Top Effective Performance Management Systems for 2023

Performance management software's most commonly used features are structured 1:1s, annual reviews, development plans, and workflow automation. Each of these modules relies on this tool's powerful, underlying function: discerning analytics.

Performance management software is like an employee analytics flashlight. Whether taking it all in from a distance or closely looking at one tiny element, the illumination can help HR and business leaders observe and interpret the entire scope of company activities.

I saw the impact this tool could have early in my career. I was consulting for a bootstrapped startup, helping them identify spending leaks. It was a young company, so their recordkeeping could have been better. By chance, one of the founders had a beta version of a performance management platform she’d been asked to test drive. So we thought, why not? Nobody expected what would happen next.

The software uncovered overspending in multiple areas, including unused software and hardware expenses that were four times higher than necessary. We also found operational redundancies and costly oversights.

It’s ironic that the free software saved the day, but it really did!

This anecdote illustrates an important point. What we were slowly uncovering with hours of work, the platform captured at a glance.

This is the magic of performance management tools. The ability to comprehend all the moving parts, from the whole org to a tiny element, can rapidly empower improvement at any scale.

Not only can these platforms drive significant, systemic overhauls across departments, but they can also work on the individual level. They can provide the context and perspective to help employees understand where they fit into the larger organization, which can lead to performance improvement.

Performance Management Software answers questions like:

• Big picture: what is the entire organization working on?
• Mid-range: what are departments, divisions, and teams working on?
• Small-scale: what are individuals working on?

With the above questions answered, leadership can develop innovative, precise, and effective strategies to enhance the company’s performance.

What Are Use Cases for Performance Management Systems?

Performance management software is helpful to an organization in more ways than we can cover in one article. The following are among the most common, but every company is different, and your mileage may vary.

According to our contributor Tracie Maire, who has used performance management tools for team sizes from 25 to 3,000, the tool can benefit teams of any stature. She notes that the right time to start using one isn’t based on headcount. Instead, factors specific to your business, your culture, and your structure determine the right time to buy.

Among our team at SSR, our collective experience of buying and implementing these systems with companies of all types aligns with her sentiment. Among our staff of writers and HR professionals, I agree that there is no good standard time to start, but luckily, the use case for performance review software is evident.

1:1 meetings: Make the most of these critical interactions by using a tool to fold them into your Big Picture strategy. Performance management software can help managers and employees collaborate to create (and actually stick to!) an agenda and a regular schedule. They can review notes from past meetings, use pre-built conversation starters, and tie 1:1s back to goals and feedback. From either side of the manager or direct report line, I agree: 1:1s with purpose enhance productivity. But in my experience, that’s not all they can do.

When I worked in HR, a new manager approached me for support. He was overwhelmed by his new responsibilities, so I suggested that he use the company's performance management software, particularly structured 1:1s, as a training tool. I encouraged him to look for insights into goal-setting, targeted feedback, productivity measurement, and data analysis. He incorporated these strategies into his fledgling management philosophy, his confidence grew, and he became a well-respected member of leadership.

Objectives and key results (OKRs): Most performance management software contains a goal-setting feature that allows businesses to list their OKRs and record progress toward them.

Goal setting cuts an unambiguous path between an output (whether individual or division-wide) and the organization’s goals. The benefits of clarity around a central purpose and the ability to track progress toward it are conspicuously missing in many organizations, often due to the effect of information silos.

Performance Reviews: Many need help remembering what happened last week, let alone any details from six months ago!

The right platform can facilitate meaningful conversations that stand the test of time. By implementing structure, cadence, and documentation, companies can avoid the two worst types of performance evaluations. First, the rushed, scattershot, far-too-general-to-be-useful type, and the second,  the rushed, narrow, we-can’t-remember-last-week-let-alone-details-from-six-months-ago type.

Employee Performance Management: From onboarding to 360-degree feedback and regular check-ins, modern performance management systems provide managers with a complete picture of employee performance. It creates and monitors measurements for productivity and illuminates the connection between daily activities and long-term company goals.

I’ve seen this from both the direct report and the manager's side. While the benefits are not as easy and obvious as the focused 1:1s (more on that later), a well-managed review cycle can be transformative.

‍People Analytics: Fluent in both process and people, these platforms generate high-value analyses that can illuminate the relationship between the two. Insights on using the platform, the need for more training, adherence to OKRs, and the formalization of 1:1s are abundant.

Now that you know what it can do, let’s look at a few common mistakes companies make in buying, implementing, and capturing the value of this tool. 

1. Limited Product Suite: Some vendors offer stripped-down suites with limited capabilities or single features a la carte. Though they are often more affordable, they should be avoided.

We recommend a feature-rich product with supplemental offerings you can use now or deploy in the future. Your long-term people strategy should always be top of mind, especially when shopping for a tool deeply embedded in a worker's daily activities. 

For example, if you plan to roll out an employee engagement initiative in the next 18 months, a performance management platform that lacks this feature is a bad choice. ‍

2. Culture Change Catastrophe: A common mistake to avoid is inadequate planning for this tool's impact on company culture.

