A PIP shouldn’t be the paperwork before an exit. Research for Acas found conflict handled through formal procedures costs £6,405 per employee, over 3 times informal resolution. 5 ways to make a PIP actually help.

A Friday question for People leaders, CPOs and COOs in Dublin, London, Amsterdam, Stockholm and Tallinn: when someone in your company is put on a performance improvement plan, does anyone, including the person on it, believe it is meant to work?

In a lot of companies the honest answer is no. The PIP arrives late, it reads like a charge sheet, and everyone treats it as the first step out of the door. Managers ask about it constantly: how do you write a PIP that gives someone a real chance, without it turning into a box-ticking exercise? The best evidence on why this matters isn’t about PIPs at all. It is about what happens when workplace problems are left until they need a formal process. That is what “Estimating the costs of workplace conflict”, written for Acas by Richard Saundry of the University of Sheffield Management School and Peter Urwin of the University of Westminster, set out to measure.

1. What the data actually says

• The total bill. The authors estimate conflict costs UK organisations £28.5 billion a year, just over £1,000 for every employee and just under £3,000 for each person involved in conflict. They estimate 9.7 million employees experienced conflict in 2018 to 2019.
• Formal processes are common. Using workplace survey data, they estimate about 1.7 million formal disciplinary cases a year, at roughly £1,141 each. CIPD figures used in the report put the management time for one disciplinary case at about 6 days.
• Formal costs more than 3 times as much. Where conflict was handled only through informal discussion with a manager, HR or a representative, the average cost was £1,941 per employee. Where it went through formal disciplinary or grievance procedures, it was £6,405. In the formal group, 21% took time off and 12% saw their employment end.
• Exits drive the cost. The authors say most of the cost comes from the end of the employment relationship. Using the figures in the report, replacing one person costs about £30,614: £5,433 to recruit and £25,181 in lost output while the new hire gets up to speed.
• Poor performance is named directly. The report calls for “taking action at early points to address issues of capability and poor performance”, and warns that it can be tempting for managers under pressure “to solve problems by firing employees or ‘managing them out’ of the organisation”. It also cites earlier Acas research that “mismanagement of performance can often escalate into accusations of bullying”.
• Formal should be the exception. The authors write that disciplinary procedures “should aim to improve behaviour rather than punish”, and that formal procedures “should be the exception rather than the rule”.

Honest caveats. The data covers UK workplaces in 2018 to 2019, before the pandemic. It is about workplace conflict in general, including conduct and grievances, not only underperformance, and the formal category combines disciplinary and grievance cases, so it isn’t a measure of PIPs. Some figures, especially dismissals, rest on small survey numbers, and the authors say costs vary a great deal with organisation size. It isn’t a benchmark for your company. The direction is the useful part: the later and more formal the response, the more it costs.

2. The mid-market hurdle: PIPs that start too late and help too little

In a company of 100 to 1,500 people, most managers have never written a PIP before their first one. There is often no shared template, no agreed bar for what “below expectations” means at each level and little written evidence from the year. So the problem gets left until the manager is frustrated, HR is brought in late, and the plan is written to protect the company rather than to help the person.

That hurts a CPO and a COO in different ways. For the CPO it is a fairness and risk problem: two departments handle the same level of performance in completely different ways, and the person on the plan can’t point to anything that told them earlier. For the COO it is a cost and delivery problem: the gap has already been dragging on the team for months, the manager is now spending days on paperwork, and if the person leaves, the role is open again with all the replacement cost the Acas research describes. A plan written so the person can actually succeed is the cheaper path, and it is also the fairer one.

3. 5 ways to make a PIP actually help

1. Make sure the PIP is never the first conversation. Raise the gap in a 1:1 as soon as it shows, with an example and what good looks like, and note what was agreed. The Acas figures show informal resolution costing a third of the formal route. If the person is surprised by the plan, the manager waited too long.
2. Describe the gap against the scorecard, not a feeling. Write the plan against the same written bar used in reviews: the goals that were missed, the skills expected at that level and specific examples. Keep it to three or four measurable outcomes. “Improve communication” can’t be passed. “Send the weekly client status update by Friday at noon, with risks flagged” can. The rating scales guide has examples.
3. Put the support in writing, with an owner for each item. A PIP that only lists targets is a warning letter. Name what the company will do: weekly time with the manager, pairing with a colleague, training, clearer priorities or a lighter load while the person catches up. The manager’s actions belong on the plan too.
4. Set a fair length and fixed checkpoints. Agree a period with HR that gives the person a realistic chance to show sustained improvement, and check progress at fixed points, with a short written note after each one. Agree upfront what each outcome looks like: plan closed, plan extended or a formal capability decision under your own policy and local employment law.
5. Check consistency in calibration. Look at who is on a PIP across departments, and at who probably should have been flagged earlier but wasn’t. The same pattern of results should lead to the same response everywhere. The review bias checker and the guide to reducing rating bias help.

