Performance Management

What is a Performance Management System?

What Is Performance Management?

Performance Management Helps You:

  • Set clear and aligned goals
  • Conduct fair performance evaluations
  • Streamline appraisals And reviews
  • Foster continuous feedback and coaching
  • Recognize top performers and talent gaps
  • Support compensation and reward decisions

Set clear and aligned goals

A robust goal-setting framework is the first step to accurately collecting complex performance data. When you establish clear, consistent and measurable performance targets fine-tuned to your company’s performance review process and frequency, you can align benchmarks with broader organizational goals.

With performance management solutions, you can set well-defined objectives tailored to roles and responsibilities, which helps in the following ways:

  • Enhances employee focus by communicating clear expectations.
  • Contributes to an employee’s sense of purpose by helping them understand their role in organizational success.
  • Improves workforce autonomy and accountability with a shared-objectives approach.
  • Drives internal competition, leading to overall performance enhancement.

Enable continuous feedback and coaching

While appraisals and reviews are generally daunting, they’re crucial procedures in the human resource management realm. Still, 90% of HR professionals agree it’s time to reconstruct the annual or bi-annual process and use a different approach – the continuous performance management model.

Continuous feedback and coaching are essential components of an effective performance management system. These tools allow real-time data tracking and frequent progress checking, promoting open developmental dialogues that support consistent employee growth.

Open and continuous performance management models offer several benefits to employees. Here are a few ways they can be advantageous:

  • Continuous Feedback Management: Employees receive timely and frequent feedback on their performance, allowing them to make improvements and address issues promptly.
  • Check-in Management and 1:1 Meetings: Schedule regular meetings or deploy surveys to give and receive feedback, address doubts and discuss progress.
  • Performance Analytics Dashboard: View progress and track metrics against preset benchmarks to actively monitor KPIs. Adjust and realign goals as required.
  • Coaching and Mentoring Programs: Allow employees to acquire new skills by letting managers guide them and offer necessary resources for their professional capabilities and career prospects.

Conduct fair performance evaluations

According to a recent report by Betterworks, only one out of three employees sees performance reviews as entirely unbiased, which is a growing concern for businesses striving to retain talent.

Refining internal practices to be reliable and transparent helps foster your employees’ trust. That earned goodwill is vital, as the same report highlights that equitable and fair performance reviews can increase by a significant 23%.

You can achieve these objectives by incorporating performance management solutions. Create a reliable and structured performance review framework that ensures fairness throughout the review and feedback process.

Here’s how objective performance evaluations benefit the management and workforce:

  • Empower and improve accountability employees with self-assessment capabilities.
  • Eliminate guesswork and equip managers with actionable insights into individual, team and organizational progress.
  • Fosters trust across the organization with consistent and holistic reviews.
  • Drive growth and development with constructive feedback.
  • Improve performance and organizational success with accurate and timely assessments.
  • Enable well-rounded assessments by automating self, peer and manager reviews, reducing bias and facilitating informed decisions.

Streamline appraisals and reviews

The review process is not a one-size-fits-all approach, and you’ll need to tailor the process according to your company, workforce and industry requirements.

By implementing performance management tools, you can generate review templates, track performance data and store relevant information in a centralized location. This consolidation streamlines review cycles with built-in auditing tools to ensure compliance with established standards.

Some programs offer more regular reviews, such as quarterly, semi-annually or ad hoc reviews — which help track employee progress toward their annual performance goals.

  • Self-Assessments
  • Competency-Based Assessments
  • Performance-Based Reviews
  • 360-Degree Feedback
  • Behavioral Assessments
  • Skill Assessments
  • Performance Ratings
  • Continuous Feedback and Check-Ins
  • Employee Engagement Tools
  • Employee Pulse Surveys

Recognize top performers and talent gaps

Performance is a spectrum, and every role is significant in achieving organizational goals. Performance management methods recognize this essential truth and acknowledge each employee’s contributions.

In this context, performance management solutions are crucial, providing insight into how your employees perform and highlighting your workforce’s strengths and weaknesses.

By collecting and analyzing data, these tools help you identify top performers and those who’ll benefit from additional support. Here are some performance management functions to consider:

Many solutions include features like pay-for-performance and incentive management that allow you to reward your top performers with bonuses.

