What Is Performance Management Software?

Performance management is notoriously difficult to get right, but performance management software can help make the process more effective and efficient.

Use this guide to help you understand benefits, key features and how to choose the best solution for you.

What Is Performance Management Software?

Performance management software is a type of HR software designed to help organizations monitor, evaluate, and improve employee performance by streamlining the performance review process and helping to set goals, provide feedback, and track progress.

Platforms are designed to help facilitate communication between employees and management, promote continuous development, and align individual goals with organizational objectives.

Performance Management Software Benefits 

Performance management software is used to enhance employee performance and ensure that everyone’s aligned with the organization's overall vision and goals. Key benefits include:

• Streamlined performance reviews: Digitizes and automates the performance review process for greater efficiency and effectiveness, including collecting feedback from multiple people.
• Enhanced goal alignment: Helps ensure employees’ goals are aligned with organizational objectives for better focus and direction.
• Real-time feedback: Facilitates continuous feedback, helping employees improve in real-time rather than waiting for annual reviews.
• Data-driven insights: Provides analytics and reporting for better decision-making on promotions, rewards, and development.
• Improved accountability: Employees are more accountable for their performance and progress toward goals.
• Career development: Helps identify skill gaps and create personalized development plans for employees.
• Transparent compensation: Links performance outcomes to compensation, ensuring fairness and transparency.
• Increased Retention: Improves employee satisfaction by fostering growth and providing clear performance expectations.
• Objective Evaluation: Reduces bias in performance reviews by using consistent, data-backed evaluation criteria.

Key Features Of Performance Management Software

While specific features will differ depending on which performance management tool you choose, some common features to look out for include:

• Performance reviews: A tool for developing, scheduling, conducting, and tracking performance reviews.
• Goal setting: Helps managers and employees to set, track, and adjust goals and align them with organizational objectives.
• 360-degree feedback: Helps collect feedback from multiple sources, including peers, managers, and subordinates, for a well-rounded performance assessment.
• Employee development plans: Facilitates the creation of personalized development plans, identifying skill gaps and areas for improvement.
• Analytics and reporting: Provides performance data, trends, and insights through dashboards and reports to support informed decision-making.
• Compensation management integration: Links performance results to compensation adjustments like bonuses, raises, or promotions.
• Recognition and rewards: Provides tools for recognizing and rewarding employee achievements, improving motivation and morale.
• Customizable evaluation criteria: Tailors the performance review process to specific job roles, metrics, and organizational needs.
• Goal tracking and progress monitoring: Continuously tracks employee progress against set goals and objectives.
• Mobile accessibility: Allows employees and managers to access the system on-the-go via mobile devices.

Who Uses Performance Management Software?

Performance management software is widely used across sectors by anyone involved in managing, assessing, or improving employee performance. 

Human Resources (HR) Departments

HR/People Ops teams use performance management software to design and send out performance reviews, track employee progress, and manage feedback, ensuring fair and consistent evaluations across the organization.

Managers and supervisors

Managers use the software to set goals for their teams, track individual performance, provide feedback, and align their teams' efforts with broader organizational objectives.

Employees

Employees use it to track their own performance, receive feedback, understand how they are performing relative to their goals, and engage in professional development plans.

Executives and leadership teams

Leadership uses the software to monitor organizational performance, identify high-potential talent, make data-driven decisions about promotions or bonuses, and assess alignment with business goals.

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11 Signs You Could Benefit From Performance Management Software

Debating whether you need performance management software or not? Here are some signs:

1. Managing a growing workforce

As your organization grows, manual performance evaluations become inefficient and difficult to manage.

2. Inconsistent or infrequent performance reviews

If performance reviews are inconsistent or not happening regularly, the software can ensure that reviews are scheduled, tracked, and completed on time.

3. Difficulty aligning individual goals with organizational objectives

When it's challenging to ensure that employees' goals align with the company’s overall objectives, performance management software can help track and align goals across the organization.

4. Need for real-time feedback

If your organization relies on annual reviews but you’d like to switch to a form of continuous performance management, then the software can help facilitate this.

5. Managing remote or distributed teams

In organizations with remote or distributed teams, performance management software can provide a centralized platform for tracking progress, setting goals, and giving feedback, ensuring that all employees stay connected.

6. High turnover rates

When your company is experiencing high employee turnover, performance management software can play a part by improving employee engagement, identifying areas for development, and facilitating employee recognition.

7. Need for data-driven decision-making

If you lack objective, data-backed insights into employee performance and need better analytics to inform decisions about promotions, compensation, or development, performance management software offers detailed reports and analytics.

8. Managing employee development and growth

When employees require more structured development plans, or when tracking skill gaps and training becomes a challenge, performance management software can help create and monitor personalized development plans.

9. Difficulty managing compliance and fairness

If your organization is struggling to ensure fair and consistent evaluations or needs to meet compliance requirements for performance tracking, software can standardize and document the review process.

10. Reducing administrative burden

If your teams spend too much time on administrative tasks related to performance management (e.g., paperwork, scheduling reviews, or tracking goals), performance management software automates these tasks and increases efficiency.

11. Fostering a culture of accountability and transparency

When there is a need to increase accountability and transparency, performance management software provides clear records of employee performance, feedback, and goals.

Choosing The Right Performance Management Technology

Step one: Identify needs

Before diving into vendor research, take time to understand the specific needs of your stakeholders e.g. HR team members, leaders, and regular employees.

For team members:

1. Current pain points: What challenges do you face with the current performance review process?
2. Feedback frequency: How often would you like to receive feedback on your performance?
3. Self-assessment: Do you find self-assessment tools useful? If so, what would make them more effective?
4. Peer feedback: How important is peer feedback in your performance evaluation? Would you like to see more structured peer reviews?
5. Recognition: How do you currently receive recognition for your work, and would you like to see changes to that process?

