How To Choose Performance Management Software: Buyer’s Guide

How to choose the right performance management software to overcome the challenges faced by your organization – a buyer’s guide

Performance management software offers businesses opportunities to increase the productivity, engagement, motivation and overall well-being of their employees. But with hundreds of performance management suites available, choosing the right one can feel overwhelming.

This guide will help you to understand the core features and processes available through performance management software. Read on to find out more about choosing the best performance management system for your organization’s needs.

Performance management software – a brief introduction

The role of performance management software has undergone a series of changes in recent years. Companies have shifted further away from the old methods of performance management, especially since the crisis of 2020. 

Annual appraisals, paper-based HR practices and other outdated methods have fallen increasingly out of favour. At the same time, hybrid working and a stronger focus on employee well-being have radically changed how managers lead their employees.

Before breaking down the key features and processes to look out for when choosing performance management software, let’s recap some performance management basics.

What are the stages of performance management?

There are four key stages of performance management. These are:

  1. Planning
  2. Monitoring
  3. Reviewing
  4. Rewarding

Understanding how performance management software plays a role in each of these key stages can help you to ensure you are getting the most out of it. It’s important to understand how these stages are continual and overlapping processes, not fixed in time and separated. 

What are the benefits of performance management?

When done right, performance management can infer a wide range of benefits on an organization’s overall performance and success.

Some of the main benefits from the successful implementation of performance management include:

  • Assisting employees define and progress through their career path
  • Transforming employees into A-players
  • Improving autonomy – and accountability
  • Providing a concrete measure of day-to-day performance and successes
  • Establishing a training and coaching pipeline for individuals and teams
  • Identifying well-being issues and boosting morale
  • Connecting a separated workforce by bringing remote and on-site workers together
  • Supporting workforce planning and aligning individual and organizational goals

How do I choose a performance management software?

There are a number of factors you need to consider when choosing performance management software. We’ll explore these in more detail throughout this buyer’s guide. Here’s a quick summary of the topics this guide will cover:

  1. Take stock of your organization’s current state and note the problems you wish to remove and desired outcomes for the business
  2. Assess the features available in performance management suites to determine those which are most relevant to your needs
  3. Check the software for useability as well as compatibility with any tools employees currently rely on
  4. Verify the tools’ ability to collect and analyze data and other information
  5. Make sure the performance management software is cost-effective (look into ROI)

Understand how performance management can solve the problems your organization faces

94% of problems in business are systems driven but only 6% are people driven.

W. Edwards Deming, American management consultant

Before investing in performance management system software, it is crucial to understand what problems and challenges your organization wishes to overcome. These tools offer powerful and versatile approaches to performance management, so defining the desired outcomes ensures they are used correctly.

The importance of leveraging the right tools for the right occasion is outlined in the Deloitte paper, Performance management: does your process serve your strategy? 

“In cases where there is less of a need for more real-time data, incremental changes may suffice. But many organizations, motivated by a desire to keep pace with a rapidly changing and globalizing business environment, the expectations of an increasingly millennial workforce, the capacity for mobile technologies to reshape work, and a variety of other factors, may opt for a more substantial change.”

Business leaders, managers and HR professionals should all be consulted before committing to investing in performance management software. Some of the questions they should ask include:

  • Is the organization struggling with employee retention and losing valuable time due to absenteeism or high staff turnover?
  • Are employees struggling to course correct due to feedback being delayed or inappropriate?
  • Are individuals and teams failing to meet their targets, whether these are related to sales, production, or something else?
  • Are employees exhibiting a lack of engagement with their work and/or colleagues?
  • Does your company’s performance appraisal system fail to deliver improvement due, for example, to poor rating systems?

These and other questions should be raised before deciding which performance management software system to choose. Such questions shouldn’t be limited to management figures – canvas the workforce to gain a holistic insight into the challenges to address.

Implementing a performance management program – software features to look out for

Once you’ve determined what solutions and outcomes you’re looking for out of your performance management software, it’s time to work on a PM program. There are a set of core features/processes you’ll need to implement this effectively.

Make sure your performance management software system includes the following features:

Multi-channel communications

With employees increasingly adopting a hybrid working arrangement with their company, a multi-channel communications platform is essential to keep everyone connected. Emails no longer cut it and are prone to being ignored or overlooked so that important decisions get delayed.

Performance management tools with multi-channel communications circumvent issues with traditional communication, allowing managers and HR leaders to disseminate information in an instant. By drawing upon mobile phone apps as well as desktop/laptop systems, employees can receive priority alerts via push notifications.

Goal setting and tracking

Establishing and tracking goals might not be a new process in the business world. But performance management software makes this process more efficient and transparent than ever before. 

