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Best Performance Management System in 2020

Finding the best Performance Management System for your business is now faster and easier! Compare prices, reviews, features, and get free consultation to find the perfect software.

Table of Contents

What Is a Performance Management System?

A performance management system is a must for organizations in today's competitive business arena. It is a well-defined process with the primary focus on people-administration, and it brings about a high level of efficiency for both the individual and the organization. It is a perfectly functional system that aligns the organizational end objectives with the employees' personal measures, varied skills, competency requirements, development maps and the delivery of goals.

The emphasis of employee review software is on holistic improvement and creating an environment of learning and development in order to accomplish the complete business strategy and to craft a high-performance workforce. So make sure to invest in the best performance management system for your organization as it is the perfect solution to kick-start your organization on to a journey of productivity and better performance.

What are the Components of a Performance Management System?

Every performance management system has the same objective. They are designed to improve the overall employees’ performance of the company.

A well-developed performance management system has a lot to offer. It not only evaluates employees’ performance but also tries to boost their satisfaction. The system helps create a friendly work culture through continuous feedback and coaching.

To build up a solid system, you will need to bring together five vital elements discussed below.

1. Setting Expectations

The very basic element of a management system is setting up clear work expectations.

We all know how communication is important within an organization. Managers or supervisors must clearly communicate what they expect of their employees. The messages should be clearly understood by them. It should include job description, targets, and performance measures.

That’s why while hiring, you should ideally look for employees who embrace challenges. Employees should be persevered in achieving their goals. Moreover, they should enjoy being an active, contributing member of a team.

2. Holding a Performance Conversation

Having a conversation with your employees helps you understand how they are doing.

Managers are not only responsible for setting work expectations. They also need to actively engage in providing constructive feedback to employees.

The conversation typically involves asking questions and listening to the responses. The process helps you gather a lot of information about your employees. The way they respond will give you a clear picture of how they are performing. Furthermore, you should try to find out about their strengths and the challenges they are facing.

If you feel that the reviews are not going well, it’s a clear sign of a communication gap. It means that the employees are having a hard time understanding the goals. In that case, restate expectations and offer more guidance so as to bring out the best in your teammates.

Active participation of management is crucial for the company’s success.

3. Providing Feedback and Coaching

Another important element of performance management is —  providing constant feedback.

Constructive feedback and constant coaching ensure that the company’s goals are fulfilled. Employees get enough time to reflect on their actions and improve their performances.

There has been a development of a new concept called ‘feedforward’ recently. Feedforward is all about focusing on the future rather than the past. It allows people to learn the right way of doing things, instead of trying to find out what they did wrong.

This way of corrective action is way faster and efficient than the feedback system. It does exactly the same thing except people feel less need to justify their action.

4. Rewarding Good Performances

Creating a culture of recognition can go a long way for the company.

The truth is we all want rewards and recognition. It’s the most effective way of motivating employees to work hard to achieve their goals.

Sometimes managers think that incorporating rewards into the system adds an extra expense. But that’s not true. When you recognize and reward your staff along the way, it boosts their self-esteem. As a result, they stay motivated, engaged, and retained throughout the year.

Moreover, it’s not necessary to have extravagant rewards. It can be as simple as sending them a ‘Thank You’ note. Or, it could be recognizing employee’s performance amidst staff meetings. Eventually, you will see how authentic appreciations are of much value.

5. Developing a Company’s Culture

Company culture is simply a way of doing things within the company. It brings together all the elements of a performance management system.

Harmonious work culture is laid on the foundation of unbiased work discussion. Managers should set out clear work expectations and remodel practices as required. These clear expectations help remove any kind of uncertainty. Thus, it encourages employees to work even harder.

In addition, there should also be positive feedback and rewards for good performances.

In short, the performance management system needs to keep adapting to the dynamic work environment. A good system leads us to a path of a positive future.

Types of Performance Management System

The performance management system is a much wider term. People often mistake it as a concept related to only employee appraisal. It consists of a whole five-step process:

  • Setting of goals
  • Development planning
  • Taking action
  • Assessing performance
  • Providing rewards and recognition

However, there are different models of a performance management system. They are different terms yet related to each other.

1. Corporate Performance Management

As the name entails, the system takes care of the performance of the entire organization. It finds ways to link your goals at the enterprise, division, and department levels.

It’s an art of outlining, measuring, and ultimately achieving your strategy. When done right, it gives you an overview of how your entire organization is performing.

