It's important to ensure your employees are performing well in their jobs, and one way to measure this is through a performance evaluation. However, the review process, which is typically coordinated between HR, the manager and employee, can be a tedious and inefficient process.

That's where performance management software comes in. Our buyer's guide details the common features, top benefits and necessary steps in choosing the right software.

The annual performance review process costs $120,000 in the value of time spent

Source: DecisionWise

43% of millennials want to receive performance feedback on a weekly basis.

Source: Ultimate Software

Companies that provide continuous feedback to their employees report a reduced turnover rate of 14.9%

Source: Gallup

Performance Management Buyer's Guide

What is Performance Management Software?

Performance management software helps companies streamline the review process and provide fair and transparent feedback to their employees. It records and tracks employees' goals that align to the company's objectives. HR can also use the software to analyze workforce data for opportunities to further retain talent.

Performance management software is typically a standalone solution. However, it's also offered as a module within talent management software and human resource management systems (HRMS). Performance management solutions can also integrate with other applications, such as enterprise resource planning (ERP) systems and learning management systems (LMS).

Common Performance Management Features

Here are some common features in performance management software

Goals/objectives management

Aligning employees' goals with the company's objectives goes a long way in improving employee engagement, so most performance management solutions provide goal setting and management functionality. The company sets their short– or long-term organizational objectives within the software as a benchmark, and after discussion, the employee and manager add in the employee's specific goals. The software then tracks the goals and alerts the employee or manager if milestones or achievements are reached or if the employee is not meeting their goals. Performance management software includes a template of SMART goals that companies can choose from as well as the option to add in their own goals.

360-degree feedback

his feature refers to the process of getting feedback on an employee's performance from the people they work with (e.g., coworkers, team leads, clients). Typically, an employee's manager may not have direct involvement in their work and wants to solicit feedback from other team members. In other cases, an employee may be asked to review their manager's performance. Performance management solutions keep track of the workflows involved in 360-degree feedback, including sending the feedback form that recipients fill out, collecting data and alerting recipients of deadlines.

Reporting and analytics

Most performance management software includes reporting features, such as standard and customizable templates, ad-hoc analysis, dashboards with drilldown filters and scheduling. Users can analyze various metrics, including skills gaps and goal alignment. The reports can be exported into PDF or Excel files and shared with other users.

Assessment/review templates

Most performance management software includes evaluation templates (e.g., rating scales, open-ended questions, surveys) that companies can customize with their name, logo or other information. There are also competency-based and role-based assessments that evaluate the employee's strength and weakness. For example, CRG emPerform includes a library of up to 50 competencies, and companies can add additional ones that are not included.

Continuous performance management

Many companies are phasing out the typical yearly performance reviews in favor of continuous feedback, which usually consists of one-on-one meetings between the manager and employee. Managers can schedule feedback check-ins and create and share a meeting agenda with the employee. Employees can also record achievements, recognition or issues. The software also provides guidelines that help managers have difficult conversations with their employees.

Compensation planning

Some performance management solutions have compensation planning features that help employers ensure pay is fair and equal for employees. They include access to the budget and built-in, performance-based recommendations for specific raises or bonuses. There are also built-in workflows that route compensation plan approvals.

Succession planning

Succession planning refers to a strategy for identifying and evaluating internal candidates to fill an open position when an employee leaves the company. Employers can build a talent pool that helps them find the top internal candidates as well as run an analysis on skills gaps and develop an action plan to close them. They can easily access data on employees' history with the company, including performance reviews and skills. Employers can also create development plans for the employees that want to move up into the vacant role but don't have the necessary skills.

Top Benefits of Performance Management Software

Using performance management software comes with numerous benefits, including:

Streamlined performance review process

The performance review process tends to be cumbersome and inefficient. Multiple people may be involved in providing feedback on an employee's performance, and the manager would need to coordinate, collect information and follow up via email or phone. Performance management software has built-in processes that alert a manager or colleague that they need to send their feedback. It also includes built-in templates, so companies won't need to worry about creating a review form from scratch.

Flexible review cycles

Even though yearly performance evaluations are still standard in many companies, they're slowly being phased out in favor of continuous feedback. Performance management software provides the flexibility that allows managers to provide coaching or recognition rather than wait for the traditional review time. And it also supports specific review frequency if companies do want to continue annual or biannual evaluations.

Reduced employee bias

While employee evaluations should be objective, they can be subjective if managers let emotions or favoritism get in the way rather than rely on actual data. Managers also tend to mostly consider an employee's recent performance (also known as recency bias) rather than their overall history.

Since performance management software stores all data relating to an employee's evaluation, managers have access to real-time, transparent information. It also has compensation planning features that correlate with performance metrics to ensure bonuses, raises or other salary adjustments are promoted fairly.

Increased employee engagement

Employees want to know that their work contributes to the company's goals and objectives. In performance management software, employees get a transparent look at the company's objectives and can set attainable goals. Employees also like to be recognized for their hard work, so some solutions offer social or peer-to-peer recognition features that allow their coworkers or managers to send kudos. Some software solutions include a reward program that provide small bonuses or gift cards as a “thank you” for an employee's hard work.

