15 Essential Steps for Managing an Underperforming Employee

Last updated: June 2026

Managing an underperforming employee starts with one clear action: have the conversation early, document what you discussed, and agree on a specific improvement plan with a defined timeline. The longer you wait, the more damage accumulates for the employee, the team, and for your own credibility as a leader. Most managers already know who on their team is underperforming. What they lack is a clear, courageous, and fair process for addressing it.

As of June 2026, global employee engagement sits at just 21 per cent, according to Gallup's State of the Global Workplace 2025 Report. Disengagement cost the world economy an estimated $438 billion in lost productivity in 2024 alone. Managers account for 70 per cent of the variance in team engagement, which means how you respond to underperformance shapes not just one person's trajectory but the culture of everyone watching. Research from Robert Half found that managers spend more than 10 hours per week, roughly 26 per cent of their working time, managing underperforming employees. That is time that could be reinvested in high performers, strategy, and growth.

Underperformance is rarely a sign of a bad person. It is most often a symptom of something fixable: unclear expectations, a skill gap, a motivation issue, a personal challenge, or a management gap. This blog covers every stage of the process, from identifying what underperformance actually looks like, to having the first honest conversation, building a performance improvement plan, documenting the process, and making the call when things are not working. It also addresses the most common mistake leaders make, which is waiting.

Jonno White, author of Step Up or Step Out (10,000+ copies sold), works with leadership teams, schools, corporates, and nonprofits around the world to build cultures where accountability conversations happen early, directly, and constructively. If your leadership team is carrying unresolved performance issues, reach out at jonno@consultclarity.org.

Why Does Underperformance Happen?

Underperformance rarely comes from nowhere. In most cases, when a leader steps back and looks honestly at the situation, there is a reason behind the performance gap, and often it involves more than one factor.

The most common root causes fall into four categories: capability, clarity, motivation, and personal circumstances. Capability gaps occur when an employee does not have the skills required for the role, whether because expectations have evolved, the role has changed, or the hiring decision misjudged the fit. Clarity gaps occur when the employee genuinely does not know what good performance looks like, because no one has told them clearly or consistently. Motivation gaps occur when the employee has the capability to perform but has become disengaged, frustrated, or checked out. Personal circumstances include health challenges, family pressures, financial stress, or other life factors that are temporarily affecting work.

There is also a fifth cause that most leadership books hesitate to name: the manager. Research consistently confirms that 70 per cent of the variance in team engagement traces back to the manager. If an employee is underperforming, it is always worth asking honestly whether the role was clearly defined, whether feedback has been given regularly, and whether the manager's own behaviour is contributing to the problem. This is not an invitation to self-blame. It is an invitation to lead accurately. For more on how team culture degrades when difficult conversations are avoided, check out the blog post "17 Signs Your High-Performing Team Is Falling Apart".

What Does Underperformance Actually Look Like?

Identifying underperformance accurately is the first step. Not every bad week is underperformance, and reacting too quickly to a single low-output period can damage trust. The signals to watch are patterns, not one-off incidents.

Common signs of an underperforming employee include consistently missing deadlines or producing work below the required standard, frequent absenteeism or lateness that goes beyond occasional personal issues, poor communication such as not responding to colleagues or failing to update the team on project status, lack of engagement in meetings and a general absence of initiative, and a noticeable drop in quality compared to earlier work. Beyond these individual signs, the team dynamics signal often appears before the manager notices the individual behaviour. High performers start carrying more than their share. Morale drops quietly. People begin to disengage from a colleague who is consistently not pulling their weight.

It is important to distinguish underperformance from misconduct. Underperformance refers to an employee not meeting the expected standard of work output or work behaviour due to capability, motivation, or circumstance. Misconduct refers to deliberate inappropriate behaviour, which may include dishonesty, insubordination, or harassment. These are managed through different processes, and confusing them creates legal and procedural risk for the organisation.

How Does Unmanaged Underperformance Affect Your Team?

The cost of ignoring underperformance is not neutral. It compounds every week you wait. Understanding the broader impact helps leaders find the courage to act earlier than feels comfortable.