The model uses frameworks like objective and key results (OKRs), balanced scorecard, and more. It helps manage and report on strategic progress and execution across departments.

Case Study Example:

Pacific Gas & Electric (PG&E)

Earlier, the PG&E team used to take an entire month to pull together a monthly report. Soon enough, they realized the need for presenting data in a high-level view. They wanted the ability to compare and assess trends.

Implementing a corporate performance management system helped them. They were able to review their results and better execute on their strategy. Read the whole story here.

2. Project Performance Management

We all know corporate performance management deals with all aspect of an organization. However, project performance management manages only one particular project at a time.

Project performance management is an art of managing people, schedules, budgets, and resources. But it is all related to a single project. It helps drive performance in part of your organization.

Some projects are so large that it feels like you are doing corporate management only. But project management has a start and end date. Plus, it can be broken into tasks and executed on. That’s why one shouldn’t consider project performance management as same as corporate performance management.

Say, you are working on a million-dollar project that will take 10 years to complete. This kind of projects requires to handle a lot of complexity. Such huge projects have aspects that are linked to corporate goals. For example, customers, finances, and staff. But they aren’t the same as corporate performance management.

Case Study Example:

The City of Arvada, Colorado

The City of Arvada, Colorado depends on project performance management software. It helps them keep track of their projects and also increases transparency. This case operates as a subset of the corporate performance management system. You can read the full case study here.

3. Personnel Performance Management

This particular model looks at the performance of all your employees.  It is also known as human resource management.

The system keeps track of performances at the individual level. It links and aligns them to the division as well as enterprise goals.

Personnel performance management includes employee review, dealing with competencies, pay review, and more. It’s true that the individual goals are linked with the organization’s overall strategy. However, the process of managing is done by the HR department. The process is not dictated by strategy and driven by corporate needs.

Thus, personnel performance management is nowhere close to the other two models. It is solely associated with people and how they are doing. It doesn’t identify itself with how the organization is doing.

Features of Performance Management Systems

Investing in the best performance management software is definitely not an easy decision for any organization. They need to scan the market and all available vendors, scrutinize the various offerings and choose the best performance management system that fulfills all the organizational requirements.

It will be helpful to look out for these essential features before investing in performance management software for your organization:

  • Goal Setting: The foundation of any effective performance management software is goal setting. Performance review software modules allow for the timely setting of corporate goals and objectives so that there are clear performance expectations to be met. Operative goals must be openly achievable, expressed in specific terms, quantifiable and timely (time management) and aligned with organizational corporate strategy. Employee performance review software makes goals effective by pairing them with important performance metrics so as to provide a framework to measure progress- so make sure that your employee evaluation software has a well-aligned goal setting module to get your organization right on track.

  • Appraisal Management Processes: Performance review software has specialized modules that help managers manage the entire performance appraisal process right from the beginning to the end. It ensures that managers listen to their employees, observe them on the job and give them timely constructive feedback along with due recognition for their work. Enterprise performance management systems make sure that feedback is at the foundation of the performance appraisal processes, making sure that timely feedback is provided for growth and succession within the organization. So make sure to choose the best performance management system for your organization that handles appraisal management in a well-organized manner

  • Individual Development Plans for Monitoring Performance: One of the best features about online performance management systems is that it can help your organization monitor the performance of the entire workforce through detailed observation, information gathering, discussion, and active listening techniques. It can identify individual worker problems by drawing our development plans for employees that help them determine their strengths and weaknesses. These development plans are very useful as they help to track systematic progress and determine solutions to help the employee enhance their performance to the best of their ability. So when you invest in a performance review software, make sure it has the ability to chalk out well-defined development plans for your workers- it is a transformational feature that can greatly increase productivity!

It's absolutely crucial to make sure that you take time and go through a complete market survey so that you can gauge the features that you require in your enterprise performance management system. Make sure to get the best performance management software for your company to help it scale new heights of success!

Benefits of Performance Management System

There is absolutely no doubt of the fact that getting an enterprise performance management system is the best decision for your organization. It is a transformational performance management tool that can escalate your organization's bottom line profits. Here is a list of some advantageous benefits that your organization will instantly gain through the implementation of performance management software:

  1. Better Communication: One of the strongest benefits of utilizing a performance software system for your organization is that streamlines all communication, enhancing the frequency and quality by ensuring that it is an inclusive and collaborative process. Enhanced communication policies through online performance management systems ensure that employees can channel their performance towards specific goals that they are aware of and thus leading to the overall better functioning of the organization.

