Case Study: Should a CHRO Abandon Performance Improvement Plans?

Anna Chen leaned back in her chair, rubbing her temples as she reviewed the latest HR reports. It had been a bruising 18 months as chief human resources officer of Barton Creek Technologies. She’d overseen the emotionally exhausting closure of two company offices, one in Portland and another, smaller but cherished, in Charlotte, as part of a post-pandemic adjustment to remote work and investor demands for leaner operations. Despite her best efforts, employee morale had taken a significant hit, and Anna felt it deeply. A quiet knock at the door broke her concentration. Marina Sandoval, a senior HR partner, entered, holding a tablet and wearing a look that signaled uncomfortable news. “Sorry to interrupt, but something just came up that I thought you’d want to know right away. It’s about Ethan Lim.” The mention of Ethan’s name sparked a vivid memory. Anna had personally recruited him almost two years earlier after an impressive presentation he’d given during her alumni visit to Singapore Management University. Ethan stood out immediately—not just for sharing Anna’s alma mater, but for his striking creativity and exceptional analytical skills. He’d eagerly joined Barton Creek, working remotely from Boston to support his wife’s MD/PhD program at Tufts. Early probationary reviews from his manager had been stellar. Anna was proud to have brought such a promising talent into the company. “Ethan?” she asked, puzzled. “Last I heard he was thriving. Has something changed?” Marina nodded, looking down at her notes. “His new manager, Tyler Nelson, placed him on a performance improvement plan last week.” “A PIP?” Anna grimaced. Tyler was a gifted, Austin-based engineer who’d been promoted to management a few months earlier based on his technical performance. It was his first leadership position, and this abrupt move set off alarm bells. “That’s concerning,” Anna said. “Do we know what triggered it?” Marina shook her head. “It’s not entirely clear yet, but Tyler seems to think Ethan’s performance has slipped significantly. Deadlines missed, quality issues, lack of responsiveness—at least according to his documentation.” Anna’s thoughts were racing. The company had introduced the PIP a little more than a year ago. All new managers underwent a training on when and how to use it, and she had hosted a company webinar on the topic. Yet while PIPs were meant to help struggling employees regain their footing, in practice they could be used as blunt instruments to push people out the door—especially by inexperienced or pressured bosses. “Marina, I don’t want to micromanage and dive into this case, but I’m worried,” she said. “We’ve promoted a lot of individual contributors into management roles recently, especially after the reorg. And I’m wondering…” Anna chose her words carefully. “I’m wondering if we’ve set them up to succeed. Can you do an audit for me on PIP outcomes? Given how fragile morale is right now, we can’t afford more damage.” As Marina left, Anna’s stomach was in knots. Had she equipped managers with a system they neither understood nor could use effectively? A Tool for Good and for Ill A week later, Anna stood at the head of the executive suite conference table, gripping a tablet that showed the results of the audit. CEO James Callahan and general counsel Sophia Greene sat awaiting her summary. “Thank you both for making time for this,” Anna began, clicking to start her presentation. The first slide displayed a single metric in bold red: 15%. “That’s our PIP success rate,” Anna continued. “Of all the employees placed on performance improvement plans in the past year, only 15% completed them and remain productive team members today.” James shifted in his seat. “And the other 85%?” “That’s where it gets interesting,” Anna said, advancing to the next slide, which showed a breakdown of outcomes. “About 60% are terminated at the end of their PIP period. But here’s what caught my attention: Nearly 25% go on medical leave within weeks of starting the PIP.” “Medical leave?” Sophia asked. “Stress-related, primarily,” Anna replied. “And there’s a pattern: These people rarely return. We suspect they are gaming the system. We’ve discovered whole Reddit boards on how to use protected medical leave to job hunt. It seems we are essentially paying some of them to find employment elsewhere.” Anna let the discovery sink in for a moment. “Even among the 15% who make it through the PIP, 40% end up leaving the company within a year. I’m guessing they survive the process but lose trust in the organization.” James raised a hand defensively. “Well, we did ramp up hiring quickly during the pandemic,” he said. “Maybe we brought in some people who were never going to be long-term fits. The PIP may just be doing what it was meant to—filtering out underperformers.” “Maybe,” Anna said. “But turnover at this scale is extremely costly.” She clicked to a slide of industry research. “According to SHRM data, turnover costs typically range from 50% to 200% of someone’s salary, depending on the role. For a software engineer earning $180,000, we’re facing $90,000 to $360,000 in replacement costs—recruiting, onboarding, lost productivity, knowledge transfer.” She looked at James. “We’re losing talent and money every time we misuse a PIP.” “I understand what you’re getting at,” Sophia interjected, “but let’s not forget the legal rationale behind PIPs. Wrongful termination suits average around $130,000 to settle, and if a case escalates to trial, the costs can soar past a quarter-million dollars. So there’s a financial