In a study of C-level and senior executives, the Economist Intelligence Unit found that people management is the biggest HR challenge today. In addition, the study found that it’s expected to be the second-biggest challenge in five to ten years. This is due to several factors, such as globalization and the increase in employees working remotely. Whatever the cause, businesses are searching for ways to more effectively manage their employees. That’s where performance management software comes in.
What is Performance Management Software?
Performance management software is also known as employee performance management software, performance management systems or PM systems. But no matter what you call them, they help managers evaluate employee performance. Specifically, it tracks, analyzes and evaluates employee performance so managers can easily monitor it. In turn, this bolsters your talent management efforts by making it easier to find and keep your best employees.
Tracking employee performance is also critical for managing your organizational performance. The overall performance of your organization depends solely on the performance of your employees, but it can be very difficult to track employee performance using paper-based systems. That’s why more and more organizations try to improve their performance management system using these innovative software solutions.
Benefits of Performance Management Software
With the right PM system, it’s much easier to inspire employees to improve their performance. You can provide them with ongoing updates on their performance and offer opportunities for recognition and feedback. This allows your employees to actively contribute to progress, and even provide input themselves.
The net result of this is that the system of performance is a lot more collaborative, which improves engagement between workers and management. The employees also benefit from the opportunity for skills development all year round.
There are other benefits to a good performance management system, too, including:
Insights into Employee Performance
The insights from employee performance software helps identify your most effective employees. The system is able to track every employee’s performance by collecting and analyzing data in real time. McKinsey Quarterly notes how several companies use this data to save time. “[Companies are] focusing specifically on individuals who are a step function away from average — at either the high or low end of performance — rather than trying to differentiate among the bulk of employees in the middle.”
Now managers can concentrate on bettering the poor performers and rewarding their most productive employees.
Increase Employee Engagement
A Gallup survey found that, worldwide, 87% of employees aren’t engaged in their work. As you can imagine, a lack of engagement leads to lower productivity and poor performance. Performance management software is one of the best tools to help solve this issue. By looking at the data, you can find out which employees are your most and least productive.
This allows you to talk to each of them and find out what engages or disengages them. You can then take this information and adjust your business practices accordingly. To increase employee engagement, common changes include reassigning tasks and adding small, fun breaks or events.
A Benefit for Everyone
The most beneficial aspect of employee performance management software is that it’s good for everyone. The business benefits from better retention and productivity, in addition to goals that are reached faster. Managers enjoy easier communication and save time by automating performance reviews. With automated performance reviews, managers can focus on making decisions based on the results.
Automated reviews are more objective than when done manually, which benefits both managers and employees. Because of this, employees are more likely to take them to heart and apply the feedback. Managers also get more consistent performances from their employees because of this.
Lastly, employees find value because the best employees stand to benefit the most. As their productivity and potential becomes clearer, they’re more likely to receive bonuses and promotions. This obviously keeps these employees happy, and therefore more engaged and productive.
Do I Need a Performance Appraisal System?
So everything you read above is great and all, but do you really need to implement a performance appraisal system?
What is a Performance Appraisal System?
Businesses use performance appraisal systems to do two things: manage and organize their performance reviews, as well as create ongoing two-way communication between employees and their managers. Performance management software plays a big role in a performance management system by automating many of the processes.
Performance appraisal systems help you go beyond a simple, unstructured annual appraisal. It involves continuous open communication and evaluation, by both employees and managers, before the appraisal interview even begins. Ultimately, the goal is to foster a culture of evaluation and feedback that’s both consistent and constructive.
How Do You Know If You Need a Performance Appraisal System?
Despite the many benefits, some people say that you don’t really need a performance appraisal system. They argue that you don’t need a formal appraisal system to achieve your appraisal goals. After all, it takes time and effort to develop a performance appraisal system. To evaluate whether or not your business could benefit from a performance appraisal system, ask yourself three questions:
1. Does Every Manager Provide the Same Level of Evaluation and Feedback?
Some managers go all out. They take careful notes on what each of their employees have done, realize their greatest strengths and map out the specifics of how they can improve. These managers inform their employees if they’ve met certain objectives, and detail how they have (or haven’t) helped reach organizational goals. Other managers, however, put in far less work. They don’t take much time to consider their employees’ self-evaluations, and generally give pretty generic feedback.
If you’re lucky, all of your managers fall into the first category. Unfortunately, this is rarely the case. If you want all of your employees to have an equal opportunity to develop, you need to standardize the performance appraisal process. This forces every manager to put in the same amount of work, so that every employee receives a high level of feedback that they can use to improve themselves. A performance appraisal system ensures this standardization. If your company is one of the majority that needs standardization, you need a performance appraisal system.
