What is a performance

management system?
A performance management system tracks the performance of employees in a manner that
is consistent and measurable.

Performance management
system overview
A performance management system tracks the performance of employees in a manner that
is consistent and measurable. The system relies on a combination of technologies and
methodologies to ensure people across the organization are aligned with – and contributing
to – the strategic objectives of the business.

The system is collaborative, with managers and employees working together to set
expectations, identify employee goals, define performance measurement, share employee
performance reviews and appraisals, and provide feedback.

When properly defined and consistently applied, a performance management

system increases overall workforce productivity. Employees are more invested in their work
and turnover is minimized while revenue per employee is maximized.

A performance management system tracks the

performance of employees in a manner that
is consistent and measurable.

What are the key elements of a

performance management
system?
Performance management software can be implemented on premise, in the cloud, or within
a hybrid environment.

A cloud platform or HR cloud provides a range of benefits including larger data storage
capacities, stronger security, and easier integration with complementary applications, such
as learning and development, compensation, and other people-centric systems.
Three key processes in a performance management system

A performance management system relies on three key processes:

1. Plan and act with goal management

o Align employee performance to the objectives
of the organization.
o Assign work that is meaningful and fulfilling to
increase employee engagement.
o Quickly adapt goals when business priorities
shift.
2. Monitor with continuous performance
management
o Monitor the goals of each employee to ensure
ongoing alignment with organizational goals.
o Provide feedback and guidance to improve
performance.
o Recognize good results as they happen.
3. Evaluate and recognize through performance
assessments
o Assess performance consistently and
accurately.
o Recognize and reward strong performers.
o Use data-driven insights from the system to
quantify the value your workforce delivers to
the business.

The evolution of performance

management systems
Businesses have been managing the performance of individuals for centuries. But one of
the first formalized models was introduced during the First and Second World Wars when
the military needed to understand the strengths and capabilities of each member to inform
battle strategies.

By mid-century, performance appraisals were being used by businesses to grade the

performance of individual workers and to assign rewards.

In the 1960s, the focus began to shift to employee development, where discussions were
held between an employee and their manager to review performance and – where
warranted – to institute teaching and training to help the employee improve and/or advance
in their career.

In the intervening years, some aspects of traditional performance management software

have evolved due to better technology, such as cloud computing, improvements in user
interfaces, and artificial intelligence (AI) and machine learning. However, most systems
continue to emphasize employee evaluation and reward on a quarterly or annual basis.

While recognition remains an important aspect of performance management, businesses

are moving to a more holistic approach, one that provides ongoing feedback and guidance
for employees to help them achieve their goals.

Who uses performance

management software?
Any company with an employee base – regardless of industry or size – will benefit from a
performance management system.

Although every employee will interact with the system at some stage, the power user is the
team leader or manager with direct reports.

 Employees work with their managers to define

employee goals. They build their individual employee
performance reviews within the system, and
participate in 360-degree review cycles if this model
is in use.
 HR professionals define the HR processes and
systems that support the performance management
cycle. They work with managers and employees to
ensure processes are fair and that each stage is
carried out in a timely manner.
 Managers are the power users of the system and
must ensure every employee actively participates in
the process. Managers are also ultimately
responsible for the performance of their team(s).

Why is a performance
management system important?
Along with increased workforce productivity, higher employee engagement, lower turnover,
and maximized revenue per employee, a performance management system that is properly
integrated with adjacent business systems can provide valuable insights that will inform
broader human capital management decisions.
For example, a performance management system stores and quantifies data from
employee/manager interactions including individual career aspirations, appropriate skill
sets, and overall fit for succession planning. With these insights, learning and development
funding can be invested in a manner that best supports the needs of the business and the
employee.

Performance management software provides an accurate and real-time view of the

workforce that aids in people planning and strategy.

What are performance

management best practices?
Consistency and transparency are key to optimizing the performance management process.
The cycle of goal management, continuous performance management, and assessment are
ongoing. Once the cycle is complete, existing and new goals are identified and the cycle
begins again.

