PIPs: How and why to hate them | Part 2 of 3
PIPs: How and why to hate them | Part 2 of 3
Learn the surprising ways that performance improvement plans (PIPs) are used in big company culture. Here's how they work, even when they don't.
Note: I am not a lawyer. This is not legal advice. Consult an employment attorney for advice relevant to your situation.
This is the second in a three part series. In How to Fire Anyone I described how firings can be conducted with care and compassion. In the last piece coming next week, I’ll describe how employees can avoid PIPs by building their own paper trail of value.
Everybody is talking about layoffs. Companies use them to reduce headcount, helping them meet financial goals. Attrition targets (aka “firing quotas”) are also a tactic employed by some companies to trim the lowest-performing tranche of workers. Many find this practice unsavory, but it’s common throughout the big tech world.
In the US, employment laws are complicated. It’s easy to end up in an expensive legal battle over what seems like a simple termination. To avoid this, employers have guardrails that help manage legal liability. An old familiar tool is used in a surprising way. That’s the PIP – Performance Improvement Plan.
It’s a friendly-sounding term for an unpleasant bit of business. The PIP is a process that provides a framework that managers use to fire people for reasons ostensibly related to their job performance. I’m going to describe how it often works. If you’re not already familiar with it, it’s may sound a little gross. It’s extraordinarily common. Even in boom times, it happens every day.
To add some unnecessary spice to an already unpleasant occurrence, PIPs are often sprung with an element of surprise. Workers are sometimes stunned to learn they are just one step away from termination. The process usually calls for some kind of “shape up” warning to be given first.
Depending on the company, that warning may not have a prescribed form. A manager might feel the warning was implicit in feedback or a performance review. The employee might feel the warning wasn’t made clear. From the manager’s perspective, the employee’s failure to take a written warning seriously often precedes a PIP.
For some, the only other warning they get is the appearance of a manager with an HR person in tow. Next thing they know, they’re swimming in bad news.
The details of the process vary widely. They are all necessarily a bit grim. A worker might be told they’re being given a chance to improve. The plan could include the offer of a severance payment if they “voluntarily” end their employment (meaning they resign) today.
If they try to ride out the plan but fail to make the grade, they’ll be terminated. They might still collect a smaller severance payment, or maybe none at all.
If they choose to work through a PIP and are able to improve enough to meet the requirements set out in the plan, they might keep their job (this article says 5%-10% who try are successful.) If they try but fail, at least one company gives a “last chance” to plead your case in front of a panel of peers or managers.
In the “FAANG” Big Tech world, PIPs are written for an incredibly large number of employees every year. The data are spotty, and reports give wildly contradictory accounts. According to a career newsletter, one big company pipped 10% of their corporate employees in a recent year. Another report estimated a third of PIPs will eventually end in separation.
Based on that data, the annual crop of dismissed workers just from one company supplies enough people to replace Netflix’s entire workforce. FAANG companies in aggregate probably pipped enough people last year to staff an entire Google.
That’s just from PIPs. It does not include layoffs.
What if I’m Pipped?
Implicit in the name is the promise that the employer wants your performance to improve. But this might not always be the case. Some have described PIPs being used by managers to eliminate employees they simply don’t want on their team.
Traditionally, PIPs have been used by managers to encourage employees to focus on improving their performance. A conscientious manager engages earnestly with each employee, diligently committing themselves to the worker’s future success. A dutiful leader should count their effort successful if a pipped employee succeeds and remains in their role. Many managers work hard towards this outcome, and to these leaders, we salute you!
While researching this piece, I spoke to HR pros who were appalled that PIPs would be used to efficiently terminate employees who managers had no intention of retaining. One described a '“sham PIP” as “unthinkable.” They spoke of managers celebrating employees who successfully completed their PIPs. They sometimes blamed themselves if the employees did not complete the process successfully.
Does your manager intend for you to succeed? Have they already decided they want you replaced? There may not be an easy way to find out.
You could try to ask: “Straight answer, boss: If I do my best with this, do you think I’ll be able to keep my job? Do you want me to stay?” Encourage an emotional response from your manager, and hope for a real answer. If you get a long, lawyerly response, “Well, it depends, according to the standards, it’s really up to you…” the decision may have already been made.
Some managers described crafting PIPs with goals that they believe employees have a slim chance of meeting. Remember that the PIP by definition should describe the standard you have not met. Some are deliberately written with arbitrary or vague criteria. Some workers described PIP assignments that the management obviously couldn’t have cared less about. Some managers seem to hope the worker will look at the PIP and say “Nope!”, take the severance, and head straight home.
Why? There may be less legal risk to a voluntary separation. It could be best for the company if the process ends on Day 1. Every situation is different. If you read the experience of a few thousand PIP workers, you’ll get the sense that the majority of PIPs are handed out to people whose managers intended for them to depart.