I’ve seen things get ugly when this kind of tech is applied at the wrong time or with the wrong message. What do I mean by “ugly”? Ugly is what happens when the effect of buying and implementing new software is net negative either in terms of ROI or in terms of employee engagement.

The topic of worker productivity is well-studied and notoriously complex. The U.S. has a long-established history of laws and institutions created to protect workers’ rights, but a persistent sense of threat remains. Some believe the best interests of workers and the scrutiny of their output are at odds. 

While I’m not suggesting that using performance management software requires a company-wide curriculum on the comprehensive history of labor relations, you should be aware that adopting a tool that monitors your worker’s daily activities may cause alarm. Keep reading for our recommendations on handling this, but first, let’s survey the landscape.

If you’re shopping for an enterprise-level tool, the culture change process will be part of the package you buy. In most cases, you’ll have access to a professional change management team to help with messaging and implementation. However, if you are like us and most other small businesses, you can’t afford Deloitte! So focus on what you can control: the message and how you deliver it.

While a white-glove consultancy service may not be your thing, you do have distinguished, dependable, and highly skilled messengers at your disposal: your human resources team.

A known and trusted entity, HR has a tremendous advantage over a consultancy: they are the architects of your culture. No team is more well-suited to bring people on board (literally and figuratively) with enthusiasm and solidarity.

Pro tip:  Focus on the development aspects of the tool. Advocate for a frame of mind that sees the implementation primarily as a means to develop each employee’s strengths. To this end, integrations with tools that manage incentives like bonuses, rewards, and recognition can be helpful to the cause.

When I used the words “get ugly” earlier because this critical element was overlooked or under-resourced.

3. Misguided Compensation Alignment: Are YOU ready to question one of the foundational elements of modern capitalism? Sorry if I caught you off guard, but here we go!

Compensation is often tied directly to an individual’s achievement of Objectives and Key Results (OKRs). It follows that a person who meets 100% of their OKRs has earned their keep by doing 100% of the job they were asked to do. This makes sense until you consider how one might measure and reward accomplishments that exceed expectations.

The solution: OKRs should only be 60-70% attainable.

The space between 60-70% and 100% is the domain of discretionary effort, and that should be made clear to your employees as you roll out your very OKR-focused program. Let your team know that their compensation and achievement of OKRs are not directly proportional, and support them in the counterintuitive task of creating goals that they won’t meet 30%-40% of the time.

When I’ve laid this out to the various teams I’ve worked with, truthfully, only about half of the minds are blown. The other half have MBAs or have otherwise acquired business acumen that made them immune to the effects of this news.

4. Rushing the Roll Out: Avoid whiplash going zero to sixty with your rollout: don’t redline your implementation! 1:1 meetings with OKRs are an excellent place to start. If possible, you can pace yourself as you shift to a new program by finding a solution that overlaps your current system. The same is true if you’re starting from scratch— avoid the temptation to do too much, too fast.

How do I know this? This advice comes straight from the headlines of the team's real-world experience at Select Software Reviews. In other words, been there, done that: rushed it, regretted it.

I once witnessed a performance management software rollout tank because it was both rushed and scatter-shot. The tool's promise was squandered by pushing too hard: the training was minimal, the expectations needed to be more attainable, and the integration needed to be more robust. The company lost thousands of dollars and invaluable measures of trust from the workers.

You should schedule one to four months per module and dedicate copious resources to education for managers and employees. It’s essential to be patient when asking people to change their behavior. With a thoughtful, phased rollout, you’ll give your team time to adjust and the software the chance to justify itself.

5. Adding Another Login: If you chose a tool that requires your team to log in to anything other than what they already do, you’ve chosen the wrong tool. Many factors contribute to workplace stress, and extraneous tools can be counted among their ranks. Fortunately, many of these systems are built with an open API and integrations in mind.

Your platform should provide seamless integration with email, internal comms tools like Slack, project management tools like Jira, and any other virtual environments where you will likely find your team. Well-integrated tools increase the chances of high engagement and bottom-line impact.

Here’s some water cooler gossip: unless your team is using a password management system like it 100% definitely should all of the time, one of the best ways to introduce security threats to your company is to tempt people to reuse passwords by giving them too many things to log into.

6. Misaligned Goals: Employees will instinctually set OKRs that are directly related to company goals, but sometimes this needs to be corrected.

For example, if an organization aims to cut costs, you can expect to find this item listed among individuals’ OKRs.

But here’s another true story from one of our HR pros who was an eyewitness to this misalignment pitfall: following what they thought was the direction of the company, a person from the marketing team included “cut costs” among their OKRs. Somehow, nobody noticed. The sun didn’t crash into the earth. Still, heaps of time was wasted scrutinizing transactions to cut costs when the company's needs would have been better served by this person spending on initiatives that support creativity and innovation.

The key to goal alignment is education. When structuring OKRs, individuals must be supported by managers who, in turn,  were well supported when learning how to educate their direct reports.

