Top Effective Performance Management Systems for 2023

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Here are those spooky stats we mentioned in the intro, though we suspect you're not in need of convincing that this is a critical piece of software that support a highly consequential process. When surveyed by Reflektive, employees reported:
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• 85% would consider quitting their jobs if they felt their performance review was unfair.
• 18% said they would "bad-mouth their co-workers, boss or company," while another 12% planned on exposing company secrets.
• Employee turnover costs can range from 6 months to 2 years of the position's salary for highly paid executive roles.

Yikes! However, the worse news is that's only some of the damage a poor performance management approach can cause a business. Navigating effective performance management software to keep employees happy and productive, thus, has become a life or death matter to companies of all sizes and areas. But building a compatible tool, for some, has proven to be a difficult task.

To ease your struggles, here are the top effective performance management systems made through our vendor vetting process.

Time to figure out what the best performance management tools in the market can offer: their uniqueness, pricing, pitfalls, and ROI.

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Performance management software is the analytics layer on top of the organization that allows HR and the executive team to have a strategic understanding of the people side of the business, along with metrics and information to help individuals understand how they fit in and how they can improve their employee performance. This software can tell you:

• What the organization is working on
• What a team is working on
• What an individual person is working on, and even what methodology they’re using

Use Cases for Performance Management Software

Performance management software is helpful to an organization in several ways:

One-on-ones: Some forms of 1:1s have existed in many businesses, yet in pretty limited ways. So today, performance management systems are implemented to get the most out of these interactions, where managers and employees collaboratively create agendas for 1:1s, review notes from past meetings, use pre-built conversation starters, and tie 1:1s back to goals and feedback.

Objectives and key results (OKRs): Most Performance management software has goal setting feature that allows businesses to list their OKRs and record progress toward them. The progress of an individual or team often rolls up into a larger part of the organization. For example, if five different sales teams progress towards hitting quota, so will the sales function.

Performance Reviews: We have trouble remembering what happened last week, let alone six months ago. Implementing a performance management system means you can now have meaningful performance conversations more regularly rather than awkward annual performance evaluations, resulting in employees ramping up faster and aligning more closely to company goals.

Employee Performance Management: Real-time feedback and advice on what to learn and what to work on can hugely impact your Human Resources team's talent management practice. From onboarding to 360-degree feedback and regular check-ins with managers, modern performance management systems provide managers a whole picture of employee performance and help them better coach their team.

People Analytics: One of the best parts of a performance management system is that you can now deeply understand what’s happening in any part of your organization. Most of these solutions come with analytics that will give you insights into which teams are using the platform and which need more education on the value of 1:1s, OKRs, etc. These analytics can help you know what everyone is working on and how that aligns with your overall business strategy.

While performance management software is an incredibly powerful toolset to engage team members, there are a few ways that we see companies need to improve when buying, implementing and capturing value from these tools.

Product Suite: Many of the vendors in this category have tangential offerings in the employee engagement category. It’s essential to think about your long-term people strategy when you are contemplating these solutions. While some may have exactly what you need today, others might be good enough and align nicely with your plans. For example, you may have found the perfect point solution for performance management, but it doesn’t have an employee engagement module. If you plan to roll out employee engagement in the next 18 months, it makes sense to bundle these both for ease of use on the user end and back end.

Culture Change: At the enterprise level, you most likely have the change management team helping you buy and onboard a performance management solution. However, most companies can’t afford Deloitte! So having HR explain the new solution's why and how is necessary. Chances are, you already have some sort of performance management solution in place, and the software is meant to streamline it. If you start from ground zero, you will have to communicate several times the value to the organization AND individuals using this solution. A pro tip is to use individuals’ success stories to explain the value.

Compensation Alignment: One pitfall is tying compensation directly to an individual’s OKRs. Performance-based compensation works and is very much the underpinning of capitalism itself. However, OKRs should only be 60-70% attainable. Otherwise, they are not going to optimize individual and team performance. If you tie these goals to comp, you will have a tough time getting people to put together OKRs that they can only meet 60-70% of the time. Make it clear in your communications how meeting OKRs will impact bonuses.

Phased Roll Out: Very few businesses can rapidly go from zero to sixty. If your company is not already doing 1:1’s and OKRs, pick a core module of the solution you’re buying that strongly overlaps your current way of doing business. You already do 1:1’s? This software can be a better way to organize and facilitate these interactions. Start there, and roll out the next module after your team is familiar with the software. Schedule 1-4 months per module to educate, roll out, and get comfortable. A meaningful forced change to people’s behavior will not result in success, but a measured one will.

