Employee Performance Management System - A Buyer's Guide

Every organization wants to improve its employees' performance and engagement. Only 32.5% of US employees are engaged at work, which means about 60% of employees are not adding any substantial value to your organization.

Having an effective performance management strategy can solve this problem, and it begins with having the right performance management software.

Here's a quick guide to selecting the best performance management software for your business.


What Is Employee Performance Management Software?

Performance management software is a software solution that allows you to track, manage, and oversee the performance of your employees. Companies often rely on annual, one-dimensional performance review procedures; however, 45% of HR leaders consider them to be inaccurate.

A performance management system optimizes and automates your performance management process. It enables you to identify and reward your best performing talent, discover the training and improvement opportunities, and increase employee satisfaction and retention.


Importance of a Performance Management System

Your employees are the driving force of your organization. If your workforce is productive and efficient, you'll seamlessly achieve your organizational objectives. Contrarily, if they don't perform well, you'll end up spending more money and resources to get the job done.

Lack of employee productivity could be due to numerous reasons, such as:

●     Not being enough motivated

●     Poor communication

●     Poor supervision

●     Inconsistency

●     Lack of delegation

●     Lack of acknowledgment

●     Biased feedback during annual performance reviews

●     Inadequate technologies

All these reasons boil down to an inefficient performance management process. A performance management software solution helps you overcome this hurdle. With the best performance management software, you can conduct unbiased, accurate, and timely performance reviews, acknowledge your employees and make them feel an integral part of the organization.


Key Functionalities of a Performance Management System

Here are some key features and functionalities to look for in a performance management system.

1. Goal Setting

It isn't possible to track and analyze your employees' performance if you don't set goals that they can pursue. Setting clear, dynamic, and trackable goals is an essential feature to look for in any performance management system.

The goal-setting feature allows you to create goals and track their progress. You can also update and customize the goals as per your requirements. The feature also allows you to create and delegate tasks to make the entire management process smooth and hassle-free.

2. Reporting and Analytics

While creating goals helps you pave the pathway for your employees, in-depth tracking and evaluation help you determine how far your employees went. The reporting & analytics feature enables you to get detailed insights into how your employees are performing towards a particular goal. You can measure the progress of each goal, along with metrics such as objectives hit, objectives pending, days to deadline, and more.

The best performance management software systems also allow you to generate visual reports that provide better, easy-to-consume information on how your employees are performing. Moreover, goal tracking can become difficult for larger organizations. With robust reporting tools, you can access critical data and make the right decisions.

3. Self-Assessment

The self-assessment or self-evaluation module allows employees to assess their own performance. Self-assessment has numerous benefits. First, it lets employees be their own guide. They can rate themselves, analyze their performance, and identify scope for improvement. Secondly, it adds a sense of responsibility to all employees, which helps nurture their leadership qualities.

4. 360-Degree Feedback

As discussed, one-dimensional feedback doesn't help your organization. It can often be inaccurate and biased, which negates the purpose of a performance review. The 360-degree feedback feature enables you to overcome this hurdle. It allows you to gather a multi-layered response on each employee's performance instead of relying on input solely from their manager.

This module introduces a new feedback structure to your organization. Instead of following a hierarchical feedback structure that flows down from senior executives to managers, this structure collects anonymous responses and feedback. The feedback could come from seniors (managers and executives), lower-level employees (juniors), and lateral-level employees (colleagues). This ensures that the feedback is accurate and unbiased.

5. Manager Logs

A good performance management tool comes with a dedicated dashboard for managers, also known as a manager log. It allows team leaders, managers, and other senior leaders to keep an eye on how their employees are performing and for this purpose, managers are using employee monitoring software for tracking their employees’ performance. They can also use the manager log to create, assign, and delegate tasks and track progress.

6. Rewards and Recognition

69% of employees agreed that they would work harder if they were better recognized. By identifying and rewarding your best-performing employees, you give them a reason to continue working harder for the organization.

Moreover, the value an employee adds to your organization goes beyond the revenue they generate and the targets they achieve. A performance management system allows you to recognize and reward employees that add value to your organization in other ways.

7. Integration

The best performance management software integrates seamlessly with other HR software and enterprise software systems. These integrations allow you to manage all your business operations from one place, which helps save time and increase productivity.


Benefits of Performance Management Software

The right performance management software can optimize your performance review process in many ways. Let's look at the key benefits of implementing a performance management software system.

1. Employee Performance Insights

A performance management software solution provides a transparent look into each employee's performance. This includes more than the feedback they've received from their managers or the revenue or goals they've achieved. You can get a comprehensive idea of how your employees perform by setting numerous criteria for measuring performance.

When you get in-depth insights into your employees' performance, you can make better decisions. You can identify which employees are performing the best and which ones are underperforming.

2. Continuous Feedback

More than 50% of employees consider annual performance reviews to be inaccurate. When you conduct yearly performance reviews, your employees are more motivated to work harder when the performance review date approaches to get positive reviews. On the other hand, some employees may perform well all year long but somehow fail to deliver towards the end of the year. This could lead to inaccurate feedback.

Performance management software allows you to collect continuous feedback throughout the year, which eliminates the chances of any discrepancies. You can monitor your employees' performance throughout the year and compile a performance report accordingly. Not only does this improve your performance review accuracy, but it also encourages your employees to work harder throughout the year.

3. Employee Recognition and Appreciation

Performance management software allows you to identify the best-performing employees and reward them accordingly. 21.5% of employees who don't feel recognized at work appear for a new job interview, compared to only 12.4% who feel recognized. Identifying and appreciating your best-performing employees is the key to retaining your top talent.

4. Unbiased Feedback

When you rely on a single source for feedback, the feedback received becomes one-dimensional. A manager may not know the true potential of an employee as much as their colleagues do. Or the manager might be inclined to give negative feedback to an employee due to personal interests.

With performance management software, you can collect multi-layered, unbiased feedback. The solution allows you to garner reviews from seniors, juniors, and colleagues to ensure the feedback is accurate and fair.

5. Integrated Processes

A performance management software system allows you to consolidate all your HR processes. It integrates with payroll, time and attendance tracking, and other HR solutions. This lets your HR team stay productive and manage all their tasks from one place.


How to Choose the Right Performance Management Software?

Performance management software can go a long way in enhancing your performance management efforts. However, you need to pick the right software to avail its true benefits.

Here are a few things to consider when looking for a performance management software system.

1. Understand Your Problems

Each company is unique and has different problems. Some businesses struggle with unbiased feedback, whereas others have a hard time identifying and rewarding their employees. Knowing what challenges you're facing will be the key to selecting the best performance management software for your business.

2. Determine Your Desired Features

Once you've listed out your goals, determine the features you need to achieve them. For example, if you want to improve feedback accuracy, you'll need continuous and multi-layered feedback capabilities. Don't pick the features you don't need, as more features can increase your costs.

3. Ensure Accessibility and User-Friendliness

Make sure the software you choose is user-friendly and easy to use. Your HR team and other employees should be able to get accustomed to using it quickly. In addition, ensure that the software is cloud-enabled so that you can use it across devices.

4. Check Pricing

Lastly, check the solution's pricing. A performance management system can be a significant investment, so keeping your budget and overhead costs in mind is essential. If you buy a solution that's too expensive, you may not be able to achieve the desired return on investment.



Implementing a performance management system can streamline your performance review process and help you identify your best-performing employees. It's essential to pick the right software that aligns with your objectives and enables you to achieve your goals.