The features listed below represent the fundamental functions standard to these platforms. Your company may require more, less, or alternate options, but these four define the baseline.

‍1. Integrations: Though more of a characteristic than a feature, software seamlessly integrating with your existing tools is crucial for maximizing productivity and reducing operational costs. A tool that integrates with your current stack minimizes the need for manual data entry, avoids potential data errors, and allows for a smooth workflow between different systems. In short, easy integration saves time and resources and provides for a more effective and streamlined operation.

2. Check-ins: Employees want and deserve frequent check-ins with managers. Comprehensive annual reviews have their place too, but OKR-driven 1:1s and regular check-ins keep employees engaged and focused. They can be an opportunity to teach skills that improve performance.

100% of Select Software Reviews employees agree on this one. It’s a no-brainer and should be baked into the platform you buy.

2. Automation & Workflows: Look for a tool with integrated automation options from top to bottom—one must-have feature: automated 1:1's with templated questions and built-in scheduling. Integrations with your other HR tech and internal comms like Slack and Outlook are also critical.

3. Annual Employee Evaluations: The awkward yearly review is quickly becoming a thing of the past (hooray!), but that doesn't mean employee evaluations have disappeared completely – they've simply evolved.

When choosing your software, take a hard look at how the tool streamlines and improves this part of your talent management strategy. Ideally, the tool will ensure the year’s worth of 1:1s and check-ins have been purposefully designed to lead to a meaningful, comprehensive retrospective. The best among the best will also curate a well-informed vision of the future.

Our take on this feature is unified: it is essential to get this right! All roads of your performance management system should lead to this point, and it should be (assuming the best of everyone) a positive experience across the board.‍

4. Development Plans: Look for a platform with features focused on helping your workforce develop skills to meet company and personal goals. At a minimum, the system must track OKRs to ensure development is headed in the right general direction. On the other end of the spectrum (and, usually, price range), we’ve seen companies reap massive benefits from platforms with built-in learning management capabilities. The more specific the educational material, the better.

About half of our team (all dignified HR professionals, mind you) scoffed at this and said something like, “Okay, we’ll just take the company jet to meet with the dignitaries from the Learning Management Department of the Performance Management Software most small businesses can barely afford.” Point taken, fellow pros. There are not many options for SMBs who want good performance management software. But keep this in mind: while much of what I’ve discussed is specific to (game-changing) software, much of what I hope to get across are tactics that can be deployed for the low price of free-ninety-nine.

For example, here are three things that zero dollars can buy you:

1. A Source to Learn Better People Management Skills

‍2. A Nuanced Understanding of Performance Management‍

3. A Way to Ensure a Positive Effect with a Performance Management Strategy

Ask these questions to each company you speak to. Do your research beforehand, but have these in your back pocket.

• What is your product roadmap? How do employee engagement, recognition, and rewards fit into that vision?
• How does your solution integrate with my existing HRIS or HRMS?
• How does this tool integrate with our project management software?
• What is your change management playbook? How will you help our employees and managers transition to this solution?
• Do you have recommendations for the rollout? Which modules go first, and why?
• 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? Is it best for small businesses, enterprise/knowledge workers, retail, remote teams, etc.?
• Can I export the data to cross-reference with other KPIs kept in other systems? Which systems?
• How does the annual performance review process work?
• How does the tool navigate systematic reviews?

Don’t underestimate the resources involved in making this choice or the impact of your selection. You’re not simply buying another piece of software.

You are introducing an operational paradigm shift by selecting and deploying a change-making, eyebrow-raising, OKR-activating transformative powerhouse. Don’t do it alone! Build a team for this task.

A cross-functional buying committee is a small team assembled to speak to the needs of the departments they represent. In addition to the benefit of their perspectives, their collective knowledge, skills, and “weight” will help secure the budget you need to support the program. Equally important is the personal connection to their divisions, amplifying the sense of safety and trust needed for a successful implementation.

I have seen firsthand how helpful this type of coalition can be, and I cannot recommend this enough.

What does performance software do?
It does a lot! This includes but is not limited to scheduling and scoring performance reviews, measuring OKRs and goals, scheduling check-ins, and analyzing employee data.‍

What benefits does it provide?
Increased retention, a better understanding of your organization, easy tracking of performance data, and increased employee engagement.

‍What are the primary features?As mentioned above, check-ins, workflow automation, annual evaluations, and development plans are the standard functions, but integration is the feature that ranks above the rest.

Performance management software is a powerful tool that operates in the space between behavior change and analytics. For maximum effect, sustained resource requirements must be accounted for.

Buying, implementing, and maintaining this type of software requires a commitment to the continual process of operating it. Out of the box, it provides a framework and analytic capabilities, but it must be tuned into your team’s specific needs to be effective and well-received.

Remember that HR tech is a highly dynamic market, so be patient and prepared to sort through dozens of options on your way to the best fit.

Don’t underestimate the pace of evolution in this space. Fundamental business principles and HR best practices are essentially unshakable, but HR tech tools are in a state of constant, rapid development. Don’t fall behind!

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