WSJ Your Money Briefing - Why the Most Hated Way of Firing Someone Is More Popular Than Ever

Episode Date: December 5, 2024

In an era of tighter company budgets and efficiency, performance improvement plans, or PIPs are on the rise. Wall Street Journal reporter Lauren Weber joins host J.R. Whalen to discuss how PIPs work and what employees placed in them can do.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Amazon Q Business is the generative AI assistant from AWS because business can be slow like wading through mud But Amazon Q helps streamline work So tasks like summarizing monthly results can be done in no time learn what amazon q business can do for you at aws.com learn more Here's your money briefing for Thursday, December 5th i'm jr. Whalen for the wall street journal Here's your money briefing for Thursday, December 5th. I'm JR Whalen for The Wall Street Journal. As companies tighten budgets and look to boost efficiency, they often use performance as a metric when looking to downsize staff.

For employees not meeting their goals, performance improvement plans, or PIPs, are on the rise. Because a PIP is really do or die. It usually says on the formal document that you receive when you're put on a plan, failure to meet these expectations or meet these goals could result in termination. We'll talk to Wall Street Journal workplace reporter Lauren Weber after the break. Investing in sports, a four-part series from exchanges, the Goldman Sachs podcast, informed perspectives on the ever-evolving business of sports and the expanding investment ecosystem with leaders at the forefront of the industry. For the sharpest analysis on franchise ownership,

media rights, the growing women's sports market, and more, investing in sports from Goldman Sachs Exchanges. Listen now. Listen now. The percentage of workers subject to performance actions, including performance improvement plans, has increased about 30% since 2020. Wall Street Journal reporter Lauren Weber joins me. Lauren, what is the purpose of a performance improvement plan? On the face of it, it's to improve someone's performance.

The idea is that if an employee is not meeting expectations or underperforming, that you come up with a systematic list of things that they can do within a certain amount of time in order to improve, get back on track, and keep their jobs. That's the outward reason for it. In many cases, what we found from speaking to people is that both managers and employees is that by the time the PIP comes along, the performance improvement plan, a company in some cases has already decided they want to terminate someone. And so this is more of an exercise in documentation in order to help the company avoid legal liability

down the road. How common are these plans? We found some data showing that in 2023, they were used on about 43.6 workers out of every 1000 were involved in some kind of formal performance procedure, which includes a PIP. That is about a 30% increase from four years ago in 2020, when they were used with about 33.4 workers out of every 1000. So their use has gone up quite substantially. Why are more companies doing this?

There is a lot of reasons for it. One is kind of a hangover from the pandemic. You remember the labor shortages from like 2021, 2022, when companies couldn't find enough workers quickly enough and in some cases would just hire anybody who would show up for the job and continue showing up for the job. So what that meant was a lot of people who were not a good fit for certain jobs got hired or maybe not qualified for certain jobs got hired or maybe not qualified for certain jobs, didn't want to be in those jobs. Part of this now is a little bit of a culling of some of that hiring that happened then that was perhaps ill considered.

Another piece of it is the economy is just a little bit weaker, more tentative. Companies are worried about profits, they're worried about growth. And so there's a certain amount of culling of people. And one way to do that without having a formal layoff where in some cases you have to alert the government that you're laying off a certain number of people, it's very disruptive for companies, what we found is that PIPs are often used as a quiet layoff to quietly let go of people who may not be considered long term or be good at the job long term. How is an employee notified that they've been placed in a performance improvement plan or a PIP?

Often there's a meeting called with the manager and someone from HR. Often there's someone from HR there because this is a process that's often overseen by the human resources department. Maybe you get called into a meeting. It might be also that you've had some warning before like your manager. If you have a good manager this should not come as a surprise. This was a constant theme in our interviews. A good manager will be pointing out things you need to work on along the way. There might be interim steps before you get to the point of a PIP because a PIP is really do or die. It usually says on the formal document that you receive when you're put on a plan, failure

to meet these expectations or meet these goals could result in termination. So at that point, this shouldn't be the first indication that you're having performance issues. What types of responsibilities or warnings are outlined for a worker? They can be all over the map depending on what your role is. In some cases maybe it's something as simple as you have to show up for work on time. In other cases you're given a long list of goals. Sometimes they seem very unattainable.

We heard from many people that they knew the PIP was not real. They knew the PIP was really mainly an effort to terminate them when the expectations were just totally out of control or completely unattainable. In some cases, people argue back on that and try to show, hey, this is not realistic. Let's make this more realistic. But often, again, that's kind of an indicator that the real goal of the PIP is just to get rid of you. If an employee is fired as a result of being on a PIP, does that get categorized under being fired for cause?

It generally does. And that often means that they're then not eligible for unemployment insurance, which is another reason we often heard why companies may use PIP so that they can fire people for cause and then not have to pay out the unemployment insurance. Now it's very hard to find any proof of that but it is true that it is considered fired for cause. What can someone do if they feel like they've been wrongly placed in a plan? We heard so many stories from people who felt they had been wrongly placed. People said they felt that their PIP was retaliation for speaking up about something, for

voicing concerns, retaliation by a manager who they didn't get along with. So there are all kinds of reasons people feel that they've been placed on PIPs that they feel have very little to do with their actual performance. If somebody feels that they've been unfairly placed on one, you can fight back. You can bring documentation showing either why you maybe shouldn't be on a PIP at all or the fact that your manager maybe didn't manage correctly or manage appropriately or set expectations appropriately and therefore the PIP shouldn't be applied. Some people just say, okay, I'm going to go through this and they use that

time it's often 30 days, 60 days, 90 days, to just start looking for another job if they feel like the writing's on the wall. And then in other cases, they apply themselves to the goals. Maybe they've been able to negotiate some of those goals a little bit and try to get through it and survive. That's WSJ reporter Lauren Weber. And that's it for your Money Briefing. We'll be back tomorrow with WSJ's Amani Moise to discuss insurance you

can buy in case porch pirates steal your deliveries. This episode was produced by Ariana Osborne with supervising producer Melanie Roy. I'm JR Whalen for The Wall Street Journal. Thanks for listening. you