benefit that doesn’t show up in those numbers. A PIP provides the paper trail we need to protect ourselves.” “I agree that’s important,” Anna said. “But we introduced PIPs as a supportive program—to rehabilitate, retrain, and retain talent. Employees are still reeling from the office closures, and I worry they see PIPs as little more than a firing mechanism. I think we should consider reforming them into something genuinely developmental, possibly with better training or even incentives for managers to use them positively. With your permission I’d like to present a plan for that at our next meeting.” James paused before speaking. “I hear you, Anna. But our budget is tight. Between inflation, tariffs, and investor demands, we don’t have much room for new initiatives. We’re also looking at acquiring a company in Latvia by the end of Q4 as part of our international expansion. Their labor laws are much stricter than ours—terminations require extensive documentation and justification. So could this project wait?” Anna suppressed a wince. She suspected that delaying the PIP reforms would send them into management-initiative purgatory. James stood up, ending the meeting. “Bring me proof, Anna—proof that reforming the PIP will actually improve retention without compromising our legal position.” Broader Insights and Alternative Paths Anna scanned the faces in one of Barton Creek’s meeting rooms. The employees seated before her had recently been or were currently enrolled in the company’s PIP program. Anna had asked them for candid feedback and reassured them it would remain confidential. Still, the anxiety was palpable. After Anna’s introduction, Alex, a UX designer in her twenties, tentatively raised her hand. “Honestly, being on a PIP feels awful,” she said. “People may not say anything to your face, but it’s obvious they know. I feel isolated, like I’m wearing a badge of shame.” Vanessa, a software developer known for her straightforwardness, spoke next. “The PIP is clearly my boss’s way of trying to get rid of me without firing me. The goals are impossible, and I feel pressure to resign. There’s so much pressure to track and report my daily productivity that I have no mental space at all for the creative thinking that might actually move the company forward.” David, a project manager who’d recently completed his PIP, took a turn. “For me, the PIP did clarify expectations,” he said. “I thought I was performing adequately, so getting put on it was a shock, but maybe a needed one. What bothered me was the constant scrutiny and documentation rather than actual support. If I’d had any mentoring, it might’ve genuinely helped. But the whole thing felt like my manager was following a rote program.” Several others nodded in agreement. Anna thanked everyone for their candor. While the employees dispersed, she reflected on the conversations she’d had with several managers earlier that week. Their perspectives had been mixed but illuminating. While some thought the PIPs were a fine tool to prompt performance improvements and eventually manage out employees who couldn’t get up to speed, even with help, others expressed frustration over lack of training or unclear guidelines, admitting they often felt unsupported or confused about how to effectively use the system. One comment stuck in her mind. It came from Emily, a longtime manager who had raised a provocative point inspired by an article she’d read about Netflix’s “keeper test.” As she explained to Anna, it involves bosses regularly asking themselves, “If this employee told me tomorrow they were leaving, would I fight hard to keep them?” If the answer is no, the employee is let go with a generous severance package. Emily suggested that given Barton Creek’s restructuring, it might consider empowering managers to try the same approach. “We can’t afford to keep laggards,” she’d said. “Right now we tend to hold on to people too long, even when it’s obvious they’re not fitting. Before the PIP, I would find busywork for them and hope that they would want to transfer to a different department or leave. So the PIP is at least a step in the right direction. But I think we could still act faster and more decisively.” As Anna drove out of the company parking lot that evening, her mind swirled with the different feedback. On the one hand, she wondered whether shifting to a system of sudden terminations was more humane. But her gut instinct, shaped by personal experience, leaned toward reforming the PIP—transforming it from a punitive, fear-driven system into a transparent, mentorship-based one. Years ago, in her second job out of college, Anna herself had struggled, almost quitting due to impostor syndrome. An empathetic manager had stepped in, offering guidance and gentle encouragement and ultimately changing the trajectory of Anna’s career. Could Barton Creek’s PIP be turned into something similarly supportive? Practical concerns nagged at her. Rebranding and relaunching the PIP would be costly—requiring significant resources and training for managers already stretched thin, and potentially creating resentment in people weary from restructuring fatigue. Anna knew she’d burned significant political capital recently, and additional pushback from senior leaders seemed inevitable. And, of course, the words of her CEO rang in her ears. How could she prove the system was broken and in need of attention amid all the competing interests on his desk? Given the organizational cost and internal resistance, was transforming the PIP system realistic? Or was it better left as is? Pulling into her driveway, Anna felt no