December 23, 2022

Why Employee Performance Management Is Important

Written by
Why is TechnologyAdvice Free?
Tags: HR

Key Takeaways

  • Continuous performance management offers many benefits for businesses, including better employee engagement, increased productivity, and better retention.
  • The right HR software can make it easier to create and stick with a formal performance management program.

Many companies are guilty of treating corporate performance management as a yearly event where supervisors only give feedback at an annual performance review. Unfortunately, this is a surefire recipe for employee disengagement. According to a Gallup workplace survey, employees who receive daily feedback from their managers are three times more likely to be engaged than those who receive feedback once a year or less.

Given that few companies have a continuous performance management program in place, it’s easy to understand why the same survey reported 85% of employees worldwide are still not engaged or are actively disengaged at work, despite more effort from companies. Instituting a formal employee performance management structure — and supporting it with the right software — could be the key to combating employee burnout and improving your business performance as a whole.

What Are the Benefits of Performance Management?

A well-designed performance management program offers benefits for employees, managers, and the organization at large. In particular, performance management helps:

  • Create opportunities for 360-degree feedback.
  • Clarify each employee’s role.
  • Identify employee needs and address potential problems.
  • Promote employee engagement and employee productivity.
  • Encourage employees to set goals and celebrate achievements.
  • Support employee training and development.
  • Increase employee retention and satisfaction.

The biggest benefits of regular, ongoing performance management will help you create buy-in for related HR software.

360-degree feedback

Effective performance management isn’t just about the manager telling the employee what they need to do differently. To really get the most out of organizational performance management, it should be at least a two-way conversation between a manager and a direct report, so the supervisor can also receive continuous feedback on how their management style is working or not working.

To get even more benefit out of performance management, turn it into a 360-degree process that incorporates performance feedback from the employee’s peers as well as a self-review. This holistic approach offers a more well-rounded view of the employee’s performance beyond what a two-way discussion can capture.

Role clarification

It’s not always clear what role each employee is supposed to play, especially in smaller organizations where the same people wear many different hats. Having regular performance management appraisals gives employees the chance to clarify expectations about their roles and ensure everyone is on the same page.

This will prove helpful as employees prepare to advance in the company. Managers can discuss areas for growth to work toward a promotion and identify ways to redistribute tasks among the team as roles change.

Proactive performance improvements

One of the goals of an effective performance management process is to address the earliest indications of an employee’s performance problems. Without regular performance discussions that foster transparency and accountability, though, this can be challenging. How can managers help employees who don’t feel comfortable admitting their weaknesses?

Continuous performance management gives managers the chance to talk with employees about their needs and keep that dialogue open on a regular basis. Regular communication helps establish trust, and employees don’t have to put a special meeting with their supervisor on the calendar if they’re facing roadblocks or other challenges.

Employee engagement and productivity

At some point in our careers, we’ve all had a coworker who checked out and coasted through the job without really being engaged. While you may attribute that to the employee, this kind of behavior can actually be traced back to supervisors who don’t give effective feedback or take employee performance management seriously.

In fact, that same Gallup workplace survey found that the manager or team leader alone accounts for 70% of the variance in employee engagement. This means that creating a culture of continuous performance management from the top down encourages every employee at every level of the organization to stay engaged and productive.

Goal-setting and recognition

Performance management check-ins are the perfect time to talk with employees about their career goals and set personal individual performance objectives. It’s also a good time to evaluate the feasibility of your employees’ various goals and help tweak them as necessary. Goals that are completely out of reach may need to be adjusted, especially if employees don’t yet have the skills to achieve their goals yet.

These check-ins are a great opportunity to celebrate employee achievements and praise them for meeting their goals. Instead of only focusing on what the next benchmark is, take some time to look back and reflect on how much your employees have grown since the last check-in.

Also read: Top 5 Digital Rewards & Recognitions for Remote Workers

Training and development

Individual employee performance appraisals were originally intended to identify gaps in employee skill sets, but it’s self-defeating to identify the gaps without offering any type of solution on how they can meet performance standards. If employees are setting ambitious goals, then that presents the perfect opportunity to talk with them about professional development options.