Gallup's research shows that disengaged employees have 37 per cent higher absenteeism, 18 per cent lower productivity, and 15 per cent lower profitability than their engaged counterparts. When one person is consistently underperforming, the rest of the team observes it and draws conclusions. They notice when standards are not held consistently. They notice when a manager sees a problem and does nothing. And they start recalibrating: if that behaviour is tolerated, what is actually expected of me?

Replacing an employee who leaves because of an unresolved performance culture costs between 33 and 50 per cent of that employee's annual salary, according to benchmarking data from the Society for Human Resource Management. This includes recruitment costs, lost productivity during the vacancy, and onboarding time for the new hire. Addressing underperformance early, even when it is uncomfortable, is almost always less costly than the alternative. For broader strategies on keeping your team functioning well, see the blog post on improving team dynamics at https://www.consultclarity.org/post/27-simple-strategies-on-how-to-improve-team-dynamics.

Step 1: Ask Yourself the Hard Questions First

Before you approach an underperforming employee, spend 10 minutes asking yourself four questions. Have I actually communicated clear expectations to this person in writing? Have I given this person regular, specific feedback, or have I been vague or intermittent? Have I provided the training, tools, or support this person needs to succeed? And is something I am doing, or not doing, contributing to this situation?

This is not about letting the employee off the hook. It is about arriving at the conversation with accuracy rather than assumption. A leader who walks into a performance conversation without first examining their own contribution often ends up solving the wrong problem. If you uncover genuine gaps in your own management practice, address them alongside, not instead of, the employee's performance issues.

Step 2: Document What You Are Observing

Before you have the first formal conversation, write down specific examples of the performance issues you have observed. Record dates, tasks, outcomes, and the standard that was expected versus what was delivered. Stay factual and specific. "Quality of work has been poor" is not documentation. "The client report submitted on 3 June contained three factual errors, missed two required sections, and was delivered two days after the deadline" is documentation.

Specific examples serve two purposes. They make the conversation precise rather than vague, which helps the employee understand exactly what needs to change. And they create a record that protects both the employee and the organisation if the situation escalates to a formal process or, in the Australian context, a Fair Work Commission proceeding. Australian employers are required to demonstrate procedural fairness before any employment can be terminated on performance grounds. Documentation that traces informal steps, formal conversations, and agreed improvement plans is the foundation of that fair process.

Step 3: Have the First Conversation Promptly

The first conversation is the single most important step in managing underperformance. Every day you delay makes the conversation harder, the pattern more entrenched, and the employee more confused about where they actually stand.

Research from the Chartered Management Institute found that 57 per cent of people would do almost anything to avoid a difficult conversation. For managers, the temptation is to hope the problem resolves itself, to soften messages until they lose their meaning, or to give feedback so gently that the employee walks away without understanding that their job is at risk. None of these approaches serve the employee or the team. For a full look at the avoidance patterns to watch out for, read the post on the signs you are avoiding a difficult conversation at https://www.consultclarity.org/post/signs-avoiding-difficult-conversation.

Schedule the conversation privately, without other team members present. Keep the framing factual and caring simultaneously. A useful structure for the opening is: state what you have observed (specific behaviour), describe the impact (on the team, the client, the organisation), ask what the employee thinks is going on, and then listen without rushing to solutions. This last point is critical. The most common cause of underperformance conversations going wrong is the manager talking for 80 per cent of the meeting and the employee having no space to explain what is actually happening for them.

Jonno White's three-step system from Step Up or Step Out provides a practical framework for exactly these conversations: setting clear expectations in writing, creating an accountability process with a defined timeline, and giving the person the agency to decide whether they will step up to the standard or step out of the organisation. Book Jonno White to work with your leadership team on this framework by emailing jonno@consultclarity.org. International travel is often far more affordable than clients expect.

Step 4: Listen Before You Problem-Solve

What a manager assumes is causing underperformance and what is actually causing it are frequently different things. An employee missing deadlines might be dealing with an unmanageable workload. An employee disengaged in meetings might be experiencing a health issue they have not disclosed. An employee whose quality has dropped might be in the wrong role, performing tasks that drain rather than energise them.