Improved employee learning and development

The vast majority (87%) of millennials feel that development opportunities are very important when accepting a new job, according to Gallup. Therefore, companies need to promote opportunities that help employees in their career development. Performance management software provides development plans that companies can customize and integrate to learning management systems with training courses.

How to Choose a Performance Management Solution

There are many performance management solutions out there that vary in features and pricing. It's key to research all of your options before purchasing a software. We've listed four important steps below.

1

Knowing your company's needs

Before researching any vendors, you'll need to consider your needs and requirements. For example, do you need a dedicated performance management software or is a module within a HR software enough? Are there particular features that you absolutely require? You'll also want to ensure that your top executives, IT department and other staff are on board with deploying a new software.

2

Creating a Shortlist

Once you've established your software objectives, create a shortlist of vendors that best fit your needs. We recommend listing out the must-have features, as well as the nice-to-have ones, to help determine the type of solution you're looking for.

In addition to features, you'll need to consider the vendor's deployment options (e.g., on-premise, cloud), implementation processes and customer support.

3

Contacting vendors

Once you've established your shortlist of vendors, it's time to reach out to them. Explain what your objectives are and what features you require in a solution. You'll also want to request a demo of the software with real-data scenarios, if possible. Vendors offer virtual demonstrations, but it can also be useful to ask if a vendor is willing to meet with you at your office. Another way to test the software is to participate in a free trial, if there is one. Most vendors offer a 14-day or 30-day free trial.

And be sure to compare different price quotes you receive. We explain more on pricing in a separate section below.

4

Conducting due diligence

Once you've selected your top two or three vendors, ask for references from their current or previous clients. While vendors tend to give you the clients with the most glowing recommendations or experiences, ask to speak to clients that are in the same industry or are the same size as your company. It's important to see not just the positives of the solution or vendor but any issues clients have experienced as well.

Performance Management Pricing

One of the most important factors in selecting performance management software is pricing. Prices can vary depending on company size, customization and implementation.

Here are a few questions you should consider regarding pricing.

  • Is there a clear plan to judge return on investment?
  • How many features do we really need?

In the past, there were two models: perpetual licensing and subscription hosting. However, more performance management software vendors opt to host the solution in the cloud, which means companies will only need to pay a monthly or yearly subscription cost.

There are two popular pricing strategies: per user, per month and per employee, per month.

Per user, per month:

In the per user, per month strategy, companies can pay for each user that access the system, whether they're managers, HR, executives or employees. One example is ClearReview, which provides a single yearly pricing that's based on the number of users (features are all-inclusive). Its pricing calculator indicates that a company with 25 users is expected to pay $3,350 annually. There are no additional costs.

Per employee, per month

In this model, companies pay for each employee, whether they access the software or not. One example is AssessTeam, which offers three pricing tiers based on the number of features offered. Its Basic tier is $1 per employee, per month, the Premium tier costs $2 per employee, per month and the Enterprise tier is $3 per employee, per month.

You'll also need to consider implementation, training, data migration, customization and support. Depending on the vendor, each of these factors may require additional fees. Some vendors have a staff of implementation specialists, while others rely on third-party consultants.

Once you've compared price quotes, you'll want to see a copy of the contract (also known as a Service Level Agreement) from the vendor. Here are two questions to ask the vendor as you look over the agreement.

  • Are there any hidden costs?
  • Are there any “evergreen” clauses (e.g., subscription automatically renews without client approval)?

Be prepared to negotiate for better pricing with the vendor.

Challenges of Performance Management Software

While performance management software has many benefits, there are some challenges, including:

Purchasing a best-of-breed performance management solution

Some companies may feel it doesn't make sense to spend money on a dedicated solution when an integrated talent management software that has performance management functionality could suffice. Or they may not need the advanced features a dedicated software offers.

man with checklist and giant pen

Getting buy-in from key players

It's critical to get buy-in from top executives, HR, IT and managers before purchasing software. However, they may have reservations. For example, top executives may be concerned about spending money if there's no discussion about return on investment, and HR or managers may have their own preferred way of conducting performance reviews. IT may also be concerned about data security of cloud-based solutions or not want the responsibility of hosting and maintaining the software on the company's servers.

man at desk thinking

Integration issues

Before purchasing, companies will need to consider how the software integrates with their existing applications (e.g., ERP, HRMS). The software may not integrate with a particular system, resulting in manual data entry or other issues.

man with checklist and giant pen

Implementation issues

Cloud-based software tends to have shorter implementation timelines than on-premise software. However, there can be issues that could delay the go-live date, such as unclear business goals, integration issues or an unresponsive vendor. It's important to inform the vendor of your goals and budget as well as outline a detailed implementation plan, including what happens at each stage.

man with checklist and giant pen

Software is not a cure-all for successfully managing employees

While performance management software makes things easier for managers, it doesn't replace their responsibility to engage in meaningful interactions with employees and effectively leading them. Managers must also be held accountable for reaching out and providing feedback to employees on a more frequent basis.

man with checklist and giant pen
7Geese
VENDOR NAME: 7Geese
READ REVIEW

GOOD

Transparent goals using OKR and SMART methodologies, people analytics tools to proactively improve talent retention, personalized employee growth plans that identify opportunities for improvement or development.