2. How Do You Make Changes Based on Performance Appraisals?
The final and most crucial step of a performance appraisal is implementing the changes suggested by your managers. Based on the results of the appraisal, a manager may recommend that an employee should be given a raise, extra bonuses or a promotion if they’ve done well. On the other hand, a manager might suggest that the employee enroll in a course through a learning management system, be placed on probation or, potentially, let go if they’ve put in subpar work.
Whatever the case is, these changes need to be made, otherwise the performance appraisal process is pointless. The question then becomes: how do you make sure those changes are made? Does someone collect and record the actions recommended by each manager? Is there a review process for these actions? And who’s in charge of making sure that these actions take place?
Without a performance appraisal system, the potential that nothing happens is much more likely. And if nothing happens, your business will be stuck, unable to improve itself. With a performance appraisal system in place, however, there’s a standard procedure for where recommended actions are recorded, who reviews them and who ultimately acts upon them.
3. Are You Using a Talent Management System?
The simplest question to ask yourself is if you’re already using a talent management system. This is also the most important question to ask, since most include built-in performance appraisal functionality. If you have a talent management system in place, it means that you already have the foundation for a performance appraisal system laid out for you.
A talent management system streamlines the entire appraisal process. It can lay out every step of the process for your managers, so that they know exactly what they need to do and when they need to do it. The system can also collect all of the recommended actions, so they aren’t lost or misplaced. And just as important, it collects your employees’ performance metrics in real time, which makes the initial evaluation of your employees much easier. After that, the only manual work you need to do is schedule the individual appraisal interviews.
With a talent management system in place, you get the best of both worlds: you get to implement a performance appraisal system while avoiding most of the work that’s necessary to start one.
Performance Management Software Features and Requirements
So if your answers to the question above pointed you in the direction of performance management software, you need to start learning more about the specifics of these systems. As we touched on earlier, the performance management process employed by most businesses centers on employee appraisals that happen every year. These are very time-consuming, and are considered to be largely ineffective.
But a performance management system can make decision making a lot easier, along with streamlining the performance management process. So when you’re looking at vendors, you need to know what features and requirements to look for:
Automation of the Performance Review Process
While there are quite a lot of employers that want to scrap the annual review process, others still believe in it — provided that it’s simplified, and additional tools for performance management are available. Luckily, the best systems can achieve both.
You also need to look for tools that’ll save you time:
- Job descriptions and templates for performance review, which must be totally customizable
- eSignature capabilities
- Reminders and notifications that prompt managers and employees to keep the whole process moving forward
- The ability for employees to undertake self-evaluations
The best performance management systems provide consistency for every organization and ensure that all managers and employees follow the same process, regardless of what level they are or where they’re located.
Take a very close look at the way that a performance management system handles job descriptions. All employees, no matter if they’re at management or sub-management levels, need to have a very clear understanding of what’s expected of them.
An Effective Feedback Program
All of the best performance management systems provide 360-degree feedback. What does that mean? Well, an employee works with many other people, such as customers, suppliers and colleagues. Any feedback provided by those that the employee interacts with needs to be added to the employee’s record so that a holistic performance appraisal system can function properly.
A good performance management system makes it easy to collect and record 360-degree appraisal data. The HR team can send out survey questions that were prepared by the software with the flexibility to create their own.
The HR team can also send out status updates so that all parties are up to date. A performance management system can even produce summary reports after the entry of the data. These reports can be very useful for managers and employees alike.
Goals and Objectives Tools
One of the biggest criticisms of management by workers is that they have no idea what their employer expects of them, which makes them unsure of their part in achieving the overall goals of the organization. A good performance management system should be able to rectify this problem.
Look for a system that provides a goal setting facility that’s straightforward to use and tracks progress. Managers should be able to set goals for individual workers so that the organization can use them to set departmental goals, as well as their own for both the long- and short-term.
Review Cycle and Comparison Tools
Other performance review process tools may do different things — for example, tabulating the results across an office for a comparison, or providing accessible historic comparisons of reviews over time.
This in-depth data is a type of business intelligence, and it serves the business in a specific way. It allows readers to see more of a context for how someone is doing, to better evaluate their performance over time. Performance doesn’t happen in a vacuum; it happens in context, so having comparison tools can help managers to be more insightful about the reviews they’re writing, and the ones they’ve written in the past.
