Managing the performance of your employees and teams is critical. You must be able to identify good behavior and encourage it while discouraging unwanted behaviors. You also need to help your employees learn and grow, developing into the best versions of themselves. The right performance management system will power your organization’s growth and success.

Performance management has changed a lot over the last few years, becoming more agile, less punitive, and more employee-focused. However, handling the process manually is a mistake. A performance management system can help automate many of the processes, remove the potential for bias to affect results, and help you connect the dots more accurately.

The result? An enhanced ability to manage teams and individual employees, achieve critical business objectives, and even retain key talent for as long as possible. Of course, finding the right performance management system can be pretty challenging. Where do you even start?

There are plenty of software options on the market today, but they rarely offer the same features and capabilities. How do you even know what to look for in this type of system? Our guide will walk you through what you need to know about choosing a performance management system and how to ensure you make an informed decision.

Performance Management System

What Is a Performance Management System?

Let’s start with what might be the most basic question of them all – what is a performance management system? You’ll find that the answer is more complex than you might at first assume. A performance management system can technically be any formalized structure or process that helps you better manage the performance and development of your teams and employees.

Your performance management system also needs to support the new continuous performance management cycle. If you’re still following the outdated annual performance review model, now is the time to change. You’re not just behind the times, but you’re doing your employees and your business a major disservice.

The right performance management system will support the multiple stages required for success. Those stages are as follows:

While the first and last points seem like separate ends of a line, they’re actually the same point in a circle. Every check-in should include a review of what went before and involve creating SMART goals to move the employee (and the organization) forward.

The right performance management system supports each of these steps, but it does so much more. Every stage in the cycle described above requires access to accurate information, combined with the knowledge and capabilities of a compassionate manager.

Why Your Performance Management System Matters

Under the heading we defined in the previous section, you can see that a performance management system could be a software platform, but it could also be a formalized manual process that follows a specific formula. Still, manually managing performance, even for a small business, is a mistake. It’s just too easy to step off the path.

Quite a few pitfalls can wreak havoc if you go the manual route, including:

Each of those negatives listed above costs your business time and money. Some of them also mean that you’re probably losing talent at an unsustainable rate. Employee churn is a huge drain on company resources – it’s not just replacing a cog in a machine.

You need to recruit the right people, onboard them, get them up to speed, and then manage their performance over time. However, if the problem is with your performance management system or deep in your company culture, you’re caught in an endless feedback loop. There is no “out” of the loop, either.

The good news is that performance management software can automate those processes and help surface insights, forge new connections, and manage your talent better. With the right PM software, you can retain the people you’ve invested so much time and money in, guide them in their career paths and build a stronger, more successful organization.

What Types of Performance Management System Exist?

When we talk about performance management system types, what we’re discussing is the format that performance appraisals take. There are multiple options out there and they’re not all the same. Combining different appraisal types can help give a fuller, more accurate picture of an employee, their performance, their potential, and other critical considerations.

In addition to the four types listed above, other types of appraisals may play a role in your organization. These may include:

Your performance management system should support each of these functions. If it does not, then it isn’t very robust.

The Key Capabilities of a Performance Management System

Performance management systems come in all shapes and sizes, from manual options (that should be avoided) to robust software platforms that integrate with HR directly and provided L&D opportunities. However, you need to make certain that any system you use offers the right capabilities. Note that capabilities aren’t features or system components – they’re outcomes supported by those features. In short, it’s what the system enables you to do that matters most. What are some of the most critical capabilities? We’ll explore those below.

Setting Goals and Objectives

First, your performance management system must be able to help you set goals and objectives. These need to be pertinent to several things, including:

However, you cannot neglect personal goals employees may have. Those should also be accounted for in the goal and objective setting process. Ideally, you’ll be able to map everything out to create a clear picture.

Simple, Direct Communication

Communication is a critical part of performance management, particularly in the modern world. To engage in ongoing conversations and to support regular check-ins, you must be able to communicate. While face-to-face interaction is often best, it is not always possible. So, consider the communication capabilities of various performance management systems.

It’s about more than communication technologies, though. Your performance management system should also provide the means to organize and then conduct performance conversations surrounding specific topics. This touches on things like data accuracy, organization, and access to information through the system.

Finally, the results of the conversation must be entered into the system in a way that supports tracking and performance management. For instance, if the manager asks questions, listens to the answers, and then probes deeper with further questions, new insights and information can be revealed. That can then be recorded with a summary statement or a similar form and translated into a rating you can then enter into the system.