For the PDF, use your work email. The call is a free 15-minute discovery call: bring your PIP template, with names removed.

4. Where Revolut People fits, and where it doesn’t

Revolut People started as the system Revolut built to run performance as it scaled to 20,000 people across 60+ countries. The parts that map to this problem are the ones that make underperformance visible early and handled the same way everywhere. Reviews use one scorecard (goals, skills by seniority and values), so the bar a PIP is written against is the same one used in every review. PIP and probation scorecards come with ready-to-use templates and run as their own cycles, with checkpoints and a performance history, so a plan isn’t a standalone document in someone’s inbox. Calibration flags patterns such as Consistent Developing and Historical Performance Decline, so the conversation can start before a problem becomes a case. Goals cascade from company to team to person, and 1:1s come with AI-powered summaries, so the early conversations and agreed actions are on record. Core HRIS records, including reporting lines, sit on the same platform.

To be straight about the limits: software won’t have the hard conversation for a manager, and it isn’t legal advice. Someone still has to raise the gap early, write a fair plan, give real support and follow your capability policy and local employment law. What one shared record does is put the scorecard, the goals, the 1:1 notes and the checkpoints in one place, so everyone can see whether the plan was given a fair chance. Related reads: the hidden drag of underperformance, feedback that never sticks, and keeping personality out of ratings.

Bottom Line

Research for Acas puts the cost of workplace conflict to UK organisations at £28.5 billion a year, and finds that conflict handled through formal procedures costs £6,405 per employee, more than 3 times the cost of informal resolution. The data is from before the pandemic and covers more than underperformance, but the lesson travels: the earlier and more supportive the response, the cheaper and fairer it is. For a mid-market People team or COO in the UK, Ireland, Benelux, the Nordics or the Baltics, that means raising gaps in 1:1s, writing PIPs against the scorecard, putting support and checkpoints in writing and checking consistency in calibration. Try it with the next plan your company writes.

FAQ

What did the Acas research find?

“Estimating the costs of workplace conflict”, written for Acas by Professor Richard Saundry (University of Sheffield Management School) and Professor Peter Urwin (University of Westminster) and published on 11 May 2021, estimates that workplace conflict costs UK organisations £28.5 billion a year, just over £1,000 per employee. It estimates 9.7 million employees experienced conflict in 2018 to 2019 and that there are about 1.7 million formal disciplinary cases a year, at roughly £1,141 each. Where conflict was handled through formal disciplinary or grievance procedures, the average cost was £6,405 per employee, against £1,941 where it was handled only through informal discussion.

Is a performance improvement plan the same as a disciplinary process?

Not necessarily, and it shouldn’t feel like one at the start. A PIP is a written plan that sets out the gap between current and expected performance, the support on offer and how progress will be checked. Many companies use it as the first formal step of a capability process, which is why it matters how it is introduced. Follow your own capability policy and the employment law where the person works, which differs between the UK, Ireland and the rest of Europe.

How long should a PIP last?

There is no single right length. Choose a period long enough for the person to show sustained improvement in the work being measured, agree it with HR before the plan starts, and set fixed checkpoints in between with written notes after each one. A plan that is too short to succeed tells everyone it was never meant to.

How reliable is this research for a European mid-market company?

Treat it as a strong signal, not a benchmark. The data is from the UK in 2018 to 2019, before the pandemic. It covers workplace conflict in general, including conduct and grievances, not only underperformance, and the formal category combines disciplinary and grievance cases. Some figures, especially dismissals, rest on small survey numbers, and the authors say costs vary a great deal with organisation size. The direction is the useful part: the later and more formal the response, the higher the cost.

Is Revolut People available in the UK, Ireland, Benelux, the Nordics and the Baltics?

Yes. Revolut People is available to businesses with a registered entity in the UK, the EEA or the US, which covers Ireland, the Benelux, Nordic and Baltic countries.