To PIP or Not to PIP...

Why PIPs Are a Liability, Not a Solution, for Underperformance

The relationship between employer and employee hinges on an unspoken agreement: you bring your time, effort, and skills to the table, and in exchange, you’re compensated fairly. When this compact is broken—when an employee consistently underperforms—the ripples of their inaction or inability extend far beyond their desk. Yet, rather than address the issue head-on, many organizations turn to the well-worn but deeply flawed Performance Improvement Plan (PIP).

On the surface, a PIP appears to be a structured, reasonable way to help struggling employees. Define the gaps, outline clear steps, and give them a chance to improve. But in practice, it’s more often a stalling tactic, a way for leaders to avoid difficult decisions while unintentionally creating hidden liabilities for the entire organization. These liabilities—strategic, operational, and cultural—are a textbook example of what I call Executive Debt.

The Burden of Avoidance

Imagine an employee whose performance has steadily declined. Their projects lag behind, their teammates are constantly picking up the slack, and their manager spends more time coaching and covering than leading. The cracks in the system are obvious, but instead of making the tough call to let the employee go, the manager initiates a PIP.

The PIP begins with noble intentions: a belief that, with the right structure and support, the employee can turn things around. But beneath this optimism lies a more uncomfortable reality. The manager knows, deep down, that the chances of a complete turnaround are slim. The employee knows it too, reading the PIP as a countdown clock on their tenure. And the team? They see what’s happening and wonder why leadership isn’t addressing the obvious.

Instead of solving the problem, the PIP prolongs it, creating a new layer of liabilities. The team feels demoralized. The manager’s time is consumed by check-ins and documentation. And the employee, far from thriving, spends the process disengaged and stressed.

This is how Executive Debt accumulates—not in grand, dramatic decisions but in the quiet deferrals of accountability that ripple through the organization.

The Cost of Cultural Erosion

One of the most insidious effects of a PIP is its impact on organizational culture. High-performing employees notice when underperformance is tolerated, even temporarily. They see the effort poured into salvaging a struggling team member and wonder why leadership isn’t dedicating that same energy to supporting and rewarding those who are already excelling.

Over time, this creates a cultural debt, where the implicit message becomes, “Mediocrity is acceptable as long as we check the boxes.” Trust in leadership erodes, and engagement suffers—not just from the employee on the PIP but from the entire team.

For the employee under review, the PIP is rarely a morale booster. More often, it feels like a public marking of their failure. They become more withdrawn, less collaborative, and increasingly focused on surviving the PIP rather than thriving in their role. Even if they manage to meet the plan’s requirements, the stigma of having been “on a PIP” lingers, often leading to their quiet departure soon after.

Delaying the Inevitable

Performance Improvement Plans also create operational debt. By the time a PIP is initiated, the underperformance has usually been an issue for months. Projects are delayed, resources are stretched, and the manager spends more time documenting the employee’s failures than driving results. Every moment spent on the PIP is a moment not spent on higher-priority work.

And then there’s the legal risk. PIPs are often deployed as a shield against wrongful termination claims, but a poorly executed plan can backfire. If the documentation isn’t airtight or if the process appears biased, the company could find itself embroiled in costly and time-consuming disputes.

The Strategic Toll

Perhaps the most significant liability of all is strategic debt. By tolerating underperformance and dragging out the process with a PIP, leadership compromises its ability to execute on the company’s goals. Decisions are delayed, opportunities are missed, and the team’s energy is siphoned into managing a problem that should have been resolved months earlier. The longer the issue lingers, the more entrenched the debt becomes.

Meanwhile, the high performers who could be driving innovation and growth start to feel the weight of carrying an unbalanced team. Eventually, some of them will leave, further compounding the debt.

The Case Against Excuses

Supporters of PIPs often argue that employees deserve a chance to improve, especially if they’re dealing with personal challenges or simply need more training. While these arguments may come from a place of empathy, they fail to address the broader impact of underperformance on the organization.

When an employee is unable to meet expectations, it’s not just their problem—it’s everyone’s. Teams absorb the extra workload. Managers lose valuable time. Clients and customers feel the pinch. And the company’s mission is compromised.

Giving endless second chances doesn’t solve the problem; it merely shifts the burden onto others, creating resentment and disengagement across the board.

A Better Way Forward

So, if PIPs aren’t the answer, what is? The solution starts with proactive leadership. It means addressing performance issues early, with clear feedback and measurable expectations. It means hiring and onboarding with precision, ensuring that employees are set up for success from the beginning. And it means recognizing when the fit simply isn’t right and having the courage to part ways.

Sometimes, the most compassionate thing you can do for an underperforming employee is to let them go. This allows them to find a role where they can thrive while preserving the integrity and momentum of your organization.

The Leadership Imperative

Executive Debt is a silent killer. It grows unnoticed, layer by layer, as leaders defer hard decisions and allow small cracks to widen. Performance Improvement Plans, far from solving the problem, often accelerate this debt, creating cultural erosion, operational inefficiency, and strategic paralysis.

To break the cycle, leaders must act decisively. They must prioritize the long-term health of their teams and organizations over the short-term comfort of avoiding conflict. And they must honor the social compact by upholding the standards that allow employees, teams, and companies to thrive.

The path forward isn’t easy, but it’s necessary. Because the cost of deferring accountability is always higher than the cost of addressing it head-on.

Struggling with underperformance in your organization?

The pitfalls of PIPs are just one example of the hidden costs leaders face when tough decisions are deferred. “Executive Debt” dives deeper into these liabilities, revealing how unchecked cultural, operational, and strategic debts can erode your organization from within. Learn how to break free from costly cycles, make decisive moves, and build a high-performing team without the drag of unresolved issues. Get your copy today at https://executivedebt.com and lead your business into a debt-free future.