  2. Better Workflow Management: Due to better recording of employee performance, all business operations and processes flow more smoothly, without any kind of delay or interruptions. It leads to a more positive work environment and reduces stress levels as there is open communication flow between employees and managers. So, invest in the best enterprise performance system for your organization to greatly enhance your organization's workflow management and benefit from higher efficiency levels!

  3. Develops a Conducive Learning and Development Environment: Since performance review software requires employees to commit to an individual development plan, implementing them in your organization will definitely lead to an environment of learning and development. Employee management software work on developing the entire workforce and the employee in turns aims at achieving the overall corporate strategy by accomplishing a personal development plan. So, getting performance management software is the perfect solution to keeping your employees engaged in a positive learning environment.

  4. Fair, Reliable and Secure: One of the best advantages that your organization can get through performance review software is that a fair, reliable and consistent system is instituted in place that helps to increase the overall bottom line profits. It is highly secure and ensures that all your performance appraisal data that is sensitive in nature, remains protected and is accessible only by authorized personnel.

So get on the best performance management software bandwagon right now, and make sure that your organization benefits from these great advantages.

Who Should Use Performance Management Software System?

Most people associate performance management with concepts like employee review only. But it is much more than that.

Performance management is about getting the results. It is used by businesses looking to improve and promote employee effectiveness. Medium- and large-sized organizations are quick to adopt PMS technology. However, small businesses are often skeptical about implementing PMS into their system.

But the truth is that even small companies can make good use of management software. In the beginning, small units are able to evaluate and manage roles without the help of any software. But as the company grows, performance management can get quite difficult to handle. That's when a  well-defined system comes in handy.

So regardless of the sizes, the PMS becomes an indispensable tool for the managers. There are certain benefits a performance management software has to offer.  Those are willing to avail those benefits can make the right use of a PMS.

1. Aligns Personal Goals With Strategic Goals

A well-designed performance management system helps employees understand their role in the company. They have a clear interpretation of how their work contributes to the overall success of your company’s strategy and goals. This gives them a better idea of how to align their personal goals with organizational goals.

Moreover, it also ensures that employees stay focused on important tasks at hand. It adds real value to the business.

2. Engages Your Employees

A pool of skilled workers is the lifeline of every organization. Companies are quickly learning the importance of having the right employees.

Some management tool makes sure to include employee engagement functionality into their system. It lets the employees take control of their own performance and career advancement. As a result, it contributes to the overall success of the company.

Besides, it also drives a higher level of employee satisfaction and retention. That means the employees are happier and motivated to work hard. They feel valued and engaged, and less likely to leave your company for another.

3. Drives Employees’ Development

Companies are constantly growing, and people are often moved to new roles.

A performance management system ensures that your employees are continuously developing their skills. The system aids in achieving succession planning and career development goals. Such functionalities are helpful in staying ahead of your game.

And, it also prevents from one organizational change affecting the whole company.

4. Encourages Performance Conversations, Feedback, and Recognition

An effective PMS system encourages to hold performance conversation with their team members. It includes setting job expectation, providing feedback, and recognizing achievements. This results in a higher level of satisfaction and increased productivity.

Furthermore, the PMS system enables users to provide real-time feedback to the team members on job performances. Some even allow for 360-degree feedback, whereby both employer and employee can provide feedback to each other. This ensures that every member of the company knows which areas they need to improve.

The bottom line is when done right, a PMS helps increase work effectiveness. It results in reduced employee turnover rate and increased productivity. Thus, those who want to lower their business expenses should consider using a PMS.

How Does Performance Management System Help to Improve Company Culture?

Companies are continuously looking for ways to cultivate the perfect company culture. When a single employee bad mouths about the company, it can negate all the goodwill earned so far.

That is why having a healthy culture is important. In this innovative world, performance management is a key tool to enhance accountability. It helps build a high-performance culture.

A healthy PMS helps to keep everyone aligned with the strategic goals. It encourages employees to focus on what’s more important and when it needs to be done. Otherwise, management can easily get off the track.

The appropriate functioning of the performance management system tightens the link between business objectives and day-to-day activities. In fact, it promotes fair performance management practices across all verticals.

What the system does is that it combines goal settings with a method to track the progress. It helps in identifying challenges as well as the success progress. Thus, it enables the manager to reward employees for their exceptional effort. It contributes to increased productivity and job satisfaction.

