How to minimise business risk through performance management
Examining the adequacy of your performance management, disciplinary and review processes is critical for all employers, not only for the optimal performance of your business, but also to minimise the risk of possible claims, such as for unfair dismissal, by employees.
An employee that is terminated due to poor performance or misconduct is able to bring a claim for unfair dismissal if such dismissal is unfair, unjust and unreasonable in the circumstances. Evidence to refute that the dismissal is unfair is vital for the employer – appropriate and systematic performance management processes can be a powerful tool in such circumstances.
A recent example
The Fair Work Commission recently considered the case of Mr Mark Langdalev KDR Victoria Pty Ltd T/A Yarra Trams  FWC 4613 whereby an employee was dismissed due to poor work performance.
In summary, a tram driver was recorded as being persistently late to his stops on his scheduled route over a period of 10 months. Drivers have specified target times and averages that they are expected to meet on their trips. The employer alleged the employee was deliberately ‘dragging the road’ and proceeded to dismiss the employee on this basis.
The Commissioner considered:
- Whether deliberately dragging the road would give rise to valid dismissal;
- Whether the employee was deliberately dragging the road or whether external factors impacted the employee’s ability to perform his job;
- Whether persistent under performance (which does not amount to deliberate dragging of the road) could still give rise to valid dismissal;
- Whether the employer’s disciplinary procedure was consistently followed by the employer, including:
- the employer’s failure to notify the employee over the extended period in which the issue was occurring;
- that there were other employees who had poor on–time performance results who were not disciplined;
- Whether the employee had reasonable opportunity to respond to the allegations.
In this case, the employer was found to have unfairly dismissed the employee. The employee was reinstated to his employment and the employer was ordered to restore any lost pay.
The Yarra Trams example highlights the potential consequences of failing to properly manage performance. Ways to ensure performance issues are dealt with appropriately include:
- Keep records of incidents or complaints relating to the employee’s performance;
- Ensure that an appropriate work performance, conduct and disciplinary policy is in place and documented by the employer and available to employees;
- Advise the employee in a timely manner of incidents of poor performance, and document these actions. Issue warnings immediately if required;
- Keep records of discussions with the employee relating to such incidents or under-performance;
- Provide the employee with an adequate and reasonable opportunity to respond to allegations of poor performance;
- Provide the employee with reasonable opportunity to rectify any under-performance.
Before an employee is terminated as a result of a performance issue, employers should consider:
- Has the employee’s performance been appropriately managed through systematic management processes? In the above case, where the alleged behaviour occurred over a 10 month period, had the employee not had a meeting with a superior during that period to discuss employment performance?
- Is the conduct serious enough to give rise to a right to terminate their employment?
- Is there appropriate and adequate evidence that the conduct was caused by the employee and not by external factors outside of the employee’s control?
- Has the employer acted consistently with its work performance, conduct and disciplinary policy (and any relevant enterprise agreement or legislation)?
Timely and consistent reviews
Regular meetings with employees are vital to dealing with performance issues. Different businesses, depending on size and location, may have different means of discussing issues. Some businesses do a ‘one on one’ with their key managers weekly; others prefer monthly or quarterly meetings. While it is always preferred to raise performance issues with employees as they occur, and properly document them, a regular review process, which applies consistently to all employees (and is properly documented), will ensure that no issues ‘slip through the cracks’. Ten months of allowing poor performance to occur is simply too long.
Timely and consistent reviews are not just about dealing with poor performers, it’s also about setting goals, and if reached, can be a useful tool for setting rewards and wage reviews. It is a necessary tool for your star performers as well as those that you need to further work with and assist.