How to Put Underperforming Salespeople on a Sales Performance Improvement Plan
When sales representatives consistently underperform, the quickest fix might seem to be termination and a quick replacement. But putting them on a Sales Performance Improvement Plan—otherwise known as a sales PIP—is an important intervention that should come first.
A PIP outlines the steps an employee can take to regain high levels of performance during a pre-defined period of time, addressing chronic performance problems such as poor quality of work, missed targets, or a general failure to execute. PIPs are not intended to fix behavioral issues like inappropriate actions or a toxic attitude.
Sales PIPs use very clear metrics to define success and to put a timeline on it. This gives the employee a fair shot at making improvements, and it removes any element of surprise should a termination, demotion, or lateral move prove necessary.
However, not all PIPs are created equal, so this article will examine some of the ways that managers can set them up for success. After all, a well-developed and executed PIP can save a business money and keep morale high.
Of course, it is important to fire salespeople with a record of consistently underperforming, to safeguard the overall health of an organization, protect the brand, and limit revenue loss. A Harvard Business School study of more than 60,000 employees shows that avoiding a culturally toxic hire, or letting one go quickly, amounts to $12,500 in cost savings.
But it’s important to balance the need for termination with opportunities for improving performance, especially if the employee is eager to do so. Training and investing in an employee’s development can be a cheaper route to success compared to the costs of recruiting a new hire, and it can end up as a win-win for both the manager and the employee—especially at a time when salespeople are the #2 most difficult role to fill across industries. Spending on employee training is up 1.7% from 2016 to 2017, at $1,296 per head according to ATD.
So, for managers who want to do as much as they can to improve performance before replacing an underperformer, a PIP is a helpful tool.
Elements of a PIP
The key elements of an effective PIP—and its process—should include:
- Before the PIP: Manager assessment and involvement
- Creating the PIP: S.M.A.R.T. design
- During the PIP: Team effort and regular check-ins
- Ending the PIP: A clear closure
Manager assessment and involvement
Managers must ask themselves whether they are truly invested in an employee’s success, otherwise the PIP may be ineffective from the start. There’s a risk that the employee may conclude that the manager has already decided on termination, and that this is just the first step in the process—and they’ll begin looking for other jobs. The PIP is a team effort, so managers also need to put in effort to ensure its successful completion.
A good starting point for managers is to consider the reasons for an employee’s underperformance. Thinking through the possible issues will help in understanding the employee’s potential, and in investing in their success.
- The employee hasn’t received the proper training,
- Their targets have not been made clear or are unachievable,
- They are going through a rough patch in their personal life,
- They are not fairly incentivized. How do their base salary and OTE compare to market averages? Are they satisfied with their commission structures? Are their bonus structures too confusing?
(For more information on market averages for sales salaries and OTE, see Peak’s 2019 Sales Compensation Report.)
Note that misconduct, inappropriate behavior, and poor attitude are not typically what PIPs address. These issues should be corrected via other avenues, such as disciplinary action or termination if appropriate.
Meanwhile, a termination is not necessarily the only end result for the failure to successfully complete a PIP. Managers and employees should consider other avenues, such as switching to a team that is a better fit.
HR Managers can also play a part in the process of developing and executing a PIP. They should review line managers’ PIPs for front-line sales reps to ensure that expectations and timelines are reasonable and reflect the manager’s investment in the employee’s success.
PIPS must be S.M.A.R.T: specific, measurable, achievable, relevant, and time-based.
Avoid generalities. In the PIP, clearly state the expectations for the role using its original job description and compare them to the employee’s recent performance. When documenting employee behavior, make sure to include specific examples of projects, dates, or times during which the employee demonstrated certain actions.
Quota: Sales reps are expected to meet 80% of quota per quarter, at minimum.
> Q3 and Q4 2019: You failed to meet the minimum sales quota.
Customer retention: Sales reps are expected to maintain a quarterly customer retention rate of 60%.
> Q2, Q3, and Q4 2019: You failed to meet the minimum customer retention rate.
