type of system, a committee of management
and employees is formed to review employee complaints or discipline issues.
With mediation, the third party facilitates the resolution process, but the
results of the process are not binding for either party.
Step-review system: In this type of system, the performance issue is reviewed
by consecutively higher levels of management, should there be disagreement
by the employee in a discipline procedure.
Ombudsman System. In this system, a person is selected (or elected) to be the
designated individual for employees to go to should they have a complaint or
an issue with a discipline procedure.
Resignation means the employee chooses to leave the organization. First, if an
employee resigns, normally he or she will provide the manager with a formal
resignation e-mail. Then the HR professional usually schedules an exit
interview, which can consist of an informal confidential discussion as to why
the employee is leaving the organization.
With termination, different steps would be taken than in a resignation. First,
documentation is necessary, which should have occurred in the progressive
discipline process. Performance appraisals, performance improvement plans,
and any other performance warnings the employee received should be readily
available before meeting with the employee.
Absconding occurs when an employee stops showing up for work and does
not follow the proper procedure for resigning.
Rightsizing refers to the process of reducing the total size of employees to
save on costs and ultimately may result in layoffs.
Severance packages might include:
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o How the severance will be paid (i.e., lump sum or in x equal
increments)
o Which situations will pay a severance and which will not, for example,
if an employee is terminated for violation of a sexual harassment
policy, is a severance still paid?
o A formula for how severance will be paid based on work group, years
with the organization, etc.
o Legal documents, such as legal releases, noncompete agreements
o How accrued vacation and/or sick leave will be paid, if at all
Key Takeaways
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Performance issues in the workplace are common. Examples of
performance issues might include constant tardiness, too much time at
work handling personal issues, mishandling of proprietary
information, family issues, drug and alcohol problems,
nonperformance, theft, or conflicts in the workplace.
Employees choose to leave organizations for internal and external
reasons. Some of these may include a mismatch of career goals,
conflict, too high expectations, time-management issues, and
mismatch of job and skills.
HR professionals should develop a set of policies that deal with
performance issues in the workplace. The advantage of having such a
policy is that it can eliminate wrongful termination legal action.
A mandated issue is usually one that deals with safety or legal issues
that go beyond the workplace. An infringement of this type of issue
requires immediate attention.
A single incident may include a misstep of the employee, and he or she
should immediately be spoken with, to ensure it doesn’t happen again.
A behavior pattern occurs when an employee consistently exhibits a
performance issue. This type of issue should be discussed with the
employee and plans taken, such as more training, to ensure it does not
continue. A persistent pattern occurs when an employee consistently
exhibits a performance issue and does not improve, despite HR’s
talking with him or her.
At some point during the persistent pattern, disciplinary action will
likely need to be taken. It is important to develop consistent
procedures on how to record and handle disciplinary issues. Most
employers use a progressive discipline process to accomplish this
goal.
Employee separation occurs in one of three ways. First, the employee
resigns from the organization. Second, the employee is terminated for
performance issues, and third, an employee absconds. Absconds means
the employee abandons his or her job without submitting a formal
resignation.
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 In some cases, a severance package may be offered to the employee
upon his or her departure from the organization.
 Rightsizing is a term used when an organization must cut costs through
layoffs of employees. Development of criteria for layoffs,
communication, and severance package discussion are all parts of this
process.
Exercises and Solutions
1. What are some considerations before developing a severance package? What are
the advantages of offering a severance package to your departing employees?
Answer: Some considerations for severance include an overall policy on how
severance will be paid and how it will be calculated. The actual payment method,
such a lump sum or monthly payments should be determined also. The legal
aspects and legal documents the employee must sign should be developed. Also
determining how sick time and other PTO will be paid (if at all) should be
determined. Having a set plan before employees depart can ensure consistency,
create a “better” feeling about the employees departure and reward the employee
for their past contributions.
2. What are some common performance issues? What is HR’s role in handling these
issues?
Answer: HR’s role is to guide the manager through the discipline process, and if
necessary, be involved in the investigative interview. Common performance
issues (there are many) might include tardy, absences, drug abuse,
nonperformance due to incorrect skills for the job, inability to get along with
managers and co-workers.
3. What process should you use to initiate layoffs?
Answer: A systematic process should be developed to determine the criteria for
a layoff or downsize. If people are randomly chosen by their managers,
favoritism can be a problem. For example, criteria might include number of years
with the company or the last set of performance appraisals to determine who
should be laid off.
