Your HR System and Smarts for SME Success

Why is it important to have a performance management process?

Your obligations explained, plus the risks if you don’t follow HR protocols when managing an underperforming employee.

You’ve probably noticed that ‘managing performance’ and ‘performance management’ are not the same thing.

‘Managing performance’ is the day-to-day process of trying to get the best out of your employees – making sure they’re doing their jobs properly and achieving the corporate objectives of your business.

You might do this by setting KPIs, having targets for your staff to hit, holding team meetings or having regular one-on-ones. There’s no right way to manage performance, it’s simply a matter of finding what works best for you and your business.

But, when it comes to ‘performance management’, the process tends to become more formal. Usually it begins because you feel someone is not performing in accordance with their position description.

In these instances, following a robust performance management process helps reduce your legal risks including unfair dismissal claims. Not to mention, it ensures your employee has the best opportunity to improve and succeed in the role. After all, you have already invested in recruiting and training. Naturally, you want the best return for your business.

So, how do you performance manage an employee?

You can either take an informal or formal approach. Informal might be simply having a chat and letting the person know you’re dissatisfied with aspects of their performance. On the other hand, formal might include setting targets for the employee to meet in a certain time frame and issuing a written warning.

Whichever way you approach it, be sure to document everything using a HR information system such as DiffuzeHR’s cloud-based platform. This will help you prove valid reason and procedural fairness if the matter ends in an unfair dismissal application.

When setting up your process or policy, DiffuzeHR and Workplace Relations Law Firm, HR Legal, advise against having an overly prescriptive formal management process. This is because failure to follow any one step may be used as evidence that your business hasn’t been procedurally fair to the employee. Having the ability to exercise discretion in how your company wishes to handle any one case of poor performance ensures performance management is addressed in the most appropriate manner to the circumstances.

Remember, it is your legal obligation to afford the employee procedural fairness. If you do not, you may risk legal action such as:

  • Unfair dismissal application upon termination
  • The employee pushing back and complaining about other staff or claiming they are being bullied under the Fair Work Commission ‘bullying’ jurisdiction
  • General Protections/Adverse Action Claim or other discrimination claims
  • Claims under Enterprise Agreements
  • WorkCover Claims – usually stress related

Engaging in a well-documented performance management process places your business in a good position to defend these types of claims. It demonstrates that you have afforded the employee procedural fairness and that, despite the opportunity to improve, the employee cannot satisfactorily fulfil their role.

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Barry Lehrer

Having run my own small business for over twenty years, I understand one of the biggest challenges is protecting your business from potentially damaging personnel or HR issues. That’s why I developed Diffuze.

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