Performance management is essential to any business’s success. It boosts motivation and helps to align efforts towards achieving the goal. A well-designed performance management system increases employee productivity and positively impacts the bottom line.
The performance review season is approaching, and your cycle may look different this year than in previous years. During the pandemic, about 30% of companies changed their review plans. 5% of companies stopped reviewing employees altogether. About 47% of HR professionals reported that they were changing or considering changing their performance goals.
Some of these changes are permanent. However, as the workplaces begin to return to a more “normal” operation, it is likely that some adjustments will be needed. The current process is also unpopular. Only 14% are motivated by reviews and 95% are not satisfied with the review process. However, 96% want more frequent feedback. This means that they want to discuss their performance.
The traditional paper-based review processes are inefficient, and HR managers have a difficult time extracting meaningful information from the massive amount of data that is available within an organization. Performance management solutions have evolved a lot in recent years. The annual performance review was important in the past, but with the advent of agile performance management and 360-degree feedback at regular intervals, the efficiency of the business processes has improved.
What is Performance Management Software?
A performance management tool is an easy-to-use tool that allows companies to better manage and understand the performance of employees. It allows HR departments to set goals for individuals and teams that align with the values and aims of the company. Employees are motivated by the strategic development and growth of their skills.
A good employee management system allows human resource managers to track and evaluate employees’ performance in relation to established KPIs, and provide them with the relevant training and guidance. The solutions include features such as tracking and monitoring reviews, reporting and goal setting. They also provide real-time feedback and reward for improve performance.
The general consensus is that traditional performance review systems are outdated. Good business performance management solutions help HR departments communicate and create clear performance goals to departments and employees. This system ensures that employees know what’s expected of them.
Why is Performance Management Important to Business?
It’s important to manage performance because it is a crucial part of employee retention and development. Regular performance reviews help organizations retain their best talent and find opportunities for them to take on new responsibilities.
You can track key performance indicators (KPIs) to measure your employees’ progress. To measure your employees’ progress, you can use key performance indicators. You can use KPIs to measure the performance of your organization, your employees, or both.
You can use performance management if your metrics indicate that employees aren’t meeting expectations. It can be used to acknowledge employees’ achievements, no matter how big or small.
It is crucial to recognize your employees because they play a major role in their engagement. Employees who are engaged will be more likely to remain with your business.
Three types of Organizational Performance Management Systems
The term organizational performance management, also known as corporate performance management, is used to describe methodologies and processes which help you define your strategy, measure it, and finally achieve it. Three forms of organizational management are commonly used:
The Balanced Scorecard
The Balanced Scorecard is, in our humble opinion one of the most effective performance management tools available.
What makes the BSC unique is that it combines four different business perspectives–financial, customer, internal processes, and people–to help companies understand and achieve their organizational objectives.
The main components are:
- Objectives :high level organizational goals that describe what your organization is trying strategically to achieve, divided into the four perspectives
- Measures: Key Performance Indicators (KPIs), which help you determine if your strategic goals are being met.
- InitiativesKey Action Programs developed to achieve your goals, also referred to by the term projects.
The BSC is a key component of the BSC.
- You can also link the departmental goals to the organization’s overall objectives. You can also see the connections between measures and projects, as well as organization-level measurements.
- A structured reporting process is required. It is important to review your strategy regularly in order to create a BSC. This can only be done if you have a well-organized strategy.
Management by Objectives
Management by Objectives, a management philosophy created by Peter Drucker and his influential consulting firm, has many variants. It is based on a series of (two to six) organizational objectives that are used as a guide for creating employee goals.
Its key features include:
- The objectives are not always linked. This is not the BSC method, which aligns objectives within a strategy.
- As part of a collaborative initiative between leaders and their employees, objectives can be defined. Employee participation is meant to create buy-in and help clarify the path towards achieving the objectives.
- MBO is primarily focused on the objectives; it places less importance on how they will be achieved. Most organizations rely either on measures or projects, but rarely both. To make MBO successful, you need to have a structure which clearly distinguishes between measures and projects. The two don’t operate in the same manner, so combining them will lead to confusion.
Management by Objectives is a term that has been used for a long time, but it’s not always found in strategy documents. This approach can be recognized by looking at a strategic plan that may have goals and objectives. The organization will then list the activities and actions it is doing to achieve its goals and objectives.
Budget-driven business plans
Sometimes the budget is the one that drives the performance management process, rather than the strategy. In this situation, “workplans” are linked to an organization’s overall budget, and the spending is allocated to projects and programs which deliver results. This is a performance management application system that is less common, but works well for some organizations.
Its key features include:
- Income sources and expenditures (line items), can be grouped by categories to help leaders identify areas where they need to downsize or invest.
- This may include a mix of existing and new projects.
- Finance is the driving force, unlike other approaches which are organized by strategy departments.
