July 6, 2016

How HR Software Can Improve Performance Management

Written by
Simon Swords

 A 2015 study by WorkplaceTrends found that only 52 percent of companies conduct annual performance reviews. Other studies suggest that 45 percent of HR professionals don’t believe in the effectiveness of these reviews. They don’t think they’re an accurate way to appraise an employee’s performance.

So are performance reviews a waste of time?

Of course not. It’s just that many companies lack the tools and processes necessary for an effective performance management process.

The aforementioned WorkplaceTrends study also found that 58 percent of companies still use spreadsheets for performance tracking and management. Could an alternative — in the form of high quality human resources software — bring companies up to date and make performance management more effective?

Annual Reviews Aren’t Enough

A lot can happen in a year.

If you’re providing annual performance reviews but not following these up with regular updates, you’re missing a valuable opportunity.

It’s important to make sure your employees find your feedback useful and that they’re working towards their goals, putting suggestions into action. Their feedback is also important. How can you discover a problem if you’re waiting 365 days to look for it?

The only way to make performance reviews mean something is to check in on a regular basis. That’s not easy when all of your data is stored in a spreadsheet or a jumble of paperwork buried in a filing cabinet.

ACAS recommends that, in addition to an annual appraisal, companies should offer a formal interim meeting to discuss progress. They should also provide regular informal meetings. These informal meetings can often be replaced or improved by human resources software.

With most modern platforms, you can set employee goals and monitor progress towards them. Define specific objectives and set clear deadlines, so that employees aren’t left feeling unsure. Managers can check in at any time. Employees receive reminders about the goals they’re working towards and can request meetings when they need them. You can improve efficiency all around when you stop wasting time in unnecessary update meetings and log all of your performance data in a central location.

What to Cover in a Performance Review

When discussing an employee’s performance review, be sure to address the following areas:

  • Objectives and goals: What short and long term goals is the employee working toward? What progress have they made?
  • Competencies and skills: Have they completed any new training or certifications, or added to their skill set through mentorship, study, conferences, etc.?
  • Areas for improvement: Where is the employee weakest? What do their peers suggest as opportunities for growth?
  • Performance concerns: Are there any serious performance deficits that raise concerns about work ethic or competency?  

Putting Everything in One Place

It helps to have everything in one place. Sickness and absence, for example, can feed into an employee’s performance. If they’re off work regularly, how is this affecting the quality of their work? Have they missed any training?

Good HR software should cover every aspect of an employee’s life at work, detailing attendance records, tardiness, performance against goals, and other relevant metrics.

Any platform worth its salt will also offer online document storage. This is a place to keep employee handbooks, contracts, and company policies, so they can easily be accessed by every member of the company.

Time and Cost Savings

HR Magazine published a 2012 article that calculated the financial cost of time spent on performance reviews. It claimed that with a workforce of 100,000, almost $4 million would be spent on annual reviews, assuming each employee spent time in performance management meetings totalling roughly three hours a year. This figure assumes that the average employee is worth about $14 per hour.

That’s a large figure, but even scaled down, the results can be unsettling. In a company with 50 employees, the amount of money spent on annual performance reviews would be somewhere in the region of $2,000, according to the same calculation. Arguably, that’s a conservative estimate, and this calculation doesn’t even factor in the reality that multiple members of staff are involved in each review. You aren’t just removing one employee from three hours of work each year, but also the manager who conducts the review.

HR software can work out to a similar price per person when spread out over a year, but offers tools for performance management alongside a plentiful range of other features. Overall, managing staff performance using software will be significantly cheaper than less efficient methods.

Performance Reviews Should Be Easy

Managers don’t enjoy doing them, and employees don’t enjoy attending them, but it doesn’t have to be that way. Performance reviews should be easy and straightforward.

Employees often worry about what their performance review will bring to light, but if performance management is done correctly throughout the year, there should be no surprises in the annual meeting. Employees should not discover, at the end of the year, that there have been concerns about their performance; it should be flagged as soon as it’s noticed, and noticed as soon as it happens. The same also applies to positive performance. No employee should have to wait until their annual review to find out that their manager is pleased with their work.

In most cases, the switch to online or cloud-based HR software is fast and easy. In a matter of hours, you can start managing all of your employee operations and performance data in one place, with support available every step of the way. Either that, or it’s back to the spreadsheets. To learn more about HR software and get a custom recommendation for your business, visit the TechnologyAdvice Product Selection Tool.


Simon Swords is the founder of Staff Squared, an HR software platform for small businesses. Simon also founded Staff Squared’s parent company, Atlas, and has 15 years of experience in various IT executive roles.

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