Extra Discussion Question
1. Why is progressive discipline process important to create? How does this
relate to the performance issue model discussed in this chapter?
Answer: Progressive discipline process development means that everyone in
the organization is on the same page. Having a set process and training
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managers on this process means every manager, regardless of department,
follows the same process. The model refers to progressive discipline process
in that it can serve as a starting point to developing the progressive discipline
process. By using it as a starting point, we can determine those issues which
are more serious and need to be addressed right away, versus those that should
use a progressive process.
Key Terms
discipline
The process that corrects undesirable behavior.
wrongful termination
When an employer has fired or laid off an employee for illegal reasons, such as violation
of antidiscrimination laws or violation of oral and/or written employee
agreements.
investigative interview
When a discipline procedure takes place, the interview with the employee is used to make
sure the employee is fully aware of the discipline issue and allows the employee
the opportunity to explain his or her side of the story.
Weingarten rights
Refers to a National Labor Relations Board case that went to the United States Supreme
Court in 1975, allowing for union representation during an investigative
interview.
progressive discipline process
Refers to a series of steps taking corrective action on nonperformance issues.
alternative dispute resolution (ADR)
A third-party resolution method used in conflict with the goal to obtain a resolution that
works for the two parties involved.
mediation
A type of ADR in which the third party facilitates the resolution process, but the results
of the process are not binding for either party.
arbitration
A type of ADR in which a third party reviews the case and imposes a resolution.
step-review system
A system in which a performance issue is reviewed by consecutively higher levels of
management, should there be disagreement by the employee in a discipline
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procedure.
peer resolution system
A system in which a committee of management and employees is formed to review
employee complaints or discipline issues.
ombudsman system
A system in which a person is selected (or elected) to be the designated individual for
employees to go to should they have a complaint or an issue with a discipline
procedure.
absconding
When an employee decides to leave the organization without resigning and following the
normal process.
resignation
When an employee chooses to leave the organization.
severance package
Includes pay, benefits, or other compensation to which employees are entitled when they
leave the organization.
rightsizing
Refers to the process of reducing the total size of employees, to ultimately save on costs.
Section 2 Learning Objectives
1. Be able to explain employee rights.
2. Define unions and explain their relation to the HRM function.
Section Notes
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Employment at will is the right of an employer to leave an organization at any
time without a specific cause.
Exceptions to employment-at-will include:
o Public policy exception. With a public policy exception, an employer
may not fire an employee if it would violate the individual state’s doctrine
or statute. For example, in Borse v. Piece Goods Shop in Pennsylvania, a
federal circuit court of appeals ruled that Pennsylvania law may protect atwill employees from being fired for refusing to take part in drug test
programs if the employee’s privacy is invaded. Borse contended that the
free speech provisions of the state and of the First Amendment protected
the refusal to participate. Some public policy exceptions occur when an
employee is fired for refusing to violate state or federal law.
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o Implied contract exception. In a breach of an implied contract, the
discharged employee can prove that the employer indicated that the
employee has job security. The indication does not need to be formally
written, only implied. In Wright v. Honda, an Ohio employee was
terminated but argued that the implied contract exception was relevant to
the employment-at-will doctrine. She was able to prove that in orientation,
Honda stressed to employees the importance of attendance and quality
work. She was also able to prove that the language in the associate
handbook implied job security: “the job security of each employee
depends upon doing your best on your job with the spirit of cooperation.”
Progress reports showing professional development further solidified her
case, as she had an implied contract that Honda had altered the
employment-at-will doctrine through its policies and actions.
o Good faith and fair dealing exception. In the good faith and fair dealing
exception, the discharged employee contends they were not treated fairly.
This exception to the employment-at-will doctrine is less common than the
first two. Examples might include firing or transferring of employees to
prevent them from collecting commissions, misleading employees about
promotions and pay increases, and taking extreme actions that would force
the employee to quit.
If an exception can be proven to employment-at-will, an employee may file a
wrongful discharge lawsuit.
Whistleblowing refers to an employee’s telling the public about ethical or legal
violations of their organization.
Constructive discharge means that an employee resigned but only because the
work conditions were intolerable.