- The process of development usually begins with the finance department providing the last year’s budget to the department and asking them to list their goals for the coming year, without altering the budget.
2 Types of Personnel Performance Management Systems
Personnel performance management systems, also known as human resource performance management (HRPM), provide a framework to evaluate the performance of employees and link and align those levels of performance with the strategy of divisions, departments and the enterprise. Two types of performance systems are available for employees: HR-driven review systems and Objectives and Key Results systems.
OKR
OKR, currently the most popular framework for setting, tracking, and measuring progress towards goals, is a simple, regular way to measure, set, and track progress. This is how it works:
- The key results and objectives of each individual are tied to the organizational goals. OKRs will be set up in a hierarchy, starting with the employee. Then, the manager and then the manager’s manager. When employees reach their goals, the managers will also achieve theirs. Then, division chiefs and so on.
- Reporting is usually done quarterly. Many normalize their reports on a scale from 0-100% or 0-1. OKRs can be completed weekly or in other reports.
- The weighting of key results for an individual can be rolled up and applied to the manager.
- The strategy office may conduct reviews, or the OKRs could be decentralized.
With the right controls, you can get great results with OKR. The system also outlines the responsibilities of employees so that everyone is aware of their roles, has a clear understanding of what they are responsible for, and can work at a consistent, fast pace.
HR Review-Driven Systems
A performance management system based on HR reviews is not an alternative to the OKR framework, but rather a way for HR professionals to measure individual performance. OKRs tend to be strategy-driven and focus on factors that will impact the achievement of an individual’s objectives. Sales department OKRs, for example, could include things like how many people an individual contacted to schedule a demo.
Human resource review systems also consider aspects of performance that are not directly related to the objectives. For example, whether an employee is developing a particular skill set or if he/she fits well with the team. These types of evaluations may be separate from OKR systems, but they also need to measured. An HR-driven approach has some characteristics:
- Reviewing is usually done annually or biannually.
- The measures may include contributions (like OKRs) as well as culture, growth, and development in the organization.
- The HR department is often in charge of reviewing the results, rather than a strategy office as with the OKR System.
Techniques of Performance Management:
Performance Management techniques include:
- OKR: The objective is the goal the team or the individual must achieve. Key results are the steps that can be measured and verified to achieve the main goal.
- 360° feedback: 360-degree Feedback is feedback from all members that have an interest in the performance of each member.
- Key performance indicators (KPI): This is a collection of measures that a company uses to assess the performance of its employees at different levels. Standards should be relevant, specific, and attainable for the department concerned.
- MBO: This is a management by objectives system that defines an objective and analyzes the steps necessary to achieve the goal.
- Balanced Scorecard: Managers can derive primary goals of organizations from 4 perspectives – financial, internal processes, customer and organizational capacity.
- Recognition and rewards: To encourage employees to achieve better results, and perform well on the job, employers can recognize and reward them through a social recognition platform.
- Personal Development Plans (PDP): A personal development plan is a document that outlines the steps to reach the goals and objectives set by an individual. It also mentions training and development.
Performance Management Software: Top Features
The tools used to support performance management should be updated to reflect the changing needs of the market. Performance management software should have the following 10 features.
Instant & Anytime Feedback
Performance management is not a unidirectional process. The majority of employees leave their jobs because of their managers. Companies should encourage two-way feedback at any time.
Software for performance management can provide instant feedback at any time and maintain records to create a detailed picture over time. Managers only evaluate performance once or twice per year. This leaves out a lot of information.
Feedback is important to improve employee performance and engagement. Gallup’s research shows that employees who strongly agree that they have received “meaningful” feedback in the last week are four times as likely to be engaged as other employees.
It is important that the software used for performance management allows employees to give or receive feedback at any time.
HR can provide templates for specific scenarios in which feedback can be sought or given. It also provides a framework for the types of feedback that may be exchanged.
Transparency is important, but honest feedback should also be a priority. So, anonymous feedback is also possible so that employees are free to speak up without fear.
Development Plan
Nearly half of all employees in 2022 said that they wanted to improve their skills, but didn’t know how to start. Managers might also not know how to assist an employee struggling with their job or wanting to improve. Employees can close performance gaps with the help of development planning.
The development plan should include the tools and steps that employees can use to achieve their goals. You might consider coaching or skill-practice. Managers and employees can determine the best path forward together, but they need a system to facilitate that process.
Your software for people management should allow you to create a plan of development so that managers and employees are able to address performance issues proactively and transform these challenges into opportunities for growth. It can not only boost employee engagement and morale, but also improve employee performance.
Vault for Performance Artifacts & Calibrating
The recency effect is a major flaw with annual performance reviews. Most managers fail to remember an employee’s accomplishments beyond the last few months.