Performance Reviews

Make sure that the performance management system you choose provides you with robust review capabilities. You should have the ability to use 360-degree reviews, self-assessments, and other appraisals that we discussed previously. These should be either baked into the system as preexisting forms, or you should be able to design your own appraisals based on in-house needs.

Good Performers

It’s not enough to simply track and review performance and progress. You need a way to reward good performance. In the past, this was largely tied to an annual raise. Those who met or exceeded expectations saw additional money each year. However, today’s employees have more needs, and offering a wider range of rewards can create an atmosphere of fair play while creating a more positive company culture. You can consider almost any type of reward imaginable, from additional paid time off to recognition in front of their peers, but make sure your performance management system provides the means to track good performers over time.

Unwanted Behaviors

Just as you need to track good performers, you also need to monitor for unwanted behaviors. This could include almost anything, but all of these are behaviors that ultimately detract from employee, team, department, and business success. Your system should provide robust tracking capabilities to monitor performance improvements over time as well as to alert you to employees who do not make critical changes to behaviors. This allows managers to provide timely feedback and encourage course corrections in real-time.

Supplying Feedback and Making Suggestions

Every performance management system should provide you with a way to provide feedback and make suggestions to employees. All employees have strengths and weaknesses, and the right system will help you define areas where there is room for improvement and how to achieve that improvement, but also to note areas where employees are ahead of the curve. Remember – it’s about providing constructive feedback, rather than destructive criticism. The ultimate goal is to improve employee performance and productivity while simultaneously encouraging a positive culture that values learning and development.

Integrating Learning and Development into a Performance Management System

As mentioned previously, performance management is closely related to learning and development. They’re two sides of the same coin. You cannot improve performance without also offering an L&D solution that helps employees achieve critical improvements.

Still, not all performance management systems integrate with the L&D side of things. In today’s environment, and with the increasing skills shortage affecting virtually every industry, you cannot afford to choose one that doesn’t. Why is that? Why is learning and development now considered part of performance management?

Think of it this way: If you need to see a change in employee performance, would you see better results by just telling them they need to improve, or by giving them the tools and resources necessary to do so? By combining learning and development with performance management, you ensure that your employees always have access to the resources they need to improve their performance, whether that’s through ongoing professional CE, upskilling courses, voluntary career development training, mandatory corporate training, or something else.

Performance Management System FAQs

To help you better understand your options when it comes to choosing the right performance management system, we’ve answered some of the most frequently asked questions.

  1. What advantages can a company see with a performance management system in place?

Your business can see quite a few critical advantages. They include improved consistency, better engagement, improved employee retention, better employee loyalty, and even better customer/client satisfaction. Remember – managing employee performance should improve the organization and its ability to perform, compete, and deliver. It shouldn’t really be about “weeding out low performers”. Instead, it should be about identifying poor fits between employees and positions, providing team members with the resources and training needed to excel, and encouraging everyone to do their best work.

  1. Why should I use an automated software-based performance management system rather than doing it manually?

Without a software-based performance management system, you’re in danger of inconsistency, bias, prejudice, and other issues. It’s also much more time-consuming and labor-intensive. There is no way to track and access information the way you can with software, either. Simply put, manual systems can wreak havoc on your organization, while software platforms offer automation, streamline processes, ensure you can collect information regularly, and also foster consistency across the board.

  1. What is continuous performance management?

Continuous performance management is simply the term used for performance management processes that take place across the entire year, rather than being relegated to an annual review only. It’s designed to deliver critical benefits, including real-time course correction, and can be used in conjunction with learning and development initiatives to build a stronger workforce.

  1. What benefits does a continuous performance management system offer employees?

Employees will see several important benefits with a continuous performance management system. These include increased autonomy, more independence, the ability to self-assess, the ability to provide feedback on manager performance, and the chance to upskill and develop professionally and personally. It can also strengthen professional relationships, create a more positive company culture, and ensure transparency in the PM process.

  1. What are the most important considerations when choosing a performance management system?

When choosing a performance management system for your company, make sure you know whether you want a standalone solution or one that ties in with other systems. You should also consider a full suite that includes L&D capabilities. Customization, form creation, and course content authoring are also important considerations, as is usability and overall user experience with the system. Finally, the budget should also be considered. Some options offer scalable features that allow you to pay for just what you need, when you need it, while others require you to purchase the full package, whether you need all those features or not.

Conclusion

In the end, there is no one-size-fits-all performance management system. Some companies will benefit more from a standalone solution, while others will need a full suite of tools that allow not just performance management, but also employee upskilling and mandatory corporate training. At eLeaP, we understand that every company is different. Contact us today to learn more about how we can help with your performance management and learning and development needs.