What Is Performance Management Software?

Human resources (HR) departments help companies find the best fit for their open positions. Today's work environment is more competitive than ever, and HR professionals constantly need to attract, retain, and manage new employees well so that they and the business can thrive. This is where HR software solutions can assist, helping HR pros with tasks like applicant tracking (AT), benefits administration (BA), payroll, and performance management (PM), training, to name a few. As a result of using great HR tools, the workforce can be supported and the company can be better organized and productive.

Standalone PM software solutions and services do exist but integrated solutions that work in conjunction with various HR tools make more sense for small to midsize businesses (SMBs). Integrated solutions generally cost less, and employee performance can be tracked and also reflected in other components. Most notably for payroll for bonuses and compensation as well as training for certification and skills advancement.

Comparing Performance Management Software

While we have two Editors' Choice winners in the features table above; it's important to note that BambooHR is a holdover from our recent review of all-around HR software and management systems. However, its Editors' Choice award also stands in this PM category. BambooHR did an exceptional job of integrating a thorough PM feature set into a well-rounded, intuitive HR platform that's easily accessible by SMB operators. Along the same lines, Deputy is the best scheduling tool on the market but it's not primarily a PM tool. However, Deputy offers enough solid PM functionality that it warrants consideration, especially if scheduling and PM go hand in hand within your organization.

A new Editors' Choice award solely for the PM category goes to SAP SuccessFactors. This is a platform that started out dedicated to PM but is quickly evolving into an all-around HR management tool suite. While SAP SuccessFactors didn't win an Editors' Choice as an all-around HR solution, it's by far the best PM tool we reviewed and easily earns the award in this category.

When comparing these solutions yourself, it's good to understand what kinds of features and capabilities are available under the PM umbrella. As a rule, basic PM should cover some or all of the following three tasks:

1. Goals, feedback, and coaching: The tool should have some way for managers and employees to set long- and short-term goals, track those goals, provide and record manager feedback, and document any coaching provided (as well as how the employee responded to it). There are many mechanisms a software architect can employ to achieve these capabilities. Therefore, it's critical to have this work chain demoed to you to make sure it works within your organization's culture before purchasing.

For example, a casual culture might be satisfied by a joint journaling feature that lets both manager and employee keep a free-form log of ongoing coaching and growth. On the other hand, a more formal process (one dictated by stringent compliance regulations, for example) might require a more structured process involving specific documents and forms, multiple levels of approval, and numeric scoring.

2. Performance review process: Some organizations might be happy with one or two evaluation forms filled out by employee and manager and then stored for future analysis. Other organizations might refer to this data much more often, necessitating a dashboard-style view of an employee's performance with up-to-the-minute data on job quality, skills assessment, positive and negative feedback, and more. All of them should at least chime in at the start of the review process, and most can automate that process either through email or document routing.

3. Compensation: This is optional and depends on how directly your company links compensation to performance metrics. Some companies, especially SMBs, compensate employees on a more static basis, with performance scores affecting compensation only at extreme ends of the scale (basically, more reward for the very good or sanctions for the exceptionally bad). Other companies use performance scores to calculate overall compensation at varying grades even for the same job, including salary, stock options, and even benefit tiers. This is where HR tool suites, including both PM and payroll capabilities, provide adjustable formulas and calculators designed specifically to crunch those numbers. While this does generally present more work, it can pay dividends not only in motivating employees to do better but also in maximizing your investment in each individual.

Tying It All Together

For many years, most of us have grown accustomed to PM being an annual chore conducted primarily by an immediate supervisor and an HR professional many of us never even meet. Goals are designed to be achieved on at least a semi-annual basis and are reviewed only once every six or 12 months. While that has some benefit, most of the tools we reviewed espouse a more agile PM discipline for today's business managers.

By automating the performance process through email, document routing, or dedicated workflow capabilities, many of these tools make PM part of everyday employee management simply by providing a way to track and document employee/manager communications. This isn't meant to turn an employee's work life into a police state. Rather, it's designed to let performance tracking become more agile and responsive.

After all, the job goals and requirements that really matter can change on a daily basis, not on a semi-annual one. By providing tools and dashboards that let managers track how an employee is doing on such a cadence, HR gets a much clearer and granular understanding of the employee's performance, skills, and needs. The trick is delivering these capabilities in such a way that they don't become a burden on how managers and employees do their day-to-day jobs.

That's why HR software vendors are putting more emphasis than ever on usability rather than just acting as buckets for annual metrics. Many solutions provide advanced reporting and analytical capabilities, including new ways to build custom reports and features, letting managers and HR professionals view employee data visually. Another example is mobile access, which seems like a superfluous feature until you view it under this new HR-all-the-time lens. In a culture where PM is part and parcel of daily employee management, offering mobile access to dashboards and communications capabilities is critical to long-term success.

A business that's seeking HR and PM solutions should consider reevaluating how its company can use these tools to effectively manage and assist its workforce. The software solutions we chose for this review roundup manage to deliver the necessary HR capabilities, help optimize your employee investment, and help you cultivate and retain top talent.