With A Performance Contract They Fire Themselves

Oct 28, 2014

Results-freeFor managers, there is one thing worse than hiring the wrong person and that is to keep that individual employed with their agency long after the collective experience dictates they should be terminated. Yet, in almost every case, managers will admit they have difficulty with making termination decisions.

From my many years of experience in working with managers in hundreds of staffing firms on both a national and international basis, I have concluded that the primary reasons for this apparent lack of decisive action include one or more of the following:

  • The manager’s need for relationship and acceptance is partially focused on the employees in their office. This typically indicates an underlying sense of personal or positional insecurity on the part of the manager.
  • The manager’s misguided belief that if they ignore the problem, it will self-correct or the individual involved will recognize the situation and voluntarily resign.
  • For a variety of reasons, the manager lacks the willingness or ability to confront the employee and resolve the problem once and for all.
  • In the absence of objective performance measurement, the manager believes that he or she will be unable to defend their termination decision when challenged by the employee in question.
  • The manager views the termination decision as a reflection of their inability to effectively carry out the duties of their position. They view the termination as a personal failure.

Execution Deficiency

The most difficult termination decisions for most managers generally involve employees who have been with their firm for quite some time. In most cases, those employees have enjoyed sporadic success and have demonstrated a functional grasp of the business. This is termed an “execution deficiency.” The employee knows what to do and how to do it. However, they allow someone (could be themselves) or something to get in the way of consistently performing on an acceptable level. This is a difficult situation, particularly if the manager has grown emotionally attached to the employee or if they justify keeping the employee because sporadic success is more attractive to them than going through the process of hiring a replacement.

The Performance Contract

Nevertheless, if the manager has fulfilled, to the best of their ability and resources, their obligations to the employee, and the employee’s performance remains unacceptable, a termination decision must be made. However, with an execution deficiency, the employee should make the termination decision. This is the function of a “Performance Contract.” Properly structured and utilized, it places responsibility for performance right where it belongs — on the shoulders of the employee. If the employee chooses not to perform at an acceptable level, the Performance Contract serves as their resignation.

It must be emphasized that a Performance Contract should be used ONLY in those situations where more traditional approaches have not worked; the manager has fulfilled his responsibility to the employee, and where the unacceptable performance can be traced directly to the inconsistent effort of the employee.

The Contract Specifics

In its’ simplest structure, a Performance Contract commits the employee to achieving a specific and measurable performance outcome within a short period of time. The contract should be written in the first person singular, as if written by the employee. It should include measurable outcomes and should not typically be written to cover a period of time in excess of one week. The bottom of the contract should include signature and date lines for both the employee and the manager.

Before it is drawn up, the Performance Contract and its contents should be thoroughly discussed with the employee, and the manager must gain the employee’s agreement to enter into the contract. Obviously, if the employee refuses, under the circumstances outlined above, the manager has no other choice than to terminate them.

The Performance Contract is not a substitute for effective decision-making. However, it does provide the employee with a final opportunity to turn things around and remain part of the team. If they fail to meet the measurable performance outcomes agreed to in the contract, considering the fact that all of the outcomes can be achieved through a reasonably consistent effort, they are in essence stating they have chosen to no longer be part of the team and the contract will serve as their resignation. One way or another, the problem with the employee gets resolved.

The Performance Contract is not right for every situation. In order to be effective it must be properly structured and both parties must view it as a binding agreement. With these prerequisites, it is effective.

As always, if you have questions, comments or would like to receive a copy of a sample “Performance Contract” email me by clicking here.