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Performance Management System Software: The Comprehensive Guide

How performance management system software strengthens alignment, unites individuals with teams, and streamlines regular appraisals

The nature of how business leaders tackle performance management is undergoing radical changes. The move to hybrid working and other unforeseen changes to the economic landscape requires new strategies and tools. 

Performance management software provides the solution to these emerging challenges. This comprehensive guide will break down the key features and tools available, driving better performance and delivering company growth.

What is performance management system software?

Performance management system software consists of a range of interconnected tools which drive productivity and keep employees focused on top priorities. Goal tracking, regular feedback and ongoing training and development are all integral aspects of the core processes managed via performance management system software.

What are the 5 best tools for performance management?

Performance management system software delivers a range of tools, which include:

  1. Goal tracking via key performance indicators (KPIs) and objectives and key results (OKRs)
  2. Planning, scheduling and conducting regular feedback sessions, such as one2one check-ins
  3. Streamlining the appraisals process and moving away from annual appraisals to monthly or quarterly appraisals
  4. Aligning personal goals with the company’s broader strategy, for instance through Personal Development Plans (PDPs)
  5. Implementing reward and recognition programs to further boost engagement and motivation

How do I start a performance management system?

There are a number of factors to consider when setting up a performance management system. Understanding the shortcomings of the appraisals process currently in use will help to establish a performance management system that drives productivity. Outlining the company’s performance expectations allows effective monitoring and development of employees to ensure the best outcomes.

Align systems and processes throughout the company

Building a visionary company requires one percent vision and 99 percent alignment.

Jim Collins and Jerry Porra, authors of Built to Last: Successful Habits of Visionary Companies

Aligning employees with teams, departments and the company at large is a crucial foundation for a successful company. This alignment can be achieved on a number of levels, each of which contributes towards improved engagement, efficiency and overall performance.

Performance management tools allow business leaders and managers to integrate multifaceted approaches to alignment throughout a range of processes. By incorporating these into company-wide software solutions, employees can be kept on the right track at any given time.

Performance management system software assists in this process of continuous alignment by:

  • Highlighting and promoting cultural values. Aligning employees with the core aims of a company means sharing a coherent vision of its overarching strategy. A company’s culture should transcend the nuts and bolts of the product or services it provides and reflect an overarching ethos. These guiding principles can be promoted clearly and consistently through performance management branding and tools.
  • Cascading measurable and achievable goals. When an employee is set new objectives, they should be placed clearly in the context of the company’s overall goals. A performance management system allows all users to clearly identify how their individual objectives fit into the bigger picture, including teams and departments. Making these goals oriented around strengths encourages additional productivity.
  • Linking personal and professional goals together. Managers and team leaders should work closely with employees and offer leeway for them to set their own goals. Often, this process reveals hidden competencies and gives employees the space to take on new challenges. Ultimately, the sense of personal ownership gained from this process.

Run evaluations of objectives at the individual, department and company level

Performance management software systems feature powerful tools for tracking and improving employee objectives. But they also work at the level of the organization, meaning business leaders can gain a holistic overview of how individual and team goals link to the company’s core vision.

Company-wide objectives and key results (OKRs) can be tracked alongside individual key performance indicators (KPIs), allowing users to pinpoint precisely where corrective efforts are required. When employees see how their work impacts the bigger picture, they feel engaged with the overarching strategy and better understand their role.

Making OKRs the centrepiece for performance conversations is another way to help bolster employee alignment with company strategy. As management consultant Drea Zigarmi explains in his article for Medium:

“When OKRs serve as the centrepiece for ongoing conversations about performance, individuals and teams are far more likely to remain engaged in the process of achieving their goals and have a sense of purpose because they can see the linear correlation between their contributions and the goals of the company.”

Drive employee engagement to unleash top talent

Day to day interaction with colleagues and managers is optimized through performance management system software. These tools are specifically geared towards fostering continuous engagement, which in turn reduces absenteeism and encourages healthy collaboration.

Performance management system software drives engagement by:

  • Giving employees a clear insight into their strengths and weaknesses, so they understand where to improve and how to do it.
  • Connecting employees with one another to create networks of support from colleagues. Microsoft Teams channels, forums, and other discussion groups allow for ongoing collaboration and problem solving.
  • Developing interpersonal and social bonds between staff. Social feeds and other performance management resources help to bring people together and connect over shared hobbies and interests.
  • Encouraging healthy competition with performance leaderboards. Tracking performance in real-time gives additional incentive for employees to work towards excellence.

Engagement is also improved through feedback systems, collaborative tools and regular appraisals. Let’s examine each of these elements in more detail.

Create and encourage a culture of feedback – and implement the tools to facilitate this process

Employees who report receiving recognition and praise within the last seven days show increased productivity, get higher scores from customers, and have better safety records. They’re just more engaged at work.

Tom Rath, business consultant

Feedback is the lifeblood of great performance management. It helps keep employees oriented towards goals and priorities while greatly improving engagement and motivation. Encouraging a culture of feedback can be achieved through performance management system software.

Here are some methods and tools found in performance management software that can be used to nurture a culture of feedback.

