PIPs and appraisals in Luxembourg: time to end the hypocrisy

The Performance Improvement Plan (PIP), a concept imported from the United States, is becoming increasingly common in Luxembourg. Initially intended to support employees in overcoming performance challenges, the PIP has too often been co-opted as a veiled exit strategy.

In many companies – particularly within Luxembourg’s financial sector, where US-style management models dominate – PIPs are no longer about support. They are about control. Employees are placed on unrealistic performance tracks with vague objectives and tight deadlines, effectively set up to fail.

Forced rankings and “Rank and yank”

At the heart of this misuse lies the forced ranking system, a performance appraisal method that assigns employee ratings based on a fixed distribution:

• 70% must be rated as average;
• 20% can be rated above average;
• and 10% are designated underperformers – often automatically placed on PIPs.

This “rank and yank” model, popularized in the US in the 1980s and 1990s, undermines collaboration, fosters internal competition, and forces negative evaluations even in high-performing teams.

PIPs as instruments of pressure

Used ethically, a PIP can be a helpful framework: it provides clear goals, realistic timelines, and tailored support. But in practice, many PIPs today are initiated without prior dialogue or substantiated concerns. Instead, they:

• Impose arbitrary and unattainable targets;
• Apply intense psychological pressure;
• Undermine employees' self-confidence while masking intentions with reassuring language.

We have witnessed cases where PIPs serve as a formalised push towards resignation or dismissal – bypassing legal redundancy procedures. It’s time to end the double talk. PIPs must not become tools for silent layoffs.

Collective and individual response

When a PIP is introduced, immediate and collective action is essential.

As an individual:

• Scrutinise and challenge the objectives, deadlines, and justifications;
• Involve staff or union representatives early;
• Document all communications;
• Request written clarification of the reasons behind the PIP.

Hope is not a strategy – PIPs are often a prelude to dismissal. Recognise the warning signs early.

As a staff delegation:

• Inform employees about what a PIP really is – and isn’t;
• Support colleagues under pressure – don’t let them face it alone;
• Demand transparency from management: How many PIPs are issued each year? How many resignations, dismissals, or sick leaves follow?
• Publicly question and, where necessary, oppose manipulative uses of PIPs.

Invest in real development

Instead of punitive plans masquerading as support, companies should invest in meaningful alternatives:

• Coaching: Targeted skill development with professional guidance, particularly useful for soft skills;
• Mentoring: Peer-to-peer learning that fosters knowledge sharing and long-term growth;
• Professional development: Training programmes and certifications that proactively address skill gaps and encourage continuous learning.

 These alternatives reflect a commitment to growth, not attrition.

A PIP should never be a quiet substitute for dismissal. By naming these practices for what they are, and by acting swiftly and collectively, employees and staff representatives can push back against misuse – and help shift the workplace culture back toward fairness and development.