September 7, 2021

The Importance of Performance Management

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Tags: HR

This post has been updated for 2021.

A talented and skilled workforce is the lifeblood of every organization. As the war for talent escalates, companies are quickly learning the importance of having the right people:

“Talent is one of the last frontiers for differentiation. Any company can have a patent or produce a product. The difference is the quality of that product comes with the value of the talent you have.” Elaine Orler, President and Founder of the Talent Function Group

Orler is on to something: the talent management market is red hot and getting hotter. According to MarketWatch, the talent management software market will be worth $16 billion by 2023. And while companies purchase new talent management software, many will also invest in performance management software, as evidenced by the market’s healthy CAGR.

Many organizations struggle with recruitment and engagement, devising innovative business models, and building a global leadership pipeline. Do you know what these issues are intrinsically linked to?

If you guessed performance management, then you are correct.

Top HR software for performance management

Performance management isn’t easy, but the right HR software can help. Here’s a short list of the top HR software for performance management.

1 Rippling

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Rippling is the #1 Rated All-In-One HR Platform. You can onboard new hires in 90 seconds, and easily manage your company's payroll, benefits, HR, and IT -- all in one, modern system. It brings all of your employee systems and data together, and helps automate your busy work. Take onboarding, for example. With Rippling, you can click a button, and take care of a new hires' I-9, offer letter, payroll, health insurance, and more -- 100% online and paperless.

Learn more about Rippling

2 Paycor

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Processing routine HR tasks by hand and entering data in multiple systems can be time consuming and risky. That’s why leaders depend on Paycor for a modern, adaptable, and unified system for all things HR. From engaging employee self-service, mobile push notifications and company updates to unlimited workflows, reminders, and notifications, Paycor‘s HR software helps you get out of the weeds so you can focus on bigger priorities like attracting, retaining and developing employees.

Learn more about Paycor

3 PeopleGuru

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Designed for mid-market organizations (100+ employees). PeopleGuru develops and supports cloud-based Human Capital Management (HCM) software to help mid-market organizations attract, retain, and recognize their people and streamline back-office HR and Payroll functions. PeopleGuru HCM is a cloud-based, agile solution residing on one database that includes: HR, Payroll, ACA, Benefits Management, Time & Labor, Recruiting, Onboarding, Performance, Learning, Analytics, Salary.

Learn more about PeopleGuru

4 GoCo

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GoCo is modern HR, benefits, and payroll, built for flexibility and ease-of-use in mind. Manage records, performance, time off, onboarding, benefits, and more all in one place. GoCo is a secure, compliant hub for sending, digitally signing, and organizing your sensitive HR documents and data. Unlike other HRIS platforms, GoCo is built to be flexible enough to support existing processes, policies, and providers, so you don't have to change the way you work just to adopt a modern HR system.

Learn more about GoCo


Visit website is a collaborative platform that allows HR managers to manage the entire employee lifecycle in one place. Track the recruitment process of all candidates at a glance, onboard new employees with pre-made templates, plan team-building activities to engage current employees, and leverage data-driven insights with analytics built into your daily workflows. Finally, integrate with Gmail and 40+ tools you already use so the platform supplements your current workflows seamlessly.

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The problem with performance appraisals

Many companies are guilty of treating performance management as a yearly event. However, a Betterworks survey shows organizations that focus on continuous performance management performed 24 percent better on average than their competitors. They were also 39 percent better at attracting the best candidates and 44 percent better at retaining them. Companies where employees revise or review their goals quarterly or more frequently have:

  • Better data quality
  • Higher employee engagement
  • More efficient review processes
  • More input from employees

But are these results really that shocking?

Would Tiger Woods be one of the most successful golfers of all time if he was only given direction, feedback, and development once per year?

It’s time to stop equating performance management with a dreaded annual appraisal. In reality, it’s much more.

The benefits of ongoing performance management

Performance appraisals and assessments are just one piece of the talent management puzzle. In order to build an empowered and skilled workforce, companies need to do more than audit employee achievements. Organizations should work towards a management cycle where judgment isn’t the sole focus — ongoing support and improvement should be just as important, if not more.