The Working Genius framework, developed by Patrick Lencioni, offers a useful lens here. It identifies six types of work that every project requires: Wonder, Invention, Discernment, Galvanise, Enablement, and Tenacity. When an employee is consistently placed in tasks that fall outside their natural geniuses, performance suffers not because of a character failing but because of a misalignment between the person and the work. Jonno White is a Certified Working Genius Facilitator. If your team would benefit from a diagnostic session exploring how each person's genius is being used or misused, email jonno@consultclarity.org.

Give the employee space to explain their perspective without interruption. Ask open questions rather than leading ones. "Help me understand what has been going on from your side" is more productive than "So you've been struggling because of workload, right?" The employee's account does not mean the performance issue disappears, but it shapes the solution you build together.

Step 5: Identify Whether It Is a Capability or a Motivation Issue

The response to underperformance should match the root cause. A capability gap requires training, mentoring, additional resources, and a realistic timeline. A motivation gap requires a different kind of conversation, one that explores whether the role is still a genuine fit, whether something has changed in the employee's engagement with the work, and whether there is a way to reconnect them to purpose.

The distinction matters practically. If you treat a capability problem with motivation interventions ("you need to care more") you will frustrate an employee who genuinely wants to improve but does not have the skill yet. If you treat a motivation problem with training ("let's do a course") you will waste resources and send the wrong message. Take the time to diagnose before you prescribe.

In some cases underperformance involves a personal circumstance that falls under the employer's duty of care. In Australia, mental health conditions that affect work performance may invoke obligations under the Fair Work Act and, in some instances, anti-discrimination legislation. It is best practice to ask whether the employee has any circumstances the employer should be aware of, and to respond with both care and appropriate referral rather than immediately escalating to a formal process.

Step 6: Set Clear, Specific Expectations in Writing

Once you have listened and identified the root cause, the next step is to make the expectations explicit and put them in writing. This is the step that most managers skip, which is why most performance conversations fail to produce change.

Write down the specific behaviours and outcomes required, the standard they need to meet, the timeline for reaching that standard, and what support will be provided. SMART goals, Specific, Measurable, Achievable, Relevant, and Time-bound, are the right structure for this. "Improve communication" is not a SMART goal. "Submit project updates to the team every Friday by 4 pm, starting from 13 June 2026, with no more than two instances of delay in the following four weeks" is a SMART goal.

Follow up the conversation with a written summary, sent by email, confirming what was discussed, what is expected, and the timeline. This gives the employee a reference point, removes the risk of "I didn't understand what was required," and creates the paper trail that any fair process requires.

Step 7: Agree on a Performance Improvement Plan

A Performance Improvement Plan (PIP) is a structured, documented, time-bound plan that sets out where performance is falling short, the standard required, the support the employer will provide, and how progress will be measured. In an Australian context, moving to a written PIP is the appropriate step when informal coaching has not produced improvement, and it is essential groundwork if the situation might ultimately lead to termination.

A good PIP includes the specific performance issues, the improvement required in concrete and measurable terms, the resources and support the employer will provide (training, coaching, adjusted workload, clearer workflows), the timeline (typically four to eight weeks), a schedule of review meetings (usually weekly), and a clear statement of the potential consequences if improvement is not achieved.

Involve the employee in building the plan wherever possible. Co-creation increases ownership. An employee who has contributed to setting their own improvement targets is more likely to work toward them than one who has had a plan handed to them. Invite the employee to bring a support person to any formal meeting. Under Australian Fair Work legislation, this is considered a key factor in procedural fairness. Employers who skip this step risk unfair dismissal claims even when the substantive decision to dismiss was justified.

Step 8: Provide Ongoing, Real-Time Feedback

Managing underperformance is not a one-conversation process. The most common mistake after the initial conversation is going silent and waiting for the next formal check-in. Real-time feedback, given promptly after a specific behaviour, is far more effective than accumulated feedback delivered at a scheduled meeting.

If an employee misses a deadline, address it within 24 hours, not at the next monthly review. If they produce work that does not meet the required standard, give specific feedback on what needs to change and why, that same day or the next morning. The pattern of improvement will not hold unless the feedback is frequent, specific, and genuinely oriented toward the employee's success.

Keep brief notes of informal feedback conversations. A running log of the date, the issue discussed, and the employee's response creates a reliable record without requiring formal documentation of every interaction.

