What is performance management software?

Performance management software is a tool designed to help managers write accurate job profiles and expectations, create relevant objectives that align with the company’s goals and mission, document performance, and write appraisals.

The best performance management software will also improve employee engagement through transparency, recognition, and feedback. Each team member can see how they contribute to the organization’s mission and how professional development programs align to business goals.

Market overview

Market size for performance management software is difficult to ascertain, as the software is often lumped in with other HR tools. Current estimates value the talent management market at roughly $16 billion by 2024, with a growth rate of approximately 16 percent.

A talented and skilled workforce is the lifeblood of every organization. According to SHRM, companies spend an average of $4,000 every time they fill a new position, and that’s outside of salary, benefits, and job board costs. But if organizations don’t take the time to continuously develop the talent—which is their most valuable resource—then all the money and effort spent hiring is for naught. Companies must look closely at how they manage and measure employee performance, and take a similarly close look at the technology they use to do so.

Market-leading performance management solutions

• Cornerstone OnDemand
• Workday
• Taleo
• Peoplesoft - Oracle
• SuccessFactors
• Silkroad
• Halogen Performance

The best performance management tools

Product	Goals	Mobile App	Analytics	Career Planning
Oracle HCM	yes	no	yes	yes
SAP SuccessFactors	yes	no	yes	yes
Workday	yes	yes	yes	yes
Cornerstone OnDemand	yes	yes	yes	yes
Namely	yes	no	yes	yes
Engagedly	yes	yes	yes	yes
empXtracks	yes	no	yes	no
ClearCompany	yes	yes	yes	yes
BambooHR	yes	yes	yes	no
Saba	yes	yes	no	yes
Bizmerlin	yes	yes	yes	yes

Conducting a performance management software comparison

Performance management software helps align your workforce to corporate objectives, measure and evaluate individual employee performance, and continually measure organizational results. The software digitally tracks all activities that ensure goals are consistently met in an effective and efficient manner.

Traditionally, companies conduct performance reviews at least annually. However, it’s important for employees to receive ongoing feedback in order to understand how they perform and contribute to corporate goals and how they can take the next steps in their career development. This means aligning and assessing performance regularly by gathering feedback from a direct manager, team members, peers, and indirect managers.

A performance management system will offer the following functions, which the company and manager can use to gain insight into an individual’s overall strengths and potential:

Coaching management

Managers use coaching management tools to organize the goals of each of their reports, build career plans, track training and assessments, and store communication and feedback. Many modern coaching management features also provide a place for reports to message and interact with their manager directly via chat.

Performance appraisal management

Many companies have moved from the annual performance appraisal model to more frequent performance assessment periods including weekly and monthly. A performance appraisal module gives companies a centralized location to store, analyze, and track changes in their employee performance from year to year and across appraisal periods.

Goal-setting, alignment, and management

Goal tools help managers and individuals write goals and track their performance toward them in a centralized and consistent manner. Today’s tools prompt individuals to update their progress toward goals, solicit feedback from the managers, and compare progress to benchmarks.

Feedback management

Feedback management tools collect and organize feedback around goals or performance metrics, giving both the employee and their manager a place to document updates and thoughts regarding goals.

Competency management and skill assessment

Competencies and skills management tools track certifications, skills tests, and licenses that keep the company compliant with local and state regulations. These tools can also be used to understand an individual’s most valuable skills, plan training, and map succession within the organization.

Development planning

Career mapping and development planning are key components of any employee engagement plan, and a robust performance management software will include tools that support HR teams and managers in planning long-term career moves with individuals.

Performance and productivity analytics

Analytics tools help companies determine whether their efforts are paying off. Performance and productivity analytics aggregate performance metrics and productivity KPIs to better plan for next steps and assess the success of current projects.

Pay for performance

Many companies base bonus and commission rates on individual performance toward and above goals. Pay for performance modules in performance management systems help teams tie performance pay directly to accrued metrics and progress toward goals.

Talent profiles

HR and management teams need quick access to deep information about their employees. Talent profiles give a detailed view of an individual’s skills and proficiencies, without needing to comb through reams of performance reports. These tools can help HR teams build job descriptions, manage succession planning, and even understand where their teams lack vital skills.

Multi-rater functionality

Performance management tools that include multi-rater functionality provide the context for multiple perspectives on an individual’s performance. These tools can be used to conduct 360 reviews—where peers and members of other teams can provide feedback on performance—as well as give review capabilities to multiple levels of the organization.

Mobile capabilities

As with everything in tech today, portability provides managers and employees the freedom to complete performance tasks outside of the office, on a commute, or at home. Mobile capabilities also bring performance conversations to a context where many individuals are more comfortable sharing honest feedback: their phone apps.

Reporting and analytics

No modern app is complete without reports and analytics that provide insight into the tool’s effectiveness, the employee’s performance, or the company’s improvement. These modules are a must for proving the worth of the tool to a CFO or CEO, and can give deep insight for teams to use when planning future HR initiatives.

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Trends in performance management tools

Assess, coach, repeat

Modern PM software isn’t just for HR— it’s for employees, managers, and leaders. Today, more than 70 percent of employees in an organization are knowledge workers or service providers. This means they become more valuable over time as their knowledge of the industry and the company’s policies increase. Consequently, performance management has shifted from a competitive evaluation model towards ongoing coaching and development.