Many companies find that performance reviews are inconsistent, inaccurate and unfair. It’s not surprising that many employees dislike performance reviews.
The use of performance artifacts to ensure objective reviews and align the methods used by managers for reviewing performance is a great way to make sure that they are all in line. The right tools make this process easier and more efficient.
You can eliminate the weaknesses that undermine employee confidence in the review process by using performance management software. Plus, more accurate data on performance allows leaders to make better decisions about who should be promoted or given a raise and who is underperforming.
A repository of performance artifacts should be a feature of any performance management software. This is where managers and employees can store artifacts such as client feedback emails or peer recognition.
This vault eliminates the need for a Manager to remember all the things an employee did during the review period.
The ease of use must be a priority. A Manager, for example, can quickly take notes during a one-on-one with an employee on an app and upload it to the vault.
Configurable Appraisal Router Process
Most management teams find it essential to be able to customize the appraisal workflow. According to your organization’s roles, an appraisal could need to be approved by several people, such as the supervisor, employee and HR. You can have all the approval levels you need with a performance management system that is streamlined. It should also make it easy to send the appraisals to the right employees.
Goal management
Both managers and employees should be able define personal or professional goals for a comprehensive development plan. The same goals and objectives for the future should appear on the next evaluation to make it easier to assess and follow up.
Personal goals are essential for employees to feel invested in the performance of their career and plan their success. When employees work toward goals, they contribute to a growth mindset in your organization.
Setting goals is something that many managers and employees are in agreement about. However, without tools to help manage the process it’s easy to put this idea aside. Setting goals is a difficult task.
Select a performance-management system that helps you set goals and allows managers to monitor progress. This will keep your employees accountable and motivate them. Managers and employees can achieve real progress with the right tool.
Simple and Dynamic Measurements
The days of the factory worker with a set job description are over. It’s only natural that KRAs will change over the course of the year in a matrix-based setup, where employees are expected to wear many hats and work with multiple managers.
Performance Management Software should allow employees and managers to update their job goals according to the role they are playing during the engagement.
The measurements should also be simple & clear. Goals should be able to record both quantitative and qualitative targets. Subjective KRAs, on the other hand can be measured by simple questions such as “What went well?” or “areas for improvement”.
Social Recognition
Why should companies not use social media to boost employee morale and performance when Facebook & Twitter are as important as oxygen?
The wall will allow managers to recognize the achievements of their employees, and also receive comments from other employees. This encourages the employee & others who follow suit.
Performance management software, if already part of an intranet company, should include APIs for sourcing such recognition.
Simple Scheduling and Recording of One on Ones
Managers should be able schedule regular one-on-1 meetings with employees, as the focus will be on feedback and personalization. These check-ins may be scheduled on a time basis or at the start or end of projects or important tasks.
Software for Performance Management should allow one-on one meetings to be scheduled once or repeatedly, with reminders set up ahead of time.
The recording of key points of the discussion can be used to refer back to them in future sessions. It can also be pushed into the vault, if needed.
Journals
Maintaining detailed, ongoing notes is essential for accurate employee appraisals. However, it can be a lot of paperwork. Performance management software allows employees and managers to keep track of goals and performance in between appraisal cycles. This simplifies the process and makes it more accurate.
Integration
A performance management system should be able to integrate with any payroll or HR software. Performance management software that is only compatible with a handful of HRMS systems does not provide a consistent user experience or easy deployment. If your payroll needs evolve, you will be unable to keep your existing performance management system.
Why Should you Invest in a Solution for Performance Management?
It’s not surprising that companies are looking for the best solution to help them achieve these benefits.
Gartner reported that in 2019, 81 percent (or HR leaders) were still looking for ways to improve their organization’s efforts at performance management. The pandemic has caused many organizations to rethink their performance management efforts.
Performance management solutions, or people management software as they are also called, provide a set of tools that help you track and manage employee performance. These solutions benefit employees, HR departments and managers as well as the entire company.
Performance management tools offer powerful benefits to decision-makers. Some of the most important benefits include:
- Processes for performance management: A software solution can make processes such as succession planning, performance evaluation, and others more efficient, systematic and productive.
- Employee Performance: Better management of performance can also lead to better performance by employees. Employees receive the support and resources they need to excel at their jobs.
- Engagement of employees: A more proactive performance management system can also improve engagement. In this area, more frequent and richer forms of feedback can make a big difference.
- Performance data: software also allows you to track important data for individuals, departments and your entire organization in order to support succession planning and other talent-related decisions.
Benefits of Performance Management Software
Performance management software has many benefits.
How to empower and appreciate employees
One of the most notable benefits of using a performance management system is that it gives employees some autonomy in evaluating their own performance and development. Employees can view their progress, and how they help organizations achieve long-term goals. They can also see information about past achievements. Other people can also view the data, give feedback and use it to evaluate the employee’s tasks.