Step 9: Support the Employee Genuinely

Underperformance management is not punishment. It is leadership. The goal is to give the employee every realistic opportunity to succeed before escalation becomes necessary.

Genuine support means providing the training or coaching that was identified as needed, not just promising it. It means checking in proactively, not waiting for the employee to ask. It means acknowledging progress when it occurs, not only reinforcing what is going wrong. And it means treating the employee with dignity throughout, regardless of how the process ultimately concludes.

An employee who is placed on a PIP and never receives the support the plan promised has grounds to argue that the process was not genuinely designed to help them succeed. Courts and tribunals in Australia look at whether the employer provided genuine support, not just whether the paperwork was completed.

Step 10: Monitor Progress and Hold the Line

After the PIP is in place, conduct the review meetings on schedule. If the employee shows genuine improvement, acknowledge it explicitly and adjust the plan accordingly. If the employee shows partial improvement, be specific about what has improved and what still needs to change. If there is no improvement, document that accurately and proceed to the next stage of the process.

The hardest part of this step for most managers is maintaining consistency. It is tempting to soften the feedback when someone is trying but not yet meeting the standard. Honest, caring consistency is not the same as harshness. You can say "I can see you are working hard on this, and I want to acknowledge that. The outcomes still need to reach the required standard by the agreed date. Let us look at what else we can do to support you in the next two weeks" without abandoning the performance standard.

Step 11: Involve HR When the Process Requires It

For organisations with a Human Resources function, HR should be kept informed from the point where a formal performance management process begins. HR ensures the process is legally compliant, procedurally fair, and consistent with how similar situations have been managed elsewhere in the organisation. They can also provide coaching to the manager, support to the employee, and documentation of the process.

In smaller organisations where HR is unavailable, leaders should familiarise themselves with the Fair Work Ombudsman's best-practice guide on managing underperformance, which is publicly available at fairwork.gov.au, and seek external HR advice if the situation is likely to proceed toward formal warnings or termination.

Hire Jonno White to work with your leadership team on building the conversation frameworks and accountability structures that make performance management less reactive and more embedded in daily culture. Jonno is the author of Step Up or Step Out (10,000+ copies sold globally) and host of The Leadership Conversations Podcast (230+ episodes, 150+ countries). Email jonno@consultclarity.org.

Step 12: Know When Formal Warnings Are Required

If informal performance management has not achieved the required improvement, the next step is a formal written warning. A formal warning must clearly identify the performance that is of concern, describe the required improvement, provide a realistic timeline for achieving it, and state clearly that failure to improve may result in termination.

In Australia, the Fair Work Commission has confirmed that a warning that does not meet these criteria is not a valid warning for the purposes of a termination decision. A 2024 Fair Work Commission decision (JF Camenzuli v Companion Systems Pty Ltd) reinforced that employers must demonstrate they gave genuine warnings, provided support, and followed a fair process, not merely that they believed the performance was unsatisfactory. This precedent underlines why documentation, specific feedback, and genuine support are essential throughout the process, not optional additions.

Step 13: Consider Whether the Role or Structure Is the Problem

Sometimes the underperformance issue is not primarily about the individual. It is about the role. If an employee is consistently struggling with tasks that a predecessor in the same role also struggled with, or that multiple people in similar roles across the industry find difficult, the role itself may be poorly designed.

Ask whether the accountabilities are realistic, whether the scope is manageable, whether the position description accurately reflects what the role requires, and whether the measurement criteria are fair. This is not a get-out clause for underperforming employees. It is a genuine diagnostic question that saves organisations from repeatedly cycling through the same performance management process with different people in the same flawed role.

Step 14: Make the Call When It Is Not Working

There will be situations where, despite a genuine, well-documented, and supportively delivered performance management process, an employee does not reach the required standard. At that point, the responsible leadership decision is to conclude the employment relationship.

Termination on performance grounds in Australia requires a valid reason, which means genuine, well-documented underperformance. It requires procedural fairness, including a warning, an opportunity to respond, and access to a support person. And it requires that the employee was notified of the serious consequences of not improving. Leaders who have followed the steps in this process faithfully, and documented each stage, are in a much stronger position both ethically and legally than those who simply become frustrated and act impulsively.

