Loosen the soil about a foot in all directions. I have clay and usually remove about a square foot and break the clay up by hand. I've since moved on to loosening the soil with a big broadfork, but that's no day at the beach either.
You are just trying to make sure that the peony can easily expand it's root system while aerating the soil. Clay is especially bad about forming an air-tight seal, so mixing topsoil with the clay should help the peony out a great deal.
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