That does not necessarily apply to you! And even if it does, you can craft a different outcome for yourself. Try to contain your emotions, steady yourself, and talk to your manager for as long as it takes. Try to get the best read that you can on your situation before you make a decision.
Remember that the PIP is a big, dumb machine designed to produce a predictable outcome at scale. They’re administered by the world’s most prestigious employers in management of the world’s most talented workforces.
Grading on that curve, a pipped employee might describe themselves as a lower-performing member of an extremely high-performing team. You might find yourself in the company of thousands of medal-less Olympic athletes. With the other factors involved in a manager’s decision, a PIP does not reliably indicate anything about your abilities as a professional or your worth as a human being.
Why PIPs Exist
We live in a huge, wealthy country full of brilliant, talented people. Why are we powering it with this big, dumb machine?
In the US, our capitalist employment system is based on “Employment at Will.” Generally this means that companies can fire almost any employee for almost any reason at any time
Since we are provided with this elegant, rapier-like method for instantly severing workers from their jobs, why the need for PIPs?
The answer is a bit sad and a bit cruel. One reason is that PIPs help protect companies from legal liability that arises from the few exceptions to employment at will.
Federal law says that employers cannot fire somebody for a variety of protected reasons. These include their age, race, gender, national origin, pregnancy, genetic information, religion, or disability. These same laws cover various kinds of harassment and retaliation. There are some exceptions to the exceptions. Then there are state laws that add to it, and some state laws that subtract. It’s complicated.
These laws make it easy to fire someone but inadvertently incur legal liability in the process. PIPs provide a way around that. Employers provide every employee with a performance-based justification for their termination before they are fired. That makes it harder from an employee to claim they were fired for a protected, discriminatory reason.
One expert I spoke to told me that employees who are fired for illegal discriminatory reasons often believe their employer’s performance-based PIP justifications, whether or not they are actually justified.
Consider this scenario:
A manager illegally fires (let’s say) a disabled person, telling them that their disability is the reason they are being terminated. The person sues the company. Records of the reasons for the termination are likely to be relevant in the lawsuit.
In the future, the company will assure that good records are kept related to all firings. They ensure that no firing occurs unnecessarily.
All employees are offered the opportunity to accept a severance payment should they choose to resign prior to the firing process. This reduces legal risk by reducing the number of firings that are necessary.
Every employee is given a structured opportunity to improve their performance before separation occurs. This improves the ability of the company to defend itself from the accusation that the firing happened for a protected reason.
In other words, this employer will now administer PIPs before firing any employee. According to an expert I interviewed, PIPs provide the employer’s justification for why the termination is occurring. Even when employees feel that those reasons are false, they give them a reason not to sue.
Employers may terminate employees without PIPs when they feel they have “cause.” Reasons that might provide cause include clear violations of company policy, violence, violations of the law, insubordination, fraud, harassment, and the like. In these cases, the employer may feel that they can easily defend a claim that the firing occurred for a protected reason. So in this case they might skip the PIP and just cut you loose.
Layoffs are a bit different. They typically they involve the (notionally) permanent elimination of a position (or many) rather than the firing of an individual person who will quickly be replaced. Layoffs are not a convenient end run around the exceptions to at-will employment. The company is in just as much trouble if it lays off someone for a protected reason as it would be be if they fired them.
For a layoff, the company still needs to keep careful records that show why they’re eliminating the position. Unlike the PIP, these data aren’t shared with the affected employees.
Our Laws and Culture
Is it tempting to believe that it ought to be illegal to fire someone without a well-documented reason? Should those people first be given a fair chance to improve?
That is, after all, the law all throughout Europe. Ask a European manager and you might learn that many dislike their system just as much as many American managers dislike ours.
In practice, the European policy sounds familiar because the net effect is similar to our PIPs. The manager has to document the reasons for the firing. The employee must be provided an opportunity to improve.
They’re not equivalent, though. The European system is much more rigorously defined. It probably results in better protection for workers. This more generous treatment of workers, along with better unemployment benefits, are probably to blame for higher unemployment rates overseas.
PIPs are, more or less, what American companies created when the European worker protection laws aren’t available to prevent companies from tearing workers limb from limb.
The result is our crude and often cruel process. It’s a compromise between protecting our worker’s safety and managing the employer’s liability.
That, in a nutshell, is why PIPs exist. They’re a drag, and we’re stuck with them for now.
The previous piece in this series, How to Fire Anybody, describes how managers can navigate the difficult process of firing employees with compassion and grace.
For the last piece in this series, coming next week, we’ll look at how individual contributors can create their own performance “paper trail.” Documenting your value may help reduce the changes that you’ll fall victim to a PIP.
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