I don't think they should be talking about a contract extension right now either, especially after the struggles his teams have endured in two consecutive second halves. While that's not all Terry's fault, I don't think that is the right message to send as an organization at the moment. What was on display for most of the second half was unacceptable - no matter who is on the roster - and Terry, his staff, and the front office are all accountable for that.
Rather, I'd like to see how he does with a better roster (which hopefully comes next season). If he is given better cards to play with, it would be a better evaluation of how he is able to motivate and connect with the team. If that happens and they get off to a good start next season, they should consider extending him.