What would be the initial step to approach an employee who is showing underperformance but seems to have personal issues going on in the background?

It may be appropriate in this situation to have an informal discussion with the employee about his/her performance. Disciplinary procedures usually have provision for an informal procedure, as well as a formal procedure, to allow for this.

The informal discussion may provide the employee with an opportunity to raise any issues that could be affecting performance and/or a quiet word of caution or advice (if appropriate) may be all that is required to improve performance.

This approach may lead to the problem being dealt with quickly and confidentially. However, if the employee’s performance does not improve, the employer could consider taking formal action.