News feeds

Newsfeeds are essential for keeping employees informed about the company’s successes and updated objectives. They are especially useful for businesses with a hybrid workforce since they push news and updates to all employees whether they’re on-site or working remotely.

For crucial updates such as changes in company policy or protocols, news can be sent via critical alerts. Business leaders can track receipt of these updates through notifications that confirm the intended employees have read and understood them. 

Culture feedback systems

Healthy company culture shouldn’t be imposed from the top down. Culture is an organic process that constantly evolves, and the individuals who make up an organization should be encouraged to contribute to how it is defined. Culture feedback systems allow this symbiotic process to flourish.

This two-way process can be fostered on multiple levels, all of which performance management system software can help encourage. Management should engage in conversations about the core values of the company so that employees feel emboldened to contribute ideas. Surveys and other mechanisms such as employee net promoter scores (eNPS) can also be integrated into performance management tools allowing for anonymous – and therefore more honest – feedback on culture.

Real-time performance feedback systems

Daily insights into employee performance through OKRs and KPIs gives managers and team leaders information to drive constructive feedback. From this, real-time performance feedback can be given at short notice so that any issues can be addressed quickly. 

These insights also allow for ad hoc conversations outside of regularly scheduled meetings. By using a multi-channel communications platform, performance management tools let managers and team leaders instantly connect with employees. Mobile app integration circumnavigates sometimes unreliable emails, driving comms to employees via critical alerts.

One2One check-ins

Regular one2one check-ins can be easily scheduled via performance management tools. The ability to set up templates further reduces the time managers need to invest in these regular conversations. By conducting these on a regular basis, relationships between management and employees are strengthened and everyone remains clear as to their expectations.

By using the dashboard feature of a performance management system, calendar invites and reminders are automated, so these crucial conversations don’t get overlooked. Key points of discussion, as well as any supporting documents, are automatically logged. This makes the review and appraisal process smooth and efficient.

Connect individuals with colleagues and teams to encourage collaboration and learning

Employees who feel as if their company encourages their professional growth are more engaged and motivated to perform to higher standards. This professional growth in turn gives them the skill set to further improve performance and contribute towards the company’s overall success.

By connecting individuals with like-minded colleagues, performance management tools help to facilitate this growth throughout the organization. 

Collaboration and learning tools embedded in performance management system software include:

Organizational skills databases

One of the benefits of performance management systems is the ability to integrate a range of HR administration processes. This means that business leaders can access a company-wide skills database, better understanding the talent and qualifications held by their workforce. 

Such databases are essential for driving collaborative learning and establishing coaching and mentorship programs. With HR leaders able to identify employees with skills gaps, they can connect them with peers who possess the necessary experience to help colleagues level up their talent stack.

Intranets and forums

Employees often learn and collaborate better when such efforts are organically driven. Intranets and forums provide the necessary digital spaces whereby employees can share resources and brainstorm new innovations.

Company leaders and managers can further drive these constructive conversations by setting up discussions directly related to the company’s requirements. Important topics and discussions can be highlighted via performance management social feeds and Today Screen features. This helps ensure constructive conversations are placed at the fore to maximize potential engagement.

Dedicated Microsoft Teams channels

Performance management tools often include additional software integration options. By adding Microsoft Teams to the toolset, dedicated channels can be set up to bring like-minded employees together.

Channels in Teams can be established which bring employees from different teams and departments together. By using the company’s skills database, working committees and other groups dedicated to solving specific problems can be easily established. 

Coaching and training resource databases

Traditional training resources can also be saved and accessed via performance management software systems. Such resources form an ever-evolving set of training material that employees can also contribute towards.

Training resources can be integrated into HR’s onboarding processes, allowing individuals to grow throughout their tenure in the organization. These resources can be supplemented with information about external courses and other relevant materials.

Streamline reviews and appraisals – and conduct them regularly

Annual performance appraisals have been falling out of favour with leading corporations, a fact which has only accelerated with the crisis of 2020. Long-term planning has become increasingly difficult to implement with certainty, echoed in the difficulties of long-term reflection found in annual reviews.

Jack Zenger highlighted another conflict found in annual appraisals in his article for Forbes magazine:

“The annual performance review was a practice driven by two purposes.  The first was to justify salary actions; the second, to motivate employees to higher performance.  There were logical and seemingly compelling arguments for each of these purposes. However, one problem got in the way:  Those two purposes constantly butted heads with each other.”

By using performance management software to transition from annual appraisals to monthly and quarterly reviews, employee motivation can become a central pillar of the process.

Regular performance reviews:

  • Allow managers to identify recent problems and address them promptly
  • Bolster relationships between managers and employees, improving well-being
  • Help employees to develop their skills through training programs
  • Ensure goals and objectives remain relevant and timely
  • Reduce administrative strain HR professionals experience when conducting annual appraisals
  • Give business leaders better insight into the direction the company is moving
  • Sheds light on issues in an employee’s personal lives which might be impacting on their performance

These tools also make it easy to set up appraisals templates and schedule meetings, freeing up valuable time for management and HR leaders to focus on more pressing tasks.