Best practices also include the provision of ongoing, interactive feedback throughout the
year versus only during the performance assessment stage. Performance conversations
should be relaxed and open. Employees and managers must take the time to sharpen these
skills if they wish to improve their interactions.

To ensure a consistent methodology is applied to assessments for workers within similar

roles across the company, a calibration process should be implemented.

Performance management
advances and trends
Continuous performance management
Organizations are shifting from traditional performance management to a continuous
performance management (CPM) model.

The CPM process is less formal with employees and managers engaging more frequently.
Regularly scheduled one-on-one discussions and ongoing feedback help workers stay on
track.

For managers, a CPM strategy makes it easier to track an employee’s work achievements
and weaknesses by addressing issues when they occur. Goals can be adjusted as
corporate objectives change for an agile and responsive work model.

Employees receive more timely feedback versus waiting every 6 to 12 months for a formal
meeting that may overlook achievements that occurred earlier in the performance period.
The CPM model also eliminates surprises and expedites improvement cycles.
 Deskless and field workers
Deskless workers, also known as field workers, are employees who complete tasks away
from a desk or a company’s headquarters and have inconsistent access to internal systems
and communication channels, unlike remote workers who retain access to these systems
while working from home. Examples include people who work within the hospitality sector,
natural resources, manufacturing, and healthcare. Given the nature of their work, Deskless
workers often don’t easily fit into existing systems. Organizations must ensure their
performance management systems are able to effectively support this important segment of
the workforce.

Dynamic teams
Modern performance management systems must be agile enough to adjust to changes in
the business, including team dynamics. A shift is underway from traditional and agile team
models to a dynamic model:
Traditional Agile
Formally assigned leader (such as a line
Formally assigned leader (such as a scrum master) Self-manag
manager)
Predictable workflow with a right or wrong Unpredictable workflow, focus and goals frequently
Rapid chan
way to do the work change
Team members share the same job title and Formal agile methodology with daily stand-ups and
Cross-func
area of expertise sprints
Encourages fast failure and iterative development for May not fo
effective course correction methodolog
Organic tea

Performance management
systems FAQs
What types of organizations should implement a performance management system and
how will the business benefit?
Any organization with a base of employees will benefit from performance management
software. The system provides the company with an effective, repeatable model it can use
to provide feedback and quantify the performance of its workforce relative to the strategic
objectives of the business.
What business problems does performance management software resolve?
A performance management system can help resolve a range of business problems,
including:

 Loss of top talent due to a failure to recognize and reward top performers
 Financial losses due to inefficient work practices that don’t align to the objectives of the
business
 A lack of a standardized methodology to guide compensation, promotion, and termination
decisions
 The inability to prove that these decisions were justified if challenged legally
What is a performance management process?
The performance management process consists of a series of stages where managers and
employees manage goals, monitor performance, and assess outcomes. Traditional
performance management systems follow a typical cadence of quarterly, bi-annually, or
annual reviews. A continuous performance management model supports a more frequent
cadence.

The process is ongoing. Once complete, existing and new employee goals
are identified and the cycle begins again.
What are the three stages in a performance management cycle?
There are three stages in the performance management process:

 Plan and act with goal management.

 Monitor with continuous performance management.
 Evaluate and recognize through performance assessments.
What broader business advantages does performance management provide?
Wider-ranging integration with existing systems
Organizations want their performance management platforms to deliver greater value to the
business. By integrating with systems across the operation, organizations can streamline
and automate many manual and time-consuming processes such as legal, payroll, and
others. These integrations provide a broader view of the business, allowing the organization
to develop deeper insights that help inform broader operational and strategic decisions.

Alignment with regulatory requirements

As with most people planning and strategy processes, the activities supported by
performance management must extend beyond the bounds of employee/manager
interactions. The platform must also interact with and support a range of systems relative to
record-keeping, data security, and other regulatory compliance requirements that align with
corporate and government laws.