You have known for a while now. The work comes back a little late, a little rough, and someone else tidies it before it goes out. Your best people have started routing around the problem, which means they have noticed it too. You keep meaning to say something, and you keep finding a reason not to: it’s a busy week, they’re going through a rough patch, maybe it will sort itself out. It will not. The conversation you are avoiding is rarely as bad as the silence you are keeping.
Underperformance is when someone is not meeting the reasonable standards of their role. The trap for owner-managers is treating it as a character flaw, when Employment New Zealand’s guidance points the other way: a performance issue is often less about the person than about unclear expectations, thin training, weak feedback, missing tools, or something going on at home. Before you decide someone is the problem, check whether the job has been set up to be done well.
This will tell you which process you’re in. There is a clean line in New Zealand employment practice between a performance issue and misconduct. Performance is about ability: can they do the job to standard? Misconduct is about conduct: a breach of a rule, a policy or the agreement. Get the two confused, and you can find yourself running a disciplinary process over what was only ever a coaching problem.
Left alone, underperformance doesn’t stay contained to one person. MyHR’s Julian Hackenberg says if underperformance goes unaddressed, it will impact the rest of your team and overall productivity. Your reliable people pick up the slack, then resent it, then update their CVs. The thing you were trying to avoid, that being losing someone, happens anyway, except it is the wrong someone.
There is a cost to getting it wrong, too. MyHR, drawing on Employment Relations Authority outcomes, has noted the average cost to defend and win a personal grievance sitting around $28,000, and puts the average cost to lose at roughly $68,000. The lesson is not to avoid the conversation, but to have it properly, early, in good faith. Done well, a fair process is your best protection. Any formal step must follow one, including giving the employee a genuine opportunity to respond before decisions are made.
The good news is that the sequence is well mapped. The first step is to name it to yourself. Pull the role description and the agreement, and be specific about the gap. For example, “three of the last five reports came back with errors” is useful; “your attitude is poor” is not. The point is to manage the work, not the person, and to anchor the conversation in the standard, not personality.
Next, go informal before formal. Employment New Zealand recommends informal measures first, held over a set period. That might include extra training, mentoring, buddying, or more frequent check-ins. Issues might be resolved here with no need for escalation. But if that doesn’t work, set up a proper meeting. Put it in writing, explain what it’s about, and make it clear they can bring a support person. The key principle is no ambush.
Then have the conversation, and actually listen. State the concern clearly, then hear their side without rushing to defend or correct. Agree on what “good” looks like, what support you will provide, and a realistic timeframe for improvement.
As things progress, document it properly. Write down what was agreed, share it with them, and keep it on file. Not recording outcomes is one of the most common and most damaging mistakes in small business HR.
Finally, diarise a review point. If informal steps don’t lift performance, a Performance Improvement Plan with clear, measurable expectations and a set timeframe becomes the formal next step.
What to watch
Watch for the moment it stops being a skill issue and starts becoming a will issue. Refusal, dishonesty, or deliberate breaches shift the situation into misconduct, which runs on a different track entirely.
Also, watch your own setup. Sometimes the issue traces back to the business — a role that was never properly defined or feedback that was never given. And keep an eye on the wider team, because they are always the first to feel the impact when standards drift.
Pick the name. Pick the week. Book a quiet half-hour, bring one sheet of paper with the specifics, and start with what good looks like.
Most of the time, that’s enough to reset things. And often, the people you were most worried about losing are the ones who notice you finally dealt with it.
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