Another Login: Rule of thumb: Do not require your colleagues to log into another system. It’s just too much. Instead, look for a performance management system that supports integrations with email (e.g., Outlook and Gmail), Slack, Jira, and other places your employees live each day. It cuts down on the effort needed to use these solutions, drastically increasing your chances of high engagement.

Aligning Goals: One last pitfall is around how people set goals. It’s natural for employees to set OKRs that relate to the company goals or managers. However, sometimes this is not the best use of people’s time. For example, a company's objective may be to cut costs, but someone in the marketing department needs to be focused on creative ideas for new campaigns, not scrutinizing which vendors could be cut. Individuals should be encouraged to be thoughtful about what objectives they are setting.

The top performance management systems have key features that make this much more than an annual check-the-box review:

Check-ins: Employees want and deserve more frequent check-ins than annual reviews. 1:1's and a regular review of OKRs means that employees feel engaged, know what to work on, and learn how to take control of their employee performance. The bottom line is that more continuous feedback is a massive win for the organization and individual.

Automation & Workflows: Asking your managers and employees to take on another system? Bad move! Look for a tool that automates feedback collection, facilitates 1:1's with pre-canned questions and scheduling, and has integrations with your other HR software and tools like Slack, Outlook, etc.

Annual Employee Evaluations: The awkward yearly review is dead, but that doesn't mean employee evaluations are out the door. They've simply evolved. Take a hard look at how a new vendor streamlines and improves this part of your talent management strategy.

Development Plans: Misjudging staff performance is dangerous. So when choosing a performance management system, look for one whose modules help develop, track OKRs, and move employees in the right direction. If the system has learned management capabilities with specific educational material for your employees, that’ll be a huge plus.

Here are some of the questions we recommend asking on demos when you get on the phone with a sales rep:

• What is your product roadmap, and what do you think about related HRTech, such as employee engagement, recognition, and rewards?
• How does your solution integrate with my existing HRIS?
• How does this tool integrate with the project management software we might be using?
• What is your change management playbook to help get our employees and managers on board with this new solution?
• How do you suggest rolling out this platform?  Which modules go first, why and on what timeline?
• If I’m already doing OKRs and 1:1s, how much time will this save my team?
• Is this solution designed for specific types of organizations (small businesses, enterprise/knowledge workers, retail, remote teams)?
• Can I export the performance management data to cross-reference with other KPIs kept in other systems?
• How does the annual performance review process work?
• What about more systematic review processes and check-ins?

A while back, we wrote about how forming a cross-functional buying committee can help your team ease the tools and technologies assessment.

A cross-functional buying committee is a group of 5-10 people who care about a given topic, in this case, culture/retention. They brainstorm and then figure out the best way to tackle the issue: to execute some sort of initiative, in this case, buy performance management software. Realistically, there are one to two leaders in the group who do all the work of executing the initiative

But, there are some considerable benefits to having this committee. First off, getting a budget for your initiative is so much easier. You now have leaders from marketing, sales, engineering, etc., when you go to the CFO to get money. They can help you pitch and throw their weight behind the initiative.

You also have the help of every organization during implementation. This is especially useful when rolling out a tool like performance management, where individuals must be bought into the initiative across all different functions. Having the person from your engineering team on the committee tell their team why they need to use a solution can resonate more than someone from outside the organization doing the same.

What do you use performance management software for?

You can use performance management software to schedule and score performance reviews, measure OKRs and goals, schedule check-ins, analyze employee data, and more.

What benefits does performance management software provide?

Performance management software provides benefits such as increased retention, a better understanding of your organization, easy tracking of performance data, and increased employee engagement.

What features does performance management software offer?

Performance management system features include check-ins, automation and workflows, annual employee evaluations, development plans, and integration with other tools, including applicant tracking systems (ATS) and HRIS.

What is the best performance management software?

The best performance management software solutions are:

• Trakstar: Offers preset competencies with coaching tips
• Leapsome: Customizable performance management solution
• eloomi: Growth-minded performance management
• ClearCompany: Customizable review cycles
• Betterworks: Ideal for small and mid-sized companies
• 7Geese: Dedicated team of talent advisors
• Small Improvements: Great for small businesses
• Lattice: Simple, user-friendly interface
• Reflektive: Used by Fortune 500 companies
• Kallidus Perform: Emphasis on personal development‍
• Quantum Workplace: For a performance-based culture