Whether you’re using key performance indicators (KPIs) or objectives and key results (OKRs) to determine your objectives, performance management tools offer a flexible method to input and track goals. You can also set up shared goals, helping strengthen alignment between team members, as well as aligning individual goals with broader company aspirations.

Continuous feedback mechanisms

With annual appraisals no longer viable as a sole form of employee performance assessment, the trend now continues towards ongoing appraisals and reviews. While this might seem like creating additional burdens for managers and team leaders, performance management tools makes the process efficient and painless.

Regular appraisals and one2one check-in sessions can be easily scheduled, and templates can be set up to make the process even easier. Regular feedback helps to reduce employee turnover, and setting up a system that makes this possible ultimately saves businesses valuable time and money.

Integrated HR administration tools 

Human resources departments regularly engage with management over hiring and firing decisions, as well as other decisions around talent management. Consequently, you should look for integrated HR administration tools when choosing performance management software.

Such tools include:

  • Holiday and sickness reporting
  • Document saving and sharing
  • Onboarding and offboarding tools
  • People databases
  • Sites and check-ins
  • Employee sentiment analysis

If you don’t think you’ll require these extensive HR tools in addition to the performance management suite, check to see if the provider offers alternative packages with these features disabled. And if your organization grows, you always have the option of adding this feature to your package.

Assessing performance management software for usability and compatibility

Usability is critical for any application, but for mass-market software, usability spells success or failure more clearly than any other feature.

Jerrold Grochow, senior consultant at MIT

A time-saving system wouldn’t be much use if the interface was clunky and it didn’t function smoothly. Making sure the tools you’re considering investing in are intuitive and easy to use is another important step towards choosing performance management software.

In this regard, it’s worth booking a demo with the publisher so you can give the tools a digital test drive for yourself. Is it customizable, allowing you to tailor dashboards and include your own company’s branding across its features? Can you easily set permissions for users of different levels? Does it work on all platforms, including mobile phones via an app version of the tools?

It’s also worthwhile verifying what existing software your employees use, and whether or not these can be integrated into the performance management suite. Some performance management software allows for easy integration of tools such as Microsoft Teams, ADP Workforce Now and MS Office 365. If your organization already uses these, you may want to opt for performance management software that is compatible.

Databases and data analytics – using performance management software to leverage information

One of the key advantages business leaders can gain from using performance management software systems is access to an incredible variety of data. Yet businesses of all sizes across all industries are still struggling to get on top of the true potential data has for transforming how companies operate.

As the article, Why Is It So Hard to Become a Data-Driven Company, from the Harvard Business Review explains:

“What has been underappreciated is how much time it will take for these data-transformation efforts to take effect at mainstream companies, as they remain saddled with legacy systems, legacy cultures, and in some cases, legacy skill sets. Becoming a data-driven organization does not happen overnight. Building a data culture is a process. These efforts unfold over time. Today, Big Data and AI are mainstream, but there is still much work to be done.”

With this in mind, look for the following data-driven features when considering which performance management software to choose:

People databases

A digital people database offers HR professionals a far more intuitive and easy-to-use system to track and update details about the workforce when compared to traditional paper-based methods. At the same time, such a database can include a great deal more information that can be easily searched for based on name, location, department, or even skill.

The ability to input and track employee skills allows business leaders to build up departmental and organizational charts. These charts can assist decisions about mentoring and training, providing an overview of qualifications and accomplishments. Such an overview can radically transform how companies marshal their internal talent assets to offer employee training and growth opportunities.

Real-time data analytics

Performance management software allows users to input and analyze data across a range of fields. Data directly relating to OKRs and KPIs can be assessed and used to make performance-related decisions as part of ongoing feedback. It can also be used to shed light on the organization at the macro-level, helping to rank performance by teams and departments as well as individuals.

With potentially endless data on hand, managers and business leaders might feel as if they are overwhelmed. But the best performance management software allows users to set up customizable reporting. This means that only data within predetermined parameters will be reported on, saving valuable time and avoiding wading through unnecessary or irrelevant information.

Price and cost effectiveness – understanding the potential savings with performance management tools

Finally, when choosing the right performance management software for your company’s needs, you can assess it for its cost-effectiveness. Performance management software can deliver savings across a range of business measures, including

  • Through higher employee engagement
  • Increased workforce productivity
  • Reduced time and effort spent on admin
  • Reduction in the average rate of employee turnover
  • Lowered costs of onboarding
  • Introduction of more cost-efficient methods of coaching and training

Before committing to a performance management system, make sure you are able to run your company’s data through a Return on Investment calculator. This will require basic information regarding your company’s average salary, company size, employee turnover rate, and the number of users you anticipate adopting the system.