Cargill, a food distributor and producer in Minneapolis, is part of the Cargill Group. They had been having problems engaging their employees for years. They introduced a continuous management system that included feedback and encouragement on the job site. Managers were more constructive and forward-looking when giving feedback. The employees were empowered to do their best.
Continuous and Constant Feedback
Performance management software ensures that employees are continuously evaluated, in addition to empowering them. The system provides constant feedback tools to the management. Managers and HR, for example, can access information about an employee’s performance and give immediate feedback. Instead of relying on annual performance reviews, leaders can provide fast, appropriate guidance and training to employees in need.
General Electric, for example, used to use an annual appraisal system where managers met their employees once a year only and gave their feedback. In their new performance-management system, managers are heavily relied upon to ensure that the feedback process is continuous. The managers must also guide and coach the employees on how to overcome their challenges, and ensure that they reach their goals. It is more flexible and there is a mobile app. Feedback can be regulated.
Recognition of Appreciation
Performance management systems are a great way to recognize employees. They also provide continuous feedback. Performance management software can be used to recognize employees who are on time and meet deadlines. They also receive rewards and promotions. The data can then be stored and referred to in order to get insights and write evaluations.
Google is an excellent example. Google has a system that manages all data. The retention of employees, collaboration in the workplace, and diversity have all increased. The performance management system is a great one, with features like being a motivator, good coach, result-oriented and rewarding their achievements. Google is one the best companies to be a part of.
Scope of Professional Development
Using certain performance management software, we can also provide employees with relevant opportunities for professional development. Businesses who use this software can offer career development courses to their employees based on the business goals and desired outcomes. This data can be used by employees to select the most relevant courses for professional development that are pertinent to their career goals.
Goldman Sachs is a global bank that has introduced a program whereby high-performing graduates can apply for positions in the company. The graduates will be placed in various training programs, receive coaching on skills, networking and resources needed for banking, and be enrolled into different training courses. Someone with a humanities background can achieve success in banking.
Future Oriented
The benefit of a technology-based, constant performance management is that it’s futuristic. Performance management systems allow corporations to focus on the future, rather than relying on irrelevant and outdated data from the past about an employee or their performance within the organization. This can be a benefit in terms of promoting the employee management system and developing them, as well as gaining management and skills very quickly.
Appraisal Distribution
Businesses can use performance management software to meet their specific needs by sending out employee appraisal letters. The organizations no longer have to ensure that they are aware of the employee’s accomplishments and areas for improvement. This tool will store all relevant information regarding their achievements for a more elaborate evaluation process.
Purposeful Communications
Both the employee and employer find the conventional method of evaluation to be very time-consuming. Performance management systems allow for better communication and feedback between the employees and management, as they eliminate the factors that cause difficulties when evaluating an employee. The boring paperwork that is required to evaluate an employee has been eliminated from performance management. This process allows for more time to be spent on relevant communication between employees and employers.
The Power of Assimilation
Ideal performance management software is easy to integrate with other systems, bringing a lot of benefits to companies. The ability to combine performance-related technologies, such as a career guidance program, helps organizations gain a better understanding of their employees’ performance. This also allows them to integrate a large amount of data in order to make accurate decisions about talent acquisition.
Addressing Perceptions Gaps
Software for performance management eliminates prejudices based on perceptions when distributing appraisal letters. Leaders evaluating employees face some difficulties due to the age-old, conventional methods that rely primarily on current accomplishments and deficiencies. Information is stored consistently in performance management systems. Prejudice is not tolerated.
Employee Engagement
Organizations who adopt performance management software will experience rapid employee engagement. Employee engagement is cited by companies in almost every industry as a method to increase profits over the next few decades. Performance management systems are the only way to achieve this. Performance Management Software gives employees continuous feedback and helps them feel included in the company. Employees discover their self-worth and purpose in the organization.
Eli Lilly, a large pharmaceutical firm, introduced best practices in performance management for their employees. The company focused on building trust with their employees, giving them the freedom to express their problems and needs. This empowered them to come up with new business ideas. It has also helped to build a professional relationship between managers and employees.
A performance management system can be more valuable than we realize. Understanding where employees are at is crucial for any organization. This allows them to give continuous real-time feedback and build better relationships.
Conclusion
It is clear that the majority of performance management software on the market can transform your performance-management process. It may not be sufficient to choose a software solely based on its features. Before you commit your resources to a particular software, it’s important to determine if the software is right for your organization. You can make an informed decision about your software purchase by using the above factors.
These features are important, but they aren’t the only ones that can save you time. To make the appraisal process as efficient and effective as possible, look for software that includes all of these features. Contact us if your existing performance management software doesn’t meet your company needs. We can help you identify these needs and make your next appraisals the easiest yet!