You will be subject to disciplinary action up to, and including, termination if you:
- Do not meet your 80% quarterly quota in Q1 2020
Do not meet the 60% target customer retention rate by April 2020
Adapted from sample PIP at Indeed.com
What gets measured gets done. Ensure that there are objective ways to measure end goals and milestones so there are no disagreements or surprises at the end of the process. Sales managers should also suggest specific activities with sub-targets, to help employees hit higher-level targets (e.g., make 10 additional calls per day, come in one hour earlier every day).
Sample measurable sub-targets
- Commit to a minimum of 3 (three) hours of phone time, in office, per day
- Secure no fewer than 5 (five) lead appointments per week
- Share your weekly lead list with your immediate supervisor every Monday by 9.00 a.m.
- Secure a minimum of two in-person visits with existing clients per quarter
- Meet with your immediate supervisor every Friday at 9.00 a.m. to discuss lead list, completed appointments, and pending deals
- Complete the ABC Tier 2 sales modules to become certified by July 30, 20XX
Excerpt from sample PIP at Indeed.com
Are the targets reasonably achievable within the timeframe? Consider whether the employee might need additional training to reach these targets. HR can review the PIP to evaluate whether the targets are reasonable in view of the level of management support the employee will receive, their past performance, and the amount of time allocated to the PIP.
Cross-check the expected results with the original job description referenced in the PIP to ensure that what’s being asked for reflects the role’s expectations.
PIPs generally span 30, 60, or 90 days, depending on the size of the performance gap or the skills to uplevel. There should be distinct milestones throughout the timeline, so that the employee can demonstrate a gradual performance increase and dedication to improvement, rather than a scramble to reach all targets at the end. The power of a PIP lies in its process; it’s not a simple end-goal.
Ideally, managers and HR should draft a PIP, then have a conversation about it with the employee, to collaboratively ensure that the milestones and actions are reasonable. Once the plan is finalized, all involved parties can provide their signatures.
Sales Performance Improvement Plan (PIP) Template
Team effort while PIP is in progress
Once a PIP is signed, both the manager and the employee must work together to execute it. They should have regular meetings to discuss progress, monitor performance, and provide a chance for the employee to request support.
The employee’s role in the success of a PIP includes:
- Working to deliver on the PIP goals.
- Taking the lead to schedule progress meetings with the manager.
- Providing insights on the reason for poor performance, which may suggest the type of managerial support required for successful completion of the PIP.
The manager’s role includes:
- Understanding and addressing the root cause of poor performance. For example, if a decline in performance stems from lack of training, managers can investigate the possibility of providing official training opportunities as part of the PIP, or assigning a mentor to the employee. If unclear commission and/or bonus structure—or insufficient compensation—are at the heart of the problem, a manager should also investigate this, because it may have implications for the larger team.
- Keeping morale high. No one enjoys being put on a PIP. The manager should understand that the employee’s morale may suffer, and therefore managers should provide the necessary encouragement. Confidentiality is also critical and the employee must trust the manager to keep the process between just the two of them.
Clear closure or extension
When the PIP’s timeline ends, the manager and employee must assess whether the specific success metrics have been met. If they have not, the manager has two options.
Either they can formally close the PIP and enact a termination, demotion, lateral move, or whichever other consequences were decided upon. Since such eventualities were clearly laid out during the PIP’s development phase, the outcome should not come as a surprise to the employee.
Or, if the employee seems to be making excellent progress despite missing overall milestones, the manager might choose to extend the PIP’s timeline.
PIPs work well for sales teams because sales as a function is highly measurable and has clear targets. This leaves little room for surprise in perceived performance and helps in the development of milestones and sub-milestones for an employee who wishes to improve their results.
Still, PIPs are a team effort. Sales leaders should be invested in the employee’s success and investigate ways to support them.
Firing an employee can be difficult, but when all other avenues are exhausted, managers may need to seek a replacement and should not tarry in doing so; poor performers and toxic employees can damage the rest of the team culture. Managers can also take the opportunity to reexamine their hiring process, which led to the poor hire in the first place. While the cost of training an employee can be cheaper than replacing one, the most cost-effective course of action is getting the hire right the first time.
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