According to HR expert Josh Bersin, “Companies that provide high levels of development planning and coaching to their employees have a third less voluntary turnover and generate twice the revenue per employee of their peers. These are huge returns.”

This shift is supported by performance management systems that offer coaching tips and features for managers such as:

• Automated coaching tools
• Assignment of a coach within the system
• Communication and documentation tools to track progress
• Links to on-demand related coaching information
• Workflows to track coaching and mentoring activities

These tools provide a digital record as well as data about how meetings impact performance, engagement, and turnover.

Agile goals

Business priorities change quickly and frequently. A goal set at the beginning of a year may not hold relevance for the company or individual weeks or even months later. As the entire performance appraisal process evolves, it’s best to think of your workforce as a valuable sports team: regular feedback, communication, and coaching will create high levels of performance. To facilitate high performance going forward, it’s necessary to have modern systems that encourage feedback, frequent check-ins, collaborative assessments, skill development, and social recognition.

End-to-end talent management

Recruitment, onboarding and training, performance management, and learning and development are tightly woven together. Because of this, one of the biggest trends in HR software is the shift from standalone or best of breed solutions to integrated product suites. Touchpoint solutions for payroll or recruiting provide tailored functionality for specific tasks and niche problems. However, a single vendor solution offers a seamless user interface, easy access to data across the system, and comprehensive analytics.

Common performance management software applications

When choosing a performance management tool, there’s no one-size-fits-all solution. Different business sizes and types may need additional features, so it’s important to consider your company’s goals, needs, and industry.

That said, the market can be broadly divided a few ways:

Business size

1. Enterprise: For large organizations, a performance management system that integrates with existing HR or ERP systems is necessary. Large companies upgrading legacy applications should consider integrated suites from one vendor, or ensure new software will integrate seamlessly with existing systems.
2. SMB: Thanks to SaaS deployments, small-to-medium sized businesses can benefit from a robust performance management system. For growing SMBs, scalability is one of the most important factors to keep in mind— you don’t want to outgrow your system in a matter of months. As you scale, you’ll need to continually evaluate company goals and growth projections to ensure your vendor is still a good fit. If you find your system lacks the functionality you need, don’t continue to upgrade with the same vendor just to avoid having to transfer your data to another system.

Application type

1. Best-of-breed: Do you already have a comprehensive HR solution in place, but find your performance management tool is subpar? If so, then a standalone system with more advanced functionality is necessary— especially if you’re satisfied with the majority of your HRIS. Just be sure that the new performance management software integrates with the existing platform.
2. Integrated suite: If you want to improve your entire talent management process, create an efficient and effective system from scratch, or upgrade from overwhelming spreadsheets, then an integrated suite with multiple modules is best.

How to create executive buy-in

To create executive buy-in for a new PM tool, you must build a compelling proposal. Luckily, performance management affects each individual department as well as the company as a whole. To ensure successful adoption and long-term ROI, focus on what’s in it for your decision makers. Below are a few ways to align your initiative:

CTO/CIO:

Your technology leadership team is an excellent resource to help you conduct a performance management system comparison. Involving them early on, as they can ensure the new technology will fit with existing systems and infrastructure.

If you’re replacing a self-developed or on-premise legacy solution, a modern performance management system can reduce infrastructure requirements, updates, and support, which frees the IT department to focus on more strategic goals. Additionally, CIOs can determine if a new system aligns with the company’s growth and three to five year technology lifecycle plan, ensuring it provides a return on investment.

The CIO will eventually manage your new system anyway, so make them an ally up front. A strong endorsement from IT will give you a better chance of gaining buy-in from other execs.

CEO:

People build businesses, so developing a world-class workforce is a top priority for CEOs. A performance management system works as an accountability system for individuals, teams, and the organization. Once a CEO sets high-priority objectives, performance management software can ensure departments achieve those objectives. From company goals, departments and teams set their responsibilities, which then cascade into individual performance plans.

Since your CEO is concerned about the big picture, highlight how performance management software helps align workforce skills, development, and performance. The software manages expectations for what results the company expects every single employee to achieve. And by defining clear roles, managers can see if employees perform above or below expectations and can identify where individuals should develop their skills.

CFO:

Document how the company will evaluate the effectiveness of your performance management system before you implement it. This will be the first thing your Chief Financial Officer wants to know. Identify the expected outcomes from a successful system implementation, and how your company will measure them. In addition to presenting upfront costs, prepare to outline ways a performance management system will give back to the company—especially regarding the bottom line.

Mention that with performance management software, you can actively manage and track performance investments with metrics. Teams can also use reports and analytics from a modern system to calculate ROI for both revenue and talent growth.

Executives invest in solutions that help the company make money, avoid risk, or that serve long term strategic purposes. Performance management software fits all of these criteria. Create a common language and shared perspective to connect the dots for decision makers. Speak their language and use data to back up your proposal whenever possible.

Choosing the best performance management software

This analysis of the performance management market, prominent features, and current trends can be used as a starting point for your software purchasing decision, as well as a means to create buy-in.

If you need guidance choosing a solution, you can speak with one of our in-house tech advisors to get free personalized product recommendations by phone, or use the TechnologyAdvice Product Selection Tool at the top of the page to find recommended products based on the features you need.

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