Performance management software is a tool designed to align employee performance with company goals through features such as structured real-time feedback, goal tracking, and insights that support data-driven decision-making. It enhances what you are already doing to ensure your people are ever-evolving, bringing their best to work, and fully aligned with the company's mission.

To help you understand the performance management software landscape, I will share some of my experiences from my years in HR. I have also enlisted the help of Tracie Marie (talent acquisition leader, CEO, and founder of Hire Incentive) and one of our in-house HR experts, CEO Phil Strazzulla. Together, along with our Editor, Rodrigo Vázquez Mellado, we've put dozens of hours into testing and evaluating these tools, and have come up with this list of what we consider the top considerations for a wide array of business needs.

Performance management software is a digital tool that helps organizations track, analyze, and optimize employee performance in alignment with business goals. It replaces manual processes (like spreadsheets or once-a-year in-person meetings) with automated workflows, real-time feedback, and data-driven insights, creating a continuous cycle of improvement for both employees and the organization.

A performance management platform can benefit not only HR professionals but also managers and employees.

• For HR Teams, this platform helps streamline administrative tasks (reviews, goal tracking) and uncovers actionable insights to drive retention and productivity.
• For Managers, performance management software provides tools to coach teams effectively, align priorities, and recognize contributions while reducing performance bias and guesswork.
• For Employees, this software fosters transparency, growth, and engagement by making expectations clear and feedback actionable.

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 size. 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.

Performance management software's most commonly used features are check-ins, workflow automation, development plans, and integration. 

‍1. Integrations

Though more of a characteristic than a feature, software that integrates natively with your existing HRIS is crucial for maximizing productivity and reducing operational costs. This helps minimize 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.

3. Automation and Workflows

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

4. 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.

5. 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 tools. 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:

• A Source to Learn Better People Management Skills
• ‍A Nuanced Understanding of Performance Management‍
• A Way to Ensure a Positive Effect with a Performance Management Strategy