Competency Management Software
Another type of performance management is called competency management. Competency management software features help organize data on employee skill sets. They may present the level of proficiency that an employee has with any given task or process, or gauge his or her overall capability within an industry. It may also outline their technology skills; for example, you can find out how much experience the employee has with different software packages. Some competency management tools also show off certifications and credentials.
By presenting this data, the performance review software offers a manager a more granular look at what the employee is capable of, and the skill set that he or she has built during the course of their career.
Good Journaling Facilities
The best performance management systems prompt managers to hold regular discussions with employees about their performance. Shortly after these discussions take place, the key points from the discussion can be noted using a digital journal.
Your system must have these capabilities so that the manager can record any performance-related ideas and suggestions. This should be very easy to do anytime, and there should also be a facility to include any attachments to the notes that are relevant.
Having a journaling feature for each employee record can be a great tool for the continuous improvement of employee performance. It allows you to paint a more accurate picture of the employee’s performance throughout the year, and can help make annual performance reviews both easier and quicker.
Compensation for Good Performance
More and more organizations are now linking good performance to compensation. Even some of the top performance management systems don’t have the ability to accommodate this, which is quite surprising.
When you can’t link compensation with good performance in your system, manual processes have to be implemented, which creates additional work for field managers and HR staff. Payroll mistakes are then likely to happen, at which point your employees very well may become disgruntled if they don’t receive their correct compensation in a timely manner.
So look out for a compensation translator when you’re evaluating performance management systems. Also known as a “dashboard,” it takes into account the pay grade of the worker and the ratings that they receive in their performance reviews. The system then makes automated recommendations for compensation, including increased salaries or extra bonuses.
What are the advantages of a compensation translator? Well, the first is that the approval of pay raises happen a lot quicker, which is good for employee morale. Secondly, it improves the consistency of compensation throughout the organization.
Additional Learning Through an Online Portal
All organizations should offer their employees the opportunity of skills development, as this provides additional motivation for them to improve their performance. If employees want to advance, then this also serves as a good way to get them to the next level.
Most of the performance management systems available enable employees to upload their own skills development documents, as well as other media. The best systems even provide access to external libraries of online training that can enhance employee education.
When workers use these facilities, they’re showing that they’re keen to improve themselves and grow as an employee. It helps the organization retain their employees for a longer period of time, as there’s a defined career path that they can follow. It’s your duty to provide all of the tools possible for employee development, and as such, it’s an essential tool to have as part of your performance management system.
Social Sharing Functionality
When you invest in a performance management system, you want to encourage a culture of improved performance across your entire organization. To assist in this process, the best performance management systems oftentimes have a social sharing feature that allows you to share achievements with every employee (or with groups of employees).
This system should be very similar to conventional social network platforms, meaning that employees can post photos and other team members can leave comments. A system of hashtags can also be employed to make searching and browsing easier.
Managers should be able to collect and analyze real-time data about their team members. A good example of this is analyzing the impact of a training initiative on the team’s performance as a whole, as well as individually.
Performance Management Audit Tools
Like other processes in the business world, performance management is often audited for effectiveness. Audit tools go over many of the aspects mentioned above. They look for whether the features and resources of packages, such as visual dashboards and documentation tools, are actually helping users. They may also assess whether data is presented when it’s needed most. Many audits will look at whether the specific functionality of the package matches the needs of the company overall.
Many of those familiar with the features and build of these software products see performance management audit tools as a kind of built-in quality assurance resource for the performance management package.
You may want to look at performance trends and identify any inconsistencies in the system. There are countless other analytics reports that would be useful, so find out what the flexibility is for creating them. If you find that a vendor’s system is lacking in this area, then you might want to consider exploring other options.
Top Performance Management Software Solutions
If the above features and benefits interest you, looking at some of the top performance management software solutions can help your search. These are by no means the only solutions available on the market, but three of our favorites. So let’s take a quick look at the top performance management software vendors:
A cloud-based solution with a mobile app, BambooHR is the number one performance management system for SMBs. BambooHR provides core HR services, including an employee performance module. Some of the best features provided by BambooHR are its self-service and reporting capabilities. The reports in particular make employee reviews very easy.
Namely is one of the biggest competitors to BambooHR, with powerful core HR features for any size business. The talent management module is especially strong, with one of the best performance reviews on the market. This is aided by tracking tasks, defining competencies and creating custom reviews for each employee.
CoreHR has the highest community rating in our HR Leaderboard. They chose a pretty self-explanatory name, as they too offer core HR functionality. But CoreHR is definitely no slouch when it comes to employee performance management. It offers separate dashboards for employee performance management, goal management and competency management.