How performance management systems support continuous improvement

Every year, your organization sets milestones, and managers align employee goals to those objectives. But what happens after those expectations are established?

Do company leaders know who’s on pace to meet or exceed their targets and who needs more support? Is there a single place to gauge employee progress, offer feedback and mentorship, and evaluate performance?

That’s where a performance management system comes in. It gives your leaders a real-time view of what’s happening, so they can turn coaching opportunities into big outcomes.

Here, we’ll break down exactly what a performance management system is and how it works, as well as how it can benefit your company.

Key takeaways

• A performance management system is a centralized, collaborative platform for goal setting, continuous feedback, performance reviews, review calibration, and development programs.
• Implementing performance management software in your company can have many benefits, including increased employee engagement and decreased turnover.
• Choosing and rolling out new performance management software is a multi-step process involving many stakeholders.
• Compare two to three performance management solutions to find the right mix of features and integrations with your existing HR software.

What is a performance management system (PMS)?

A performance management system is a process (typically supported by software) that helps organizations:
 

• Set and track goals.
• Provide continuous feedback and informal coaching.
• Establish developmental roadmaps.
• Periodically (and formally) review performance.
• Calibrate performance reviews across teams, departments, or throughout the organization.

The process is facilitated by a performance management software housing key goals, progress notes, development, performance assessments, review calibration, and related data.

Managers and employees use performance management software to collaborate on goal setting and career planning. Both parties can keep tabs on progress and communicate in real time rather than waiting until the annual review meeting to share feedback or get on the same page.

Key elements of performance management software

Since modern performance management software facilitates collaboration, many organizations view it as a critical form of employee engagement software. While performance management solutions vary by vendor, they generally share three core capabilities: goal setting, progress monitoring, and continuous feedback.

Goal setting

Each employee’s achievements should move the company closer to its overarching objectives. Performance management software helps team leaders and members connect individual targets to those broader initiatives.

Depending on your organization’s preferences, you can use the platform to set specific, measurable, attainable, relevant, and time-bound (SMART) goals, objectives and key results (OKRs), or other types of targets. You can also focus on production (quantitative) or development (qualitative) milestones (or both).

When your employees have a say in the goal-setting process, they’re more likely to be invested in the result. In fact, Gallup found that employees whose managers involve them in goal setting are 3.6 times more likely to be engaged.

Performance management software supports this by giving managers and employees a place to brainstorm and document these ambitions for the upcoming review period.

Progress monitoring

Goals aren’t something you establish and then just leave to chance. You must track and measure progress continuously, updating targets whenever business priorities shift.

Performance tracking software provides a real-time view into each team member’s efforts. With one glance, you’ll know whether an employee is on pace to hit their targets or falling behind. This knowledge will guide your feedback and coaching sessions, helping your employee stay on track.

Continuous feedback

Annual reviews used to be the main moment for detailed feedback, leaving employees guessing in between.

Modern leaders use continuous feedback to recognize and reward employee achievements and address employee missteps as they happen. This practice helps high performers build and sustain momentum. And it can get struggling employees back on track.

Performance management software acts as a central system of record for everything from feedback conversations to annual reviews. This allows employees to actively contribute to the discussion and reflect on their progress over time.

The importance of performance management solutions

The right performance management solution can deliver tremendous value for your organization. Some of the key benefits include:
 

• Increased productivity and revenue: The system helps employees achieve more goals, positively impacting the company’s bottom line. In fact, highly engaged business units achieve 23% higher profitability than their peers.
• Increased employee engagement: The platform keeps employees invested in their current work and their career as a whole. As noted earlier, this level of involvement makes employees 3.6 times more likely to be engaged.
• Decreased turnover: Individual and company-wide success can increase employee satisfaction, potentially leading to longer tenures. Employees who receive high-quality recognition are 45% less likely to quit within two years.

A performance management solution can also help with understanding people analytics. Users have access to a treasure trove of actionable data, including employee salaries, absenteeism and tardiness rates, 360-degree feedback scores, and more.

Considerations for rolling out performance management software

Now that you understand what a performance management system is and what it can do, you may be wondering how to find and implement the best performance management solution for your organization.

Here are some suggested steps to take:
 

1. Analyze your current performance management process and determine what works well and what doesn’t.
2. Create a list of capabilities your new system will ideally feature, organizing them into must-haves and nice-to-haves.
3. Identify, research, and compare performance management software that could work for your company.
4. Schedule product demonstrations of your top two or three picks.
5. Select the solution that offers the functionality your business needs at an investment it can afford. For example, choosing a performance management system within an HCM platform connects performance data with compensation decisions and payroll in a single system.
6. Announce the decision company-wide, highlighting the system’s benefits, and letting managers and employees know what to expect in the weeks and months ahead.
7. Roll the new system out gradually, provide ample training, and solicit feedback early and often so any issues can be addressed quickly.

Taken together, these steps give leaders a clear path to creating performance management systems that fit your culture and scale with your business.

Frequently asked questions

What is a performance management system (PMS)?

A performance management system is a process involving goal setting and tracking, continuous feedback, employee development, and formal performance assessments alongside calibration. Performance management has become a collaborative effort, with managers and employees working together throughout the process.

What is performance management software and what does it do?

Performance management software is a tool that facilitates the performance management process. Depending on the software implemented, users can do things like track goals, share feedback, submit performance reviews, establish training programs, and more.

What features should performance management software include?

At a minimum, performance management software should let users set and track goals, share real-time feedback, and create performance reviews. However, you should choose software that includes other features essential to your operation.

How is performance management software different from performance tracking software?

You may see the terms used interchangeably. However, performance management software tends to be more sophisticated, offering higher-end features such as predictive analytics.

What employee metrics does this system help you track?

A performance management system can help you track employee metrics, such as:
 

• Goal completion rate
• On-time goal achievement rate
• Output volume
• Customer satisfaction ratings
• 360-degree feedback scores
• Employee engagement scores
• Learning hours completed
• Absenteeism or tardiness
• Turnover rate

Each performance management software has different functionality, so be sure the options you consider help you track the metrics most important to your organization.

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