WARN requires organizations with more than 100 employees to give employees
and the communities in which they operation at least 60 days notice in the case of
a closure or layoff that would affect 50 or more employees.
Privacy rights can include the legality of monitoring employee’s online activity.
It can also include the Patriot Act, in which requires organizations to provide
private employee information to the federal government when required. For drug
testing, the Health Insurance Portability and Accountability Act mandates the
privacy of health information.
A union is an organization of employees formed to bargain with an employer.
(more about unions will be discussed in Chapter 12).
The purpose of a union is to give collective bargaining power to a group of
individuals. For example, instead of one person negotiating salary, a union gives
people the power to bargain as a group, creating a shift from the traditional power
model.
It is illegal to threaten an employee if he/she is considering joining a union.
However, some talking points that do not violate the law might include:
o Less ability to deal more informally with the organization
o Possibility of strikes
o Payment of union dues by employee
o Emphasis on what positive aspects the employer has provided
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The collective bargaining process is the process of negotiating an agreement
between management and employees.
Key Takeaways
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The employment-at-will principle means that an employer can separate
from an employee without cause, and vice versa.
Even though we have employment at will, a wrongful discharge can occur
when there are violations of public policy, an employee has a contract
with an employer, or an employer does something outside the boundaries
of good faith.
Whistleblowing is when an employee notifies organizations of illegal or
unethical activity. Whistleblowers are protected from discharge due to
their activity.
A constructive discharge means the conditions are so poor that the
employee had no choice but to leave the organization.
The Worker Adjustment Retraining and Notification Act (WARN) is a law
that requires companies of one hundred or more employees to notify
employees and the community if fifty or more employees are to be laid
off.
A retaliatory discharge is one that occurs if an employer fires or lays off
an employee owing to a charge the employee filed. For example, if an
employee files a workers’ compensation claim and then is let go, this
could be a retaliatory discharge.
The privacy of employees is an issue that HR must address. It is prudent to
develop policies surrounding what type of monitoring may occur within an
organization. For example, some organizations monitor e-mail, computer
usage, and even postings on social network sites.
Drug testing is also a privacy issue, although in many industries requiring
safe working conditions, drug testing can be necessary to ensure the safety
of all employees.
A union is a group of workers who decide to work together toward a
collective bargaining agreement. This agreement allows workers to
negotiate as one, rather than as individuals.
The Wagner Act, passed in the 1935, addresses many issues related to
workers’ unionization.
The process of collective bargaining means to negotiate a contract
between management and workers. HR is generally part of this process.
Interest-based bargaining occurs when mutual interests are discussed,
rather than starting with a list of demands.
Once an agreement is reached, HR is generally responsible for knowing
the agreement and implementing any changes that should occur as a result
of the agreement. One such example is understanding the grievance
process.
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Exercises and Solutions
1. Perform an Internet search and find a union agreement. Discuss how the union
agreement handles terminations and grievances.
Answer: Answers will vary based on the collective bargaining contract the
student finds. Consider assigning this as a team exercise and have students
prepare a presentation on the major components of the union contract. This
can also be done as an in-class activity if you have Internet access in your
classroom and/or access to a computer lab. Common answers may include the
outlining of a process, how the grievance team is made up (i.e., mix of
managers and union representatives). Most union agreements will also outline
a progressive discipline process.
2. Compare and contrast the differences between a retaliatory discharge and a
constructive discharge.
Answer: A retaliatory discharge is one where the employee is let go because
of something they did—and the company tries to get back at them. For
example, a retaliatory discharge would be if a worker files workers
compensation claim and then was let go. A constructive discharge occurs
when an employee leaves the organization because the company or managers
has made it extremely difficult to work with the organization.
Extra Discussion Question
1. Prepare reasons for and against the following statement, “Employers do not have the
right to monitor employee e-mail and Internet usage.” Be prepared to present in class.
Answer: This can be done in a debate format as an in-class activity. Have one group
take the “no, employers do not have the right to monitor employee e-mail and Internet
usage” and one team take the yes side. Give the students 15 minutes to come up with
opening agreements. Then let each team have 2 minutes for opening arguments.
They will then go back into teams for 15 minutes to prepare rebuttal, then have 5
minutes to present their rebuttal. Have the class vote on the most compelling
arguments presented. In an online class format, this can be done via the discussion
board.