Even after what PMS has to offer, it is still underrated in many organizations. Mainly because most of the time organizations have seen the system fail.

So how do you make performance management system work? There are three factors that are a prerequisite to building a strong work culture.

Changed Mindset

To drive results, one needs to embrace the change. An organization should be willing to understand the purpose of the performance management system. To lead successfully, the top executive and managers should transform their mindset with a focus on innovation and growth.

The company culture is defined by the ability of the individuals (company) to change and grow. An effective PMS in place supports broader business goals. Thus, it is critical that managers understand and support strategy execution. The team members should be ready to be pushed out of their comfort zone.


In true sense, reinforcement is about motivating employees to work more productively. And also, discussing their future growth and learning.

But to do that, managers need to meet periodically to formally review progress. This ensures that performance coaching and monitoring of goals are taking place regularly.

Feedback should be both on personal and professional areas. It requires a two-way conversation between manager and employee. So as to make sure that both are working from the same page in terms of what is being managed and how it is being managed.

Skills and Competencies

Managers’ skills at setting goals, planning development, and coaching are essential for the success of PMS.

In a performance management system, managers need to have frequent coaching conversations. Appraisal and feedback skills are not something that comes naturally. It can be acquired through formal learning. Some of the ways to do that are:

  • Understanding the actions that are required
  • Observing and learning from coaching videos
  • Applying the lessons learned and clarifying the outcomes
  • Practicing and rehearsing those skills until you gain competence

If these practices are incorporated into the company’s PMS system, then it begins to drive results. Thus, it helps create a high-performance company culture.

Performance management is a joint effort. That’s why leaders, managers, and all team members should participate equally. Having an effective PMS in place coupled with the required skills helps achieve organizational strategic goals.

Top Reasons to Invest in Performance Management Software

One of the biggest challenges in the HR domain pertains to effective people management. Harnessing the best performance from an organizational workforce is crucial for corporate success, and performance management tools are great to streamline operational tasks efficiently.

Employee Performance management systems have gained immense popularity and are useful assets that track, analyse and evaluate individual employee performance. Here are some compelling reasons to invest in the best performance appraisal system in the market:

  • Realistic Goal Setting: Performance management software automates the objective setting process between managers and team members. It makes common goals visible and transparent, along with giving periodic updates on target performance. Cascading goals keep employees aligned on the right path, and they keep receiving constant feedback, coaching and mentoring. This, in turn, leads to higher productivity and a satisfied workforce.
  • Agile Feedback System: Performance appraisal systems promote a culture of continuous feedback – this ensures that all team members are aware of their performance drawbacks, and continuously work on attaining new skill sets to improve performance. Underperforming employees are given adequate training so that they can learn new techniques and contribute to long term organizational goals.
  • Structured Career Development: One of the most relevant advantages of performance management tools is that they monitor an employee’s career graph, and ensure to that they are able to develop their skills to the maximum. Performance meetings at fixed time intervals help identify competencies, aspirations, and skill gaps – this makes sure that managers can address problems at the earliest and help employees gain insights into their career opportunities.
  • Increased Employee Engagement: Performance management tools help to provide 360-degree feedback to employees and set up tailor-made programs for them to improve performance. It encourages mutual open dialogue between superior managers and team members, thus making employees feel highly valued at the workplace. Performance management software is the best way to boost job engagement levels – it definitely leads to an exponential growth in all major bottom-line results, thereby resulting in higher revenues for any organization.

Performance appraisal software is a transformational tool that helps managers leverage technology to the fullest and makes better-informed decisions about workforce performance.

Tips to Choose the Best Performance Appraisal Software

There are tons of performance management software available in the market today and it is a daunting task to narrow down to a single system. Most modern performance management tools are highly functional in nature and can be remodeled to suit your specific business criteria. Here are some critical aspects to be kept in mind while choosing a performance appraisal system:

  • Data Security: One of the most important aspects to look into while selecting the perfect performance appraisal software for your organization is the safety of information. Since performance software handles large volumes of personal employee data, it is absolutely vital to ensure that the system has proper encryption measures, user access control and embedded security features to prevent data theft or fraud.

  • Scalability: Software systems need to be scalable in nature to cater to the requirements of growing and diversifying organizations. The performance management software tool that your organization chooses should be highly scalable, thus the vendor should provide additional support, features and modules according to the growth trajectory of your company.

