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Why Companies Do PIPs

A PIP can seem cruel, but there’s a clear reason that companies use them year after year. Let’s start with the top priority for a manager: ensure the optimal performance of the team. For a manager, getting their reports promoted or singing their praises is important, but only insofar as it’s in service of the optimal performance of the team.

Another detail to realize is that the high performers on any team do an outsized amount of work. This is especially true in jobs that have tremendous leverage for the most skilled workers, such as software engineering (thus the famed “10x engineer”). When a company is large enough, a “bell curve” of performance will emerge. A PIP is focused on the employees who are deemed as low performers, typically the bottom 10% of the bell curve.

So, returning back to the original question: the reason why companies do PIPs is to ensure optimal productivity and impact for the overall employee base. If high performers sense that poor performance is not being addressed, they may leave the team. So a PIP is a way to push poor performers off the team.

The company also wants to push people out in a way that minimizes the chance of a lawsuit. Even though employment in the US is at-will, there’s still a chance of getting sued if the employee argues that they were fired for an illegal reason (e.g. due to a protected characteristic).

The company or manager may claim that the PIP is designed to help you, but that’s almost never the case. They’re more concerned about minimizing the negative impact on the broader team.

Finally, PIPs are often “weaponized” to fire people under the guise of performance when the company doesn’t want to call it a layoff. This is especially relevant now in the current economy as companies may enter an age of austerity.