Key Terms
employment-at-will principle (EAW)
The right of an employer to fire an employee or an employee to leave an organization at
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any time, without any specific cause.
public policy exception
An exception to employment at will, in which an employer may not fire an employee if it
would violate the individual state’s doctrine or statute.
implied contract
An exception to employment at will in which the discharged employee can prove the
employer indicated that the employee has job security.
good faith and fair dealing exception
An employment-at-will exception in which the discharged employee contends that the
employee was not treated fairly.
wrongful discharge
Discharge as a result of discrimination, an implied contract between the employee and
employer, violation of public policy, or lack of good faith if there is a lack of
good faith and fair dealing in the firing.
whistleblowing
The practice of an employee’s telling the public about ethical or legal violations of his or
her organization.
constructive discharge
The resignation of an employee due to work conditions so intolerable that he or she had
no choice.
Worker Adjustment Retraining and Notification Act (WARN)
Requires organizations with more than one hundred employees to give employees and
their communities at least sixty days’ notice of closure or layoff that affects fifty
or more full-time employees.
retaliatory discharge
Punishment of an employee for engaging in a protected activity, such as filing a
discrimination charge or opposing illegal employer practices.
collective bargaining
The process of negotiating an agreement between management and employees.
Drug-Free Workplace Act of 1988
Requires that some federal contractors and all federal grantees agree they will provide a
drug-free workplace as a condition of obtaining a contract.
union
An organization of employees formed to bargin with an employer.
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interest-based bargaining
A type of bargaining in which mutual interests are brought up and discussed, rather than
each party coming to the table with a list of demands.
grievance process
A formal process by which employees can submit a complaint regarding something that
is not administered correctly in the contract.
Chapter Case
The Author discusses the case for Chapter 9:
http://blip.tv/play/sDyCsI4cAA
Additional Case Study Exercise
You are the marketing manager for a medium size firm. You supervise 15 people
who write advertising copy and develop marketing plans and strategies, including
management of the company Facebook page. One of your newest employees,
Catha, has been with the company for six months. While things started out well,
you have been hearing complaints from her coworkers that she does not follow
through on things she says she will do. For example, she was supposed to update
the Facebook page at a specific time of day to announce a contest. Because she
posted it several hours late, the contest did not receive as many responses as
expected. Because of her forgetfulness, it ends up creating more work for your
other employees, because they now feel like they need to constantly follow up
with Catha. You have spoken with Catha about this, who said personal problems
at home are creating issues. During the first warning, you mentioned the few
examples and Catha admitted she dropped the ball and promised to do better.
However, this warning seemed to only work for a few weeks, then you started
hearing complaints again about her poor follow-through.
1. What are the next steps you should take in the progressive discipline
process?
2. How would you council Catha to help her meet her commitments?
Answers: One option for this exercise is to ask students to get into teams and role
play this exercise with their proposed solutions. Possible solutions might include
a written warning to go in Catha’s file, then termination. However, focus on
possible coaching opportunity. Can you give her tools to help her be more
organized and less forgetful? Is she struggling with the job skills necessary? A
meeting to discuss this issue might be helpful in determining the root of the
problem. Remind students that the discipline process isn’t to punish, but should
give employees ample opportunities to correct behavior and can result in more
productive employees.
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Useful Outside Resources
The Human Resource Certification Institute: http://www.hrci.org/
Society for Human Resource Management: http://www.shrm.org/Pages/default.aspx
YouTube videos:
Options for corrective action:
http://www.youtube.com/watch?v=5AAQYuNFEfM
JoAnn Corley presents strategies to handle performance issues:
http://www.youtube.com/watch?v=YosUY92q01E&feature=related
An example of a termination process:
http://www.youtube.com/watch?v=mTILCAwG6Gs&feature=related
Negotiating Severance Packages (Bloomberg News):
http://www.youtube.com/watch?v=Tw9OHcGg_3A
Conducting Layoffs and Terminations:
http://www.youtube.com/watch?v=Sorz6N7WwXc
David Wolfskehol on Employee Layoffs:
http://www.youtube.com/watch?v=mcubKwVAvP0&feature=related
Employee’s personal problems and how to handle:
http://www.youtube.com/watch?v=Pb2HqdIi3PI
Progressive discipline process definition:
http://www.youtube.com/watch?v=PGrUmyG80-k
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