  • Integration Capability: Performance management solution should be compatible with existing systems in the organization. They should have the ability to export and import vital employee data so as to prevent the repetition of cumbersome manual work. It should be able to automatically sync vital HR data so that a unified repository of essential company information is maintained and can be accessed by managers for better quality managerial decision-making.

  • User-Friendliness: It is important to go in for a performance appraisal system that is highly user-friendly and does not have very complex features. There should not be any kind of long training sessions or technical know-how involved in operating performance evaluation software at your organization, as this will deter employees from adopting the new platform. So invest in a performance management software that is simple, intuitive, hassle-free and requires minimum maintenance or after-sales support.

It is necessary to make an informed choice and invest in the best performance management tools for your organization. The perfect performance management software can make a dramatic positive difference to your work environment and lead to collaborative employee engagement.

Performance Management Market Trends

Performance Management is constantly evolving. These top market trends will help you refine your employee management strategy.

Continuous Performance Management Will Take Place

It’s essential to evolve in how we manage talent approach. More than 70 percent of companies reported designing ‘continuous performance management’ in 2017.

Gone are the days when managers would conduct an annual appraisal and be done with it. Employees want authentic relationships with managers and opportunities for development. It is only possible by performing continuous employee evaluation.

Continuous performance management increases communication between management and employees. It makes it easier for managers and employees to collaboratively map out a career path. Moreover, it also provides coaching and learning that is needed to become the best self.

Very few PMS provides the solution to conduct continuous performance management. Always look for software that incorporates weekly feedback surveys, objective setting and management, one-on-one meetings, and quarterly reviews.

People Analytics Will Become Important

Soon enough, people analytics will become an indispensable functionality of a PMS system.

As companies are trying to improve and grow, they are heavily relying on data to gather insights. Large amounts of qual­i­ta­tive data are gathered from goals, feed­back, and con­ver­sa­tions. They provide a deep understanding of the issues like employees engagement and productivity. 

Analytics can show the actual picture of a company’s result. They are a true mirror to help tackle issues like salaries and cultural diversity. In the coming year, you will find more and more companies investing in the area of people analytics.

In fact, more than 70 percent respondents are trying to find ways to integrate data into their decision making. Deloitte reported that in 2020, all the attention will turn to AI with­in per­for­mance man­age­ment.

AI will enable HR to make improved people decision. It will help identify and interact with recruiting candidates and employees to help them explore career options.

The unbiased data will lead to decisions that will enable better performance and improve the overall employee experience.

These trends are currently in the early stage of development. It will be interesting to see how companies realize their full potential.


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Frequently Asked Questions (FAQs)

  • The essential parts of an effective performance management system comprise:

    1. Performance Planning
    2. On-going Performance Communication
    3. Data Gathering, Observation, and Documentation
    4. Performance Appraisal
    5. Performance Diagnosis and Coaching
  • Performance Appraisal is the process and time when a manager and employee sit down to review or evaluate the employee's performance over the past year, months, or a shorter time.
  • Yes, the terms Performance Review and Performance Appraisal mean the same. Different companies use different words to appraise or review an employee’s performance. Some other terms used in its place are – Employee Review, Annual Review, Annual Performance Review, Performance Evaluation, and more.
  • Effective performance management helps an organization align its employees, resources, and systems to meet their objectives. However, evaluating employees by performance is not an easy task. So, companies require implementing a performance management system to cover all the bases. It helps an organization increase its effectiveness and strengthen its position in the marketplace.
  • Performance goals will be decided during the goal-setting phase. At the end of the review period, all you require doing is to compare the results with the expected outcome for the goals set. Hence, it is crucial for you, as a manager, to keep track of how the employee met or did not meet the goal, how he handled the project and his responsibilities. You can hold feedback sessions throughout the year to see if the employees are putting their efforts in the right direction.
  • The most common problem involves insufficient training given to managers and employees about the software. Proper training must focus on:

    1. Providing knowledge about the general process of the software and its purpose.
    2. How to communicate with employees using the software?
    3. How to use the software to improve performance?
  • The performance management system can drive innovation and excellent performances; thus, giving rise to significant growth for an SME. It can result in huge money-saving in the long run and add real business value. So, SMEs must undoubtedly invest in a capable performance management software.

Performance Management software in following industries

Chirantan MungaraBy Chirantan Mungara | Last Updated: October 24, 2020

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