So what exactly does “continuous performance management” look like?

It’s a series of ongoing events that include the following processes and benefits:

Goal setting and revising

Every employee needs a clear understanding of expectations for their work. They also need context, which includes an understanding of where they fit into the company and how they contribute to the overall success of the organization. This starts with company and executive goal setting, which cascades into manager, team, and individual goal setting.

Aligning your entire workforce with higher arching business goals sets clear priorities and direction, which ensures each employee can feel ownership in the business through individual objectives.

Management and coaching

You may need to adjust goals that are completely out of reach, but other times, employees just may not have the skills to achieve them — yet. Performance appraisals were intended to identify gaps in employee skill sets. But it’s self-defeating to identify the gaps without offering any type of solution. Improved employee performance and engagement are results of consistent feedback and coaching.

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

Also read: Building a Strong Executive Team: Succession Planning & Tackling the Bus Problem

Development planning

Employees need regular, quality feedback on their performance and specific details on how they can improve. Once the employees have identified their skill gaps, they have clear insight into the skills they need to develop if they wish to progress in their careers.

Be sure that your workforce knows the purpose of performance management is to aid in their development and give them control over their career progression. According to The Institute for Employment Studies, employees that receive opportunities for learning and development are more engaged at work, which is better for your bottom line.

Rewards and recognition

Recognition helps employees receive a balance of positive to negative feedback. A little unexpected appreciation can go a long way. It satisfies our fundamental need for praise, reinforces the right behaviors and culture, and leverages social engagement. Rewards and recognition can improve employee retention and engagement, which creates ambassadors of your organization and its culture.

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

What performance management should include

Performance management doesn’t end once a performance appraisal is delivered. Managers should take an integrated approach to employee learning. This means creating development plans that support an employee’s goals, career interests, and potential, as well as the organization’s business and talent needs. Evaluation is only effective when used as a tool for growth and success.

Increased focus on driving business results

Since all goals are aligned, an employee’s day-to-day work supports the company’s mission. This promotes year-round focus on key business results and driving profitability. Additionally, employees are more likely to provide better results because they see the impact their work has on the organization as a whole.

An empowered and engaged workforce

Companies can deepen employee engagement by creating a culture of shared accountability for career growth and development. When employees have some measure of control over their career path, they’re more likely to take the necessary steps to advance their careers.

Also read: 6 Ways to Reduce Employee Attrition That Have Nothing to Do with Beer

Foundational knowledge of talent

With insight into your workforce’s skills and abilities, you can ensure all employees are getting the direction, feedback, and development they need to succeed. You can identify high and low performers and track and evaluate the effectiveness of employee development activities.

choose performance management software

Performance management infrastructure

The importance of performance management to measure and improve employee capabilities cannot be understated. Technology that supports modern performance management not only facilitates a transparent process but provides valuable data you need to measure your success. This data gives HR insight into where deficiencies exist and how that affects other processes, like recruiting and training.

A performance management system should integrate with existing human resources software, like recruiting tools and learning management suites. Integration is key to facilitating knowledge sharing and collaboration, as well as providing metrics and analytics.

Investing in modern performance management processes and technology that supports it can be the competitive edge your company needs. As businesses tackle the intersection of retention, engagement, culture, and learning, modern performance management will just become good management.

To find the best performance management software for your business, check out our Product Selection Tool. After filling out the short survey, you’ll get a customized list of software recommendations.

Read next: Building a Strong Executive Team: Creating Consistent Talent Management Standards

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  1. Bob

    Thank for the post. I agree that employees need to have regular feedback on their performance. I think that vital to the success of the employee and the business. Like you said, the learn where the gaps are in their performance, and they are able to identify and correct those gaps.

  2. Mia

    Good read, addressing talent management is vital for all organisations. Identifying employees with high potential abilities will create an empowered and engaged workforce as you mentioned.

  3. Falguni

    Thanks a lot Jenna for sharing your views. A good PMS consulting will not only fill the gaps in management levels but it will also make things more transparent in an organization.