Support compensation and reward decisions

Your workforce’s performance levels play a prominent role in shaping compensation decisions. It’s crucial to carefully consider how performance intertwines with engagement, recognition and job satisfaction. Recognizing the impact of rewards and compensation structures in this equation is also vital.

The software provides an invaluable data-driven approach that helps you create consistent, accurate, aligned compensation structures that ensure everyone gets their due.

An ideal performance management system provides quick access to internal frameworks that quantify outcomes and effectively translate them into appropriate compensation, bonuses and salaries.

Compensation management capabilities include:


How do I know if my business will benefit from a performance management system?

Here are some indicators that suggest your business may benefit from such a system:

  • Poorly aligned goals, vague targets or unrealistic expectations hamper your workforce’s performance.
  • Scarce performance data and insights make performance evaluations inconsistent or subjective.
  • Employee engagement is consistently low.
  • Identifying and developing internal talent is challenging.

Assessing your specific organizational needs and goals will help determine if such a system would benefit your business.

What features should I look for?

Each vendor offers unique combinations of features. You’ll want to determine your specific pain points and use those requirements to guide your search.

Top features and functions to consider are:

  • Goal Management
  • Talent Assessments and Performance Reviews
  • Dashboard and Reporting
  • Employee Check-ins Management
  • Employee Recognition
  • Employee Surveys
  • Feedback Management
  • Talent Management
  • Integrations

Also, consider how the system will store, secure and manage sensitive employee and user information.

We recommend referring to our detailed features checklist to learn more about the functional and technical aspects. This guide systematically breaks down the key components you need to know.

Consider how well different vendors adhere to the following compliances:

  • Equal Employment Opportunity (EEO): Ensures fairness and prevents discrimination through standardized performance evaluation criteria and processes.
  • Fair Labor Standards Act (FLSA): Manages employee working hours, overtime and compensation to comply with FLSA regulations.
  • Privacy and Data Protection: Follows GDPR and CCPA guidelines to safeguard employee data and apply global data security practices.

What are the stages of performance management?

Performance management is a systematic and ongoing process. While businesses have different performance management processes, every cycle typically includes the following phases:

1. Planning:

  • Establish clear performance expectations and goals.
  • Set realistic goals that are specific, attainable, relevant and time-bound (SMART).
  • Define key performance indicators (KPIs), targets and benchmarks.
  • Collaborate with employees to create performance plans aligned with organizational objectives.

2. Monitoring:

  • Track and measure employee performance against predetermined goals and KPIs.
  • Regularly observe and assess employee performance.
  • Provide feedback and guidance to keep employees on track.
  • Utilize methods like check-ins, progress reports and evaluations to monitor performance and reassess goals.

3. Developing:

  • Support employee professional growth and development.
  • Address poor performance and offer resources to improve.
  • Offer training programs, mentoring, coaching, job rotations or performance improvement plans.
  • Help employees acquire new skills or enhance existing ones.
  • Foster a supportive environment that encourages continuous improvement.

4. Rating and Rewarding:

  • Evaluate employee performance against goals and KPIs.
  • Provide ratings or performance appraisals based on objective measurements, self-assessments and feedback.
  • Offer rewards and recognition based on performance ratings like monetary incentives, bonuses and promotions.
  • Celebrate wins with non-monetary rewards like public recognition or congratulatory messages.

How do I select an employee performance management system?

There are countless features to sift through and a seemingly endless number of vendors in the market. So, how do you decide which solution is best for your business?

Start by compiling a list of must-have features. Refer to the top functions in this article, but if you need a more guided approach, check out our customizable requirements template. Add details like workforce size and industry to generate a prioritized requirements list.

Look at our free comparison guide for tailored solutions that suit your company’s needs.

Making a final decision can seem daunting, but we’re here to help. Contact our team for individualized recommendations by messaging or phone at 855-850-3850.

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Performance management articles are written and edited by:

Zachary Totah

Content Manager

As SelectHub’s Content Manager, Zachary Totah leads a team of more than 35 writers and editors in their quest to provide content that helps software buyers find the right system for their company.

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