closer to the answer. The Experts Respond: Should Anna Chen attempt to reform the PIP or leave it untouched? Jori Bolton Angela Geffre is the head of human capital at GrowthCurve Capital. Anna should overhaul the PIP—preserving its intent but rebuilding its structure—rather than scrapping it or letting it limp on. The numbers she shared are unequivocal: a 15% “save” rate tells us the PIP is neither rehabilitating talent nor protecting the business. First, Anna needs to prove that the PIP in its current form isn’t just ridding the company of underperformers. To do this, she can implement a program in which new hires start in a 90-day probation period to be outlined in offer letters. If baseline expectations aren’t met, the person exits quickly and cleanly. When the performance of an established employee starts to dip, on the other hand, the person can enter into a 90-day performance recovery plan cowritten with the manager. If there is no improvement after that period, the employee is let go. If there is, the person shifts to a six-month and then a 12-month program. Second, because any PIP process can be weaponized, Anna should also monitor managers—but not by looking over their shoulders. Rather, each boss should receive a scorecard noting the promotion and retention rates of their team members and the results of a twice-yearly survey that asks employees whether their leader helps them improve. A favorability rating below 70% should trigger coaching or possible reassignment into an individual contributor role. Anna should remind managers that their main objective is to make employees successful, not to tick compliance boxes. She can frame the monitoring program as a productivity tool, showing how it’s in their interest to engage with it. And though she shouldn’t micromanage, Anna should learn more about Ethan’s situation because a strong anecdote can make her evidence-backed case more compelling. In talking to the CEO, she can begin with the latter: If reform lifts the PIP’s 15% success rate to, say, 40% and improves first-year hiring success from, say, 50% to 85%, the savings will dwarf any rollout expense. Then she can demonstrate the system’s human impact by showing how a once-promising star performer is being pushed out—and outlining the value Ethan could bring if he was better managed. The CHRO’s job is to surface patterns, set standards, and design and roll out programs. Anna may still lose Ethan, but if the rebuilt framework prevents 10 more employees like him from slipping through the cracks, the organization comes out stronger. Jori Bolton Chris Yeh is an author and venture capitalist at Blitzscaling Ventures. He is a coauthor, with Reid Hoffman, of Blitzscaling, and a coauthor, with Reid Hoffman and Ben Casnocha, of the New York Times bestseller The Alliance. The PIP at Barton Creek Technologies is fundamentally broken. Rather than wasting time, effort, and scarce political capital by trying to reform or rebrand the program, Anna should shrink its scope so that it is reserved for employees whom managers are almost certain should eventually be terminated. She can then focus on developing a separate upskilling and mentorship program to help other team members boost their performance and value to the company. The challenge facing the PIP at Barton Creek is unfortunately typical: Because of conflicting and contradictory goals, these programs often fail in practice. For Anna, the PIP’s aim is developmental, to “rehabilitate, retrain, and retain” employees. But it’s not clear that others in the company agree with her. Sophia, the general counsel, states that Barton Creek adopted the system to shield the company from wrongful termination suits. For her, it is a defensive and cost-saving measure. Meanwhile James, the CEO, believes that the program is for filtering out “genuine underperformers.” These are the three senior managers with the greatest oversight and control of personnel, and they can’t even agree on the primary purpose of PIPs. By expecting them to retain employees and protect the company from legal liability and rid it of underperformers, this management team is setting up the program, and every manager and employee involved in it, to fall short. Anna has personal and philosophical reasons to pursue reform for PIPs, but she doesn’t have any evidence that changes would work as she wants. Even if she could fix individual components, it is too late to shift employees’ (extremely accurate) perception that the program is a path to termination. Instead, Anna should make these unsaid perceptions explicit. Employees should be placed on PIPs only if managers are 90% or more certain they are not a good fit for the company. The system should be not a general retention or mentorship program but a last chance for underperformers who truly want to become worthy contributors. Anna can then redirect her energy to upskilling and reskilling, rather than rehabilitation, programs. The best companies don’t wait for people to struggle before providing support. They proactively offer it to everyone, and especially to strong performers. Not only does this improve productivity and retention, but it also makes them employers of choice for top talent. HBR’s fictionalized case studies present problems faced by leaders in real companies and offer solutions from experts. This one is based on the Singapore Management University case study “When a Dream Job Turns Sour” (case no. SMU-25-0008), by Devasheesh P. Bhave and Cheah Sin Mei.

Case Study: Should a CHRO Abandon Performance Improvement Plans?

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