Missing targets is not always due to poor performance

Missing targets is not always due to poor performance

Onus will lie squarely on the company to provide total proof
Pierre Marais - 03 June 2009 ( An Excerpt)

The prevailing economic pressure on companies is not only causing an increase in retrenchments, but companies are pressed for economic survival and performance.

The setting of employee performance targets, their reasonableness and its attainability frequently cause problems. So, too, does ensuring that employees achieve these targets and, if not, disciplinary action follows.

An analysis of case law highlights employers' so-called "scientific", illogical and arbitrary ways of determining performance standards, especially sales and revenue targets.

Some calculations used by employers include grandiose visions of market dominance or penetration, adding new business revenue to the previous year's targets, etc.

When considering the fairness of a dismissal for poor performance, case law provides certain guidelines.

Firstly, it is an entrenched labour law principle that employers have the prerogative to set performance standards/targets which their employees are expected to meet.

Where an employee fails to meet the standard expected, disciplinary action for poor work performance, which could include dismissal, could be initiated by the employer.

This process could be detailed in a company's own disciplinary policy, failing which, Item 9 of Schedule 8 of the Labour Relations Act regulates the procedural and substantive fairness pre-requisites.

The details should be common knowledge and could be summarised as requiring a factual investigation on whether or not an employee failed to meet a performance standard, whether the employee was aware of this standard, was given a fair opportunity to meet it, and whether dismissal was an appropriate sanction.

Item 9 does not specify a requirement that the performance standard/target must be reasonable, attainable or fair, but merely that a target exists and that the employee did not meet it.

However, arbitrators and labour court judges have ruled that they will not merely accept arbitrary targets/standards that are unfair, unattainable or unreasonable. Where employees challenge the unrealistic nature of targets, employers will have to lead compelling evidence to prove the contrary.

Case law also reiterates that employers, when determining disciplinary action, must also consider prevailing circumstances, for example, an employee being on sick leave, business cycles, market/area characteristics, lack of support structures, lack of product, the prevailing economic climate, and so on.

In order to effect fair discipline, case law requires of employers to (1) prove that an employee failed to reach a target/standard and (2) that such failure was due to the employee's poor work performance. Remember that the mere non-attainment of the performance target is not sufficient to prove poor work performance per se.

In this regard, case law requires of employers, during performance counselling meeting(s)/disciplinary hearing, to determine, on a balance of probabilities, what the cause was of the non-attainment of the targets.

Where these causes are attributed to external factors or reasons beyond an employee's control, a dismissal or any other form of disciplinary action would be viewed as unfair.

In one particular case, an employee did not meet the set sales targets and, after counselling, the targets were reduced and agreed to by the employee.

After not meeting these reduced targets, the employee was dismissed for incapacity. At arbitration the employee argued that, even after having agreed to them, the standards set were unattainable as the market was not receptive to the company's products.

The company was unable to prove the contrary and the employee's dismissal was ruled to be unfair and she was awarded six months' salary as compensation.

Employers and employees should take cognisance of the fact that, as per case law, the achieving of the desired targets/performance standards are the responsibility of both parties.

For example, there is also an obligation on the employer to counsel, direct and assist. Notwithstanding having done so, but the targets still remain unreasonable and unattainable, employers will find it difficult to prove a fair dismissal.

Readers are also reminded that, especially at more senior levels, performance targets are sometimes a lot more fuzzy, however, the same legal principles would apply, namely that the mere non-attainment of a target could be insufficient to ensure a fair dismissal.

Unfortunately, dealing with poor performance dismissals is legally a bit more complex than discussed above.

In this regard, confusion frequently exists as to differentiating between misconduct and poor performance and/or gross negligence and/or the employee's incapacity.

Space does not permit a detailed legal explanation and readers are advised to obtain professional labour law advice when more complex cases are dealt with.