It’s common to hire for potential and not experience, so organizations need to provide the proper training and employee development programs that address employee performance and skill gaps. Plus, many companies like to promote from within rather than make outside hires, meaning they need to train candidates that show the most potential for leadership roles.

Employee satisfaction and retention

When done right, effective performance management can help increase employee satisfaction, reduce staffing turnover, and improve employee retention rates. Employees who feel supported and believe their manager is invested in their career progression are more likely to feel satisfied at work, and performance management programs provide a formal channel for that support.

Furthermore, employee engagement software can help uncover meaningful data about the impact performance management initiatives have on employee sentiment. If a company survey reveals that some employees feel they don’t have clear goals and direction, HR teams and company leaders should carefully examine the performance management measures in place.

How Can Software Help With Performance Management?

Performance management tools may be implemented as stand-alone software or integrated as part of a broader HR suite, and both approaches are beneficial for different kinds of business needs. In either case, performance management software features help businesses with goal-setting, coaching support, document management, feedback, automation, and competence management.


Managers can use software to create employee professional development plans, while employees can use it to set their own goals and track their progress toward achieving them. HR software such as Engagedly makes it easy for employees and supervisors to set goals and track progress. Additionally, the reporting and analytics features make it possible to track individual goals and quantify performance.

Coaching support

Ideally, employee performance management systems should provide coaching resources and reminders for managers, so they have the support they need to succeed as supervisors and to help their employees improve. These documents and resources can be created by an HR manager, then uploaded to the performance management portal for all supervisors to access.

Document management

Good performance management software centralizes all of the professional development documentation for a single employee. If the employee gets a new manager, the software can provide access to all of the notes and analytics on the employee’s past performance. This is also helpful for reflecting on qualitative information that adds context to quantitative metrics.


Many performance management tools, like Namely, allow for multi-rater functionality. This means people other than HR or the employee’s direct manager can leave constructive feedback about the employee’s performance. Well-rounded, ongoing feedback is usually collected through anonymous surveys to allow for transparency.


HR software can automate performance management tasks that are often handled manually, like tracking goal progress or scheduling check-in meetings. This allows employees and managers to focus on the more impactful tasks and discussions involved with performance management.

Competence management

Some HR software platforms include competence management capabilities. This means the software tracks certifications, skills tests, licenses, and other professional qualifications employees need to keep current to support.

Choosing the Right Performance Management Software

An effective performance management system that supports employee recruitment and development can be the competitive edge a company needs to win and retain top talent. The right solution will promote transparency in conversations with employees, provide actionable data, help employees meet organizational objectives, and lay a foundation for growth and success.

If you’re ready to find the right tools to support your performance management program, check out our Performance Management Software Guide to explore top solutions.

Currently Trending Performance Management Software

1 Peoplebox

Visit website

Peoplebox is an OKR and Performance management platform designed for enterprises.
Backed by Y Combinator, Peoplebox helps companies align, track and achieve their strategic priorities and cross-functional goals without the friction of a new software.

It integrates with all your work-tools (SQL, Jira, Hubspot, Asana etc) to make goals alignment and tracking (inc. business review meetings & performance reviews) magically easy.

Learn more about Peoplebox

2 ClearCompany

Visit website

Conduct better reviews, increase feedback, and simplify review cycle management to improve your performance management strategy. ClearCompany Performance Management helps you implement an employee-first approach to performance management. Shift the focus of formal reviews from evaluation and ranking to employee growth and potential while driving engagement and focus with goal-planning tools. Save time and set the stage for productive performance management with ClearCompany.

Learn more about ClearCompany

3 Trakstar

Visit website

Motivate and engage employees with Trakstar's performance management software. Unlimited online performance reviews, automated workflows and reports. Manage performance reviews easily across hundreds or thousands of employees in your organization. Learn how leading mid size companies use Trakstar to increase employee engagement, streamline goal management and create an environment of real-time feedback to drive business growth. See a free demo today!

Learn more about Trakstar

Free Download

Performance Management Software Buyer's Guide

Get My Free Guide
Technology Advice is able to offer our services for free because some vendors may pay us for web traffic or other sales opportunities. Our mission is to help technology buyers make better purchasing decisions, so we provide you with information for all vendors — even those that don't pay us.