BAD

Setting objectives can be cumbersome, scheduling 1-on-1 meetings isn't always flexible.

BOTTOM LINE

Performance management solution that helps companies eliminate paper-based processes and provide continuous feedback to employees.

READ REVIEW
ClearCompany
VENDOR NAME: ClearCompany
READ REVIEW

GOOD

Customized and streamlined onboarding, flexible performance management features, ease of complying with HR regulations by automating processes.

BAD

ClearCompany is only available to clients in North America.

BOTTOM LINE

Complete talent management platform with solutions for talent acquisition, performance management and employee engagement.

READ REVIEW
CRG emPerform
VENDOR NAME: CRG emPerform
READ REVIEW

GOOD

All-inclusive features in one subscription price, employees receive ongoing feedback rather than just once a year, automated reminders and notifications so managers stay on track of performance review process.

BAD

It doesn't offer recruiting or learning management features, however, it does integrate with HRMS, payroll and LMS systems.

BOTTOM LINE

Performance management solution that streamlines processes and helps companies develop, retain and reward their employees.

READ REVIEW
Engagedly
VENDOR NAME: Engagedly
READ REVIEW

GOOD

Goal-setting module lays out objectives and key results using customizable check-ins and progress indicators; badges, gamification and awards drive recognition and motivation.

BAD

Recruiting features are not included.

BOTTOM LINE

Highly customizable performance management solution that focuses on continuous performance with real-time feedback.

READ REVIEW
Glint Perform
VENDOR NAME: Glint Inc.
READ REVIEW

GOOD

Ability to provide direct feedback and publicly recognize employees, configurable templates, real-time insights into software engagement with drill-down capabilities.

BAD

The module is still new and may not be widely available yet.

BOTTOM LINE

New performance management solution that empowers managers to help their employees grow by using frequent, high-quality feedback.

READ REVIEW
Lattice
VENDOR NAME: Lattice
READ REVIEW

GOOD

Integration to other applications, 360-degree review functionality, employee engagement features that guide companies in improving their corporate culture.

BAD

Interface can be difficult to learn for new users.

BOTTOM LINE

People management platform that allows managers to provide continuous feedback to their employees.

READ REVIEW
PurelyHR
VENDOR NAME: PurelyHR
READ REVIEW

GOOD

360-degree feedback shared privately or publicly, ability for employees to set and track goals, customizable review templates.

BAD

Some typical performance management features (e.g., one-on-one meetings, reporting) are not currently offered.

BOTTOM LINE

A performance management module that enables SMBs to move from paper reviews to an automated process.

READ REVIEW
Saba Cloud
VENDOR NAME: Saba Software
READ REVIEW

GOOD

Offers a highly connected, ongoing, and interactive learning environment that empowers employees to create their own learning experience that aligns and drives business goals.

BAD

Not intended for businesses under 200 employees.

BOTTOM LINE

A talent development solution that helps make companies stronger by helping them to empower, motivate and inspire exceptional talent.

READ REVIEW
Saba TalentSpace
VENDOR NAME: Saba Software
READ REVIEW

GOOD

Offers a highly connected, ongoing, and interactive talent development environment that empowers employees to create their own experience, while keeping them aligned to the performance goals of the business.

BAD

Not intended for businesses under 200 employees.

BOTTOM LINE

A talent development solution that helps make companies stronger by helping them to empower, motivate and inspire exceptional talent.

READ REVIEW
Trakstar
VENDOR NAME: Trakstar
READ REVIEW

GOOD

Unlimited number of goals and reviews, automated reminders and notifications, ability to request feedback from vendors or clients.

BAD

Limited customization options, learning curve for users.

BOTTOM LINE

Cloud-based performance management software that helps organization eliminate paper-based processes.

READ REVIEW
WorkBoard
VENDOR NAME: WorkBoard Inc.
READ REVIEW

GOOD

Accessible from any device, easy tool for capturing notes and action items in 1on1 meetings, chatbot that uses AI and machine learning to find relevant answers.

BAD

Not designed to measure an individual employee's performance, learning curve for companies that have never implemented OKR strategy.

BOTTOM LINE

OKR management solution that helps companies clearly define and measure their objectives and goals.

READ REVIEW
Workhuman
VENDOR NAME: Workhuman
READ REVIEW

GOOD

At-a-glance employee dashboard for tracking feedback and check-ins, ability to set and update short-term goals, strong focus on employee recognition.

BAD

Reward points can be confusing during the redemption process, gift card rewards don't cover some essential items.

BOTTOM LINE

Solution that empowers companies to provide praise and recognition to their employees, increasing engagement and morale.

READ REVIEW
Zenefits
VENDOR NAME: Zenefits
READ REVIEW

GOOD

Prebuilt and customizable review templates, one-on-one meeting tool, access to performance reviews via the Zenefits mobile app.

BAD

Customer support can be difficult to reach, especially after the implementation process.

BOTTOM LINE

Performance management solution that helps businesses streamline the performance review cycle.

READ REVIEW