For leaders and managers:

1. Goal setting: How do you currently track team or individual goals? What features would help you manage and update them effectively?
2. Feedback loops: How frequently do you give feedback, and what tools would make this process more efficient?
3. Performance tracking: How do you currently monitor employee performance over time? What data or metrics would improve decision-making?
4. Employee development: How do you currently handle employee development and training? Are there gaps where technology could support you?
5. Collaboration and alignment: How well do team goals align with organizational goals? What would help improve alignment?
6. Reporting: What kind of reports or analytics are you looking for in a performance management tool?
7. Time management: How much time do you spend on performance evaluations, and what features could reduce this time?

For HR and business leaders:

1. Organizational goals: What are the key organizational objectives for implementing a new performance management tool?
2. Scalability: Does the software need to scale as the organization grows? What’s the ideal user base it needs to support?
3. Automation Needs: Which parts of the performance review process could benefit from automation?
4. Integration: Does the performance management system need to integrate with existing HR tools (e.g., payroll, HRIS)?

Asking these questions will help you determine what exactly it is you need from your performance management tool.

You’ll now be able to better lead the conversation with vendors and give them a list of need-to-have and nice-to-have features for each user.

Step two: Research vendors

It’s time to do some market research and familiarize yourself with the leading HR software solutions for your use case.

Luckily, the web is full of informative websites (like this one) comparing the best performance management tools to one another. Reading a handful of these is a good way to get an overview of your options.

Take the time to study their websites and take notes of any questions that arise. Are there case studies and reviews that demonstrate the tool's main USPs?

You can also join HR communities or tap into your network for recommendations.

Some vendor-specific questions to ask:

• Who are the top vendors for your use case?
• Which are the best-rated in their category?
• What is each tool’s top-rated feature?
• Is it a small business solution or is it more suited for enterprise use?
• What do customer reviews and testimonials have to say? What are the most commonly reported benefits and drawbacks?
• What kind of onboarding, training, support, and other resources does the vendor offer?
• Is there robust documentation available?
• Do the tool’s features meet your needs?
• Does the software integrate with our existing HR systems such as our learning management system?
• User interface: Is it visually appealing?
• User experience: Is it intuitive to navigate and easy to use?
• Is this tool simple or complex enough for your human resource management needs? 
• Does it offer the flexibility or customizability you need?
• Does it offer robust security standards and comply with data privacy regulations and best practices? Is an on-premise option available?
• Does the pricing meet your budget? Is the pricing clear? Is the price warranted based on the software’s capabilities? Are certain key features only available in more expensive pricing tiers? 
• Does it offer a demo or free trial?

Step three: Make a shortlist and reach out

Now you’ve identified some likely vendors it’s time to go a bit deeper and book some demo calls.

1. Send each vendor a request for information (RFI) so you can compare your options point for point
2. If you want to be really thorough, send each of your shortlisted vendors a request for proposal (RFP). This will include key information about your company, your specific needs, a vendor questionnaire, and any specific proposal submission rules they should follow, such as submission deadlines.
3. Schedule a meeting with their sales rep and go through your questions.

These calls, which should ideally include demonstrations of the product in action, will also help you get a feel for the vendor and whether you can form a good partnership.

To help compare vendors, use this handy evaluation template.

Step four: Make the business case

With all the above data gathered, it's time to put together your business case for the new software.

This doesn't have to be a 10-page document, it can be as simple as a one-page memo (because who has time to read 10 pages anyway).

 Decision-makers are looking for answers to the following questions:

• How much does it cost? 
• What pain points will the software solve?
• If we didn’t invest in the software, then what?
• How long will it take to implement?
• Why do we need to invest now?
• What is the ROI of implementing new performance management software?

You may not know the answers to the cost question; however, seeking approval at this stage will set you up for success.

Here's a business case template you can use for performance management software:

• Executive summary: Brief overview of the proposal, key benefits, and conclusions.
• Current situation and problem statement: Description of the current state and specific challenges or problems being addressed.
• Proposed solution and benefits: Detailed description of the proposed solution and its expected benefits, including a cost-benefit analysis.
• Implementation plan and risk assessment: Step-by-step implementation strategy, timeframe, and a summary of potential risks with mitigation plans.
• Conclusion and recommendations: A concise summary of the business case with final recommendations for decision-makers.

Step five: Implement and onboard

Make sure stakeholders are aware of your new solution and feel confident using it. 

The main reason companies fail to see ROI on software purchases is failing to follow through on implementation and properly integrate their shiny new tool into day-to-day operations.

Effective change management is crucial. For employees to use your new software, they need to understand how it benefits them (e.g. it saves them time/they’ll get better candidates) and know how to use it. 

Here are some tips to help with this.

• Clearly communicate that you’re adopting new performance management software, what this will mean for people, and invite them to ask questions.
• Take advantage of any onboarding and training offered by the vendor and make it mandatory for those who need to be trained to complete this training within a realistic timeframe.
• Charge someone with the responsibility of spearheading implementation and being a point of contact for any questions (and feedback) employees might have.
• Make employees aware of any self-service resources available and make sure they know how to log a support ticket if they run into difficulties.

Top Performance Management Software Vendors

Tools	Price
Mitratech Trakstar	Pricing upon request	Website
Deel	Flat rate user pricing, with a free version for businesses with up to 200 people	Website
Performance Pro	From $2 to $7/employee/month	Website
Primalogik	From $159/month	Website
PerformYard	From $5-$10/user/month	Website
Lattice	From $11/seat/month	Website
Leapsome	From $8/user/month	Website
ClearCompany	Pricing upon request	Website
Paycor	Pricing upon request	Website
Peoplebox	From $7/user/month	Website

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