The conversation at this stage should be direct, dignified, and factual. The employee should not be surprised if the process has been conducted honestly. Engaging a Certified Working Genius Facilitator or leadership coach to support the manager through this stage can be genuinely valuable.

Bring Jonno White in for executive coaching or leadership team facilitation at jonno@consultclarity.org. International travel is often far more affordable than organisations expect, and virtual coaching options are also available.

Step 15: Reflect on What the Process Revealed

Every performance management process, regardless of outcome, reveals something about the culture, the hiring process, the quality of role design, or the quality of ongoing feedback in the organisation. After the process concludes, take time to ask what could be done differently to prevent this situation arising again.

The most effective leaders build cultures where expectations are explicit from day one, feedback is regular and specific rather than annual and vague, and difficult conversations happen early before they become high-stakes. For practical advice on handling difficult conversations at all levels, check out the blog post with 25 tips for handling difficult conversations at https://www.consultclarity.org/post/25-crucial-tips-for-handling-difficult-conversations.

Common Mistakes Leaders Make When Managing Underperformance

The costliest mistake is delay. Research from the Chartered Management Institute found that 57 per cent of people would do almost anything to avoid a difficult conversation. For leaders, this avoidance compounds daily. The employee continues without knowing they are at risk. The team continues carrying the slack. The manager builds quiet resentment. And when the conversation finally happens, months after it should have, it is emotionally charged, the record is thin, and the employee feels blindsided.

The second most costly mistake is giving vague feedback that the employee can interpret as encouragement. "There are a few areas we need to work on" is not a performance conversation. Neither is "I think you could push yourself a bit harder." If an employee is at risk of losing their position, they need to know that in plain terms, with specific examples, and with a clear timeline.

A third common mistake is treating the first formal conversation as the last formal conversation. Performance management is a process, not a moment. It requires follow-up, documentation, adjustment, and consistency over weeks rather than days.

A fourth mistake is skipping the "why" question. Jumping to a performance improvement plan before understanding the root cause often addresses the symptom rather than the problem. An employee whose underperformance traces to a skill gap and an employee whose underperformance traces to complete disengagement require different responses, and confusing the two wastes time and goodwill.

A fifth mistake, often the most painful, is avoiding termination long after it is clear that the employment relationship is not recoverable. Keeping an employee on indefinitely out of discomfort or guilt, when neither party benefits from continuing, is not compassion. It is avoidance with better marketing.

Frequently Asked Questions About Managing Underperforming Employees

What is the first step in managing an underperforming employee?

The first step is an honest, private, specific conversation held promptly after the performance issue is observed. Before that conversation, document specific examples of the performance gap and ask yourself whether unclear expectations, lack of feedback, or inadequate support from management may be contributing to the problem. Early, direct, and caring conversations produce better outcomes than delayed, vague, or emotionally charged ones.

How long should you give an underperforming employee to improve?

A reasonable improvement timeline depends on the nature of the performance issue. For most performance improvement plans, four to eight weeks is considered appropriate for issues involving skill or habit change. More complex or deeply embedded issues may warrant a longer timeline. The key is that the timeline is specific, documented, and mutually understood. Open-ended timelines rarely produce improvement and create legal risk in the event of termination.

When should you write a formal performance improvement plan?

Move to a formal written PIP when informal coaching and feedback have not produced the required improvement, or when the performance issue is serious enough that informal steps alone would not constitute a procedurally fair process. In Australia, Fair Work Commission decisions consistently reinforce that employers must demonstrate genuine support and clear warning before a performance-based termination will be upheld.

What should you never do when managing underperformance?

Never give vague feedback that the employee can reasonably interpret as "you're basically fine." Never delay the first conversation in the hope the problem resolves itself. Never skip documentation. Never conduct performance management inconsistently across the team. And never conflate underperformance with misconduct, as they require different processes and carry different legal implications.

How does underperformance affect team morale?

Disengaged and underperforming employees have a measurable ripple effect on team performance. Gallup's research found that disengaged employees show 37 per cent higher absenteeism and 18 per cent lower productivity than their engaged counterparts. The rest of the team observes when performance standards are not enforced, and this shapes their own assessment of what is expected. For more on how this plays out at a team level, see the post on signs your high-performing team is falling apart.

