Managing underperforming employees: a practical approach for SMEs

Dealing with underperformance is never easy, especially in small teams where everyone’s contributions really matter. It’s one of those situations that can keep business owners up at night – you know something needs to change, but you’re not quite sure how to tackle it head on with minimal upset or disruption.

The key to managing underperformance effectively is acting early and setting clear expectations. Often, what looks like deliberate poor performance is actually confusion about priorities, a lack of training, or personal challenges that haven’t been properly addressed. That’s why at PSM, we believe it is important to take a step back to evaluate circumstances on an individual and case-by-case basis so we can understand before we judge or jump to conclusions.

Start with an honest conversation

Sit down with the employee in a private, relaxed setting (this could be via Team’s) and explain what you’ve observed. Be specific about the issues – focus on particular examples and the impact on the business. More often than not, you’ll find employees are aware there’s a problem and may even be relieved that you’ve brought it up.

Listen to their side of the story

There might be factors you’re not aware of – personal circumstances, workload pressures, or simply not understanding what’s expected of them. Sometimes, what appears to be a performance issue is actually a mismatch between the role and the person’s skills or interests. Understanding the root cause of an issue and communicating can help you decide on the right course of action.

Set clear expectations moving forward

Work together to agree on specific, measurable goals and realistic timescales. Document these agreements so that everyone’ s clear on what success looks like. Regular check-ins during this period are crucial – weekly catchups work well for most situations.

Provide the support they need to succeed

This might be additional training, clearer processes, or simply more frequent feedback. Remember, most people want to do well at work, and with the right support, many performance issues can be resolved.

Of course, sometimes despite your best efforts, you might not see any improvement and when that’s the case, you’ll need to move through formal procedures. This is where PSM HR Managers come in and can guide you through the process. With clear policies and proper documentation, you can ensure you are being fair employer and give the employee every reasonable opportunity to improve.

Managing underperformance is rarely about being harsh or punitive. It’s about being clear, supportive and fair, while protecting your business and other team members. Done well, it can actually strengthen relationships and improve overall team performance.

If you’re dealing with underperformance in your team and need guidance on the right approach, we’re here to help. Email info@psmhrmanagers.com or call 01784 472541 for practical support.