What is the difference between a performance issue and a conduct issue?

A performance issue involves an employee failing to meet the expected standard of work output or behaviour due to capability, motivation, or circumstances, without deliberate intent to breach workplace standards. A conduct issue involves deliberate, inappropriate behaviour, such as dishonesty, insubordination, or harassment. These require different management processes. Applying a performance management process to what is actually a conduct issue, or vice versa, creates procedural risk.

Implementation Guide: A 4-Week Starting Framework

The first week should be used for diagnosis and preparation. Document the specific performance issues you have observed, identify the likely root cause, and prepare the opening of the first conversation. Do not go into this conversation without having done this preparation.

The second week is for the initial performance conversation. Have the conversation privately. Listen to the employee's perspective before you problem-solve. Agree on specific expectations in writing, send a follow-up email summarising what was discussed, and schedule the first formal check-in meeting.

Weeks three and four are for active monitoring, real-time feedback, and the first formal check-in. If the employee is making genuine progress, acknowledge it explicitly. If the issue persists, document it accurately and progress to a formal PIP. At this point, notify HR if an HR function exists.

The most important thing in these four weeks is consistency. Show up for every scheduled check-in. Give feedback promptly rather than saving it for meetings. And stay genuinely invested in the employee's success, rather than going through the motions of a process that has already been decided in your own mind.

Engage Jonno White to build this kind of accountability culture into your leadership team through keynotes, executive team offsites, or Working Genius facilitation workshops. Email jonno@consultclarity.org.

Final Thoughts

Managing an underperforming employee is one of the hardest things a leader is asked to do. It requires courage, clarity, patience, and genuine care for the person in front of you. Done well, it is one of the most powerful leadership acts there is: telling someone the truth about where they stand while investing in their ability to improve. Done poorly, or not done at all, it costs the team, the individual, and the organisation more than most leaders realise.

The starting point is always the same: have the conversation. Not when you have the perfect script, not when conditions are ideal, and not after months of hope that the problem will resolve on its own. The conversation that would have taken 20 minutes in week one will take two hours in month six. The cost of delay is real.

If your leadership team is carrying unresolved performance issues, Jonno White, author of Step Up or Step Out (10,000+ copies sold globally), is available to facilitate workshops, executive offsites, and individual executive coaching sessions to build the conversation frameworks and accountability structures that make this kind of leadership sustainable. The Leadership Conversations Podcast has covered this topic across 230+ episodes reaching listeners in 150+ countries. Reach out at jonno@consultclarity.org.

About the Author

Jonno White is a Certified Working Genius Facilitator, author of Step Up or Step Out, and leadership consultant who has worked with schools, corporates, and nonprofits around the world. His book Step Up or Step Out has sold over 10,000 copies globally, and his podcast The Leadership Conversations has featured 230+ episodes reaching listeners in 150+ countries. Jonno founded The 7 Questions Movement with 6,000+ participating leaders and achieved a 93.75% satisfaction rating for his Working Genius masterclass at the ASBA 2025 National Conference. Based in Brisbane, Australia, Jonno works globally and regularly travels for speaking and facilitation engagements. Organisations consistently find that international travel is far more affordable than expected.

To book Jonno for your next keynote, workshop, or facilitation session, email jonno@consultclarity.org.

Sources

Gallup. (2025). State of the Global Workplace: 2025 Report. Washington, D.C.: Gallup, Inc.

Robert Half. (2018). The High Price of a Low Performer. Global staffing firm survey of 2,200+ CFOs.

Society for Human Resource Management (SHRM). Human Capital Benchmarking Report.

Chartered Management Institute (CMI). (2015). Difficult Conversations survey (approximately 2,000 respondents).

Next Read

Managing underperformance is ultimately a conversation problem. If you want to go deeper on the avoidance patterns that make these conversations so hard to start, read the post on the warning signs that a difficult conversation is being avoided. Leaders who catch their own avoidance patterns early find that the actual conversations are far less damaging than the months of delay that preceded them.

Keep reading: https://www.consultclarity.org/post/signs-avoiding-difficult-conversation