According to The Independent, in 2022, millions of workers left their jobs due to a lack of motivation and progression. Plus, a survey commissioned by Edenred found that having a supportive line manager who appreciates their work can result in reduced staff turnover. 

It’s clear that so much hinges on the performance of your employees. And most would argue that looking after your team is key to success within your business.  

In this article, we uncover ‘what is a performance management system?’ We’ll also delve into some performance management system examples. After reading, you’ll have a better understanding of how to choose the best performance management system for your business.   

What is a performance management system? 

A performance management system is a tool used to measure, monitor, and improve employee performance. It utilises formatting and automation technology to add structure to the process. It also helps remove the administrative workload on appraisal leaders. Performance management systems help align individual and team goals with business objectives. It can also track progress and foster continuous development.  

Performance management systems are sometimes included within a wider HR software package. For example, at Access PeopleHR, our performance review software is part of an ‘all-in-one solution. This includes things like applicant tracking, time and attendance, and so on. Such systems help to keep all your people management tools under one platform.  

However, performance review software can also be purchased as a discreet solution. Discreet performance management system examples include Kallidus, Leapsome, and Betterworks. They are generally charged on a cost-per-user, per-month basis and include a range of tools to boost your HR performance management. 

Manager and employee having a performance review

The types of performance management systems and approaches  

When working on HR performance management, there isn't a single solution that will work for everyone. Instead, you should find an approach that suits your team's specific needs. This means considering factors like your industry, business model, and team dynamics. Thankfully, most performance management systems provide a range of options to choose from, so you can create a customised system that works well for you. You could even discover that using a mix of different approaches gives you the best outcomes.  

Performance management is constantly evolving, and there have been several cultural shifts that have led us to where we are today. Read our article on the history of performance management to learn more.  

Let’s look at the three main types of performance management approaches.  

Traditional approach

Traditional approach

This typically involves conducting periodic performance evaluations where you assess your employee’s performance based on predetermined criteria. This could include their goals, targets, or competencies. It is often referred to as a top-down approach, where managers provide feedback.

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Continuous feedback approach

Continuous feedback approach

This approach emphasises ongoing feedback between employees and managers. It will involve regular check-ins, informal conversations, and real-time feedback. 

Staff Appraisal Feedback
Developmental approach

Developmental approach

This approach focuses on identifying employees’ strengths and areas for development – for skill-building and career progression. 

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We will now take a closer look at the different types of performance management models


1. 360 degree feedback

360-degree feedback involves obtaining feedback from multiple sources. These include peers, managers, subordinates, and even the individual themselves. When feedback is collated in this way, it is said to provide a comprehensive assessment of an employee’s performance. Gathering feedback usually involves surveys – which can be easily carried out and automated via a robust performance management system.  


2. Management by objectives

Management By Objectives (MBO) is a performance management model that involves setting SMART (specific, measurable, achievable, and time-bound) goals for employees. These are aligned with the overall goals of the organisation.  


3. Manager reviews 

Manager reviews are where the employee receives feedback on their performance from their direct line manager. This can be given on an ongoing basis or as part of a formal review process. It also allows employees to have a voice in their performance review process, allowing them to take an active role in their own development.  


4. Employee self-assessment 

Employee self-assessment is a process where workers assess their own job performance using predetermined objectives and criteria. This model encourages employees to take responsibility for their work and reflect on their strengths and weaknesses.  


5. HR software driven 

‘HR software is driven’ refers to a performance review model that utilises technology to support and streamline the HR performance management process. It involves the use of HR software to manage performance-related data. This includes employee goals, performance metrics, and feedback. It can also automate many aspects of the performance management process, reducing the administrative burden on managers and HR staff.  

Benefits of a performance management system

You may be wondering what the benefits of a performance management system are. In this section, we’ll demonstrate how the components of performance management systems work together to support employee development and drive business success. 

1. Clearly defined goals

One benefit of a performance management system is that it helps users set SMART objectives that align with organisational goals. An effective performance management system documents these objectives and schedules regular check-ins to keep employees on track. 

Storing goals in a secure platform allows managers and employees to easily view and track progress, including past goals. This gives all parties greater visibility and a more accurate pathway to growth and success. To find out more about setting SMART goals, visit the link. 

2. Easy-to-spot training opportunities

Performance management systems provide access to data-driven insights that can inform an organisation's training and development needs. By gathering feedback from employees and analysing performance data, you can identify areas where employees may need additional training or upskilling. This can help ensure that employees have the necessary skills to perform their roles effectively.  

As an example, your performance management system may highlight a trend of poor customer service. This may indicate a need for additional training in this area. With this knowledge, you can implement a targeted training program to improve employees’ customer service skills.  

If upskilling your staff is an area you’d like to develop further, read our article on 10 ways to upskill staff more effectively.  

3. Improved employee retention

HR performance management systems can also play a key role in retaining talent within your company. By providing employees with a clear pathway for development, you are helping them to feel more engaged and invested in their work. In turn, this can lead to greater job satisfaction, reducing the likelihood of them seeking other job opportunities.  

There is research to back this up. According to the Harvard Business Review, a 2021 study found that when employees are more satisfied with their organisation, they are much more likely to stay put. And a study commissioned by Edenred found that poor management support is one of the top 5 reasons why people choose to leave their job.   

4. Identifies areas to improve

One of the top components of performance management systems is its data reporting features. Whilst this data can identify training opportunities amongst staff, it can also identify general areas for improvement within your business. 

For example, anonymous employee feedback tools may identify certain risk areas. With one SMB we worked with, some employees were confused as to why senior team members were able to work from home, whilst general staff members had to be in the office full-time. By fostering employee feedback through a performance management system, this concern was quickly addressed before too much resentment built up within the company.  

Facilitating this open dialogue can greatly improve company culture and communication between departments.  

5. Increases self-motivation and productivity

Finally, one of the top benefits of performance management systems is the increased self-motivation and productivity among staff.  

Clear goals and expectations increase engagement, satisfaction, productivity, and performance. Employees can take ownership of their career development through feedback sessions and SMART objectives.  

This leads to self-management and informed decision-making on progress, creating a culture of continuous improvement.  

How to choose your performance management system 

Choosing the right performance management system is an important decision for any organisation. Your first consideration is whether you opt for a discreet solution or one that’s part of an all-in-one HR software package.  

With so many options out there, it can be challenging to know where to start. Here are some steps you can follow to help you choose the right performance management system for your business: 

  1. Identify your specific needs. Take time to assess your team’s strengths and weaknesses, as well as any areas you want to improve.  
  2. Do your research. Look at what’s out there in the marketplace and compare their features and pricing. Read reviews and ask for recommendations from other businesses in your industry.
  3. Test out different software. Many performance management systems and HR software solutions provide free trials or demos. Take advantage of these opportunities to find out which option works best for your business.
  4. User-friendliness is key. The system you choose should be easy to use for both employees and managers. The interface should be intuitive and easy to navigate.
  5. Reporting capabilities. When it comes to HR processes, data is your best friend. Your chosen performance management system should have robust reporting capabilities, allowing you to track performance and identify areas for improvement.
  6. Integrations. If you use other HR software and tools, make sure your chosen performance management system is compatible with these tools.  

By following these steps, you should arrive at the right solution for your unique needs.  

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Get started on your performance journey today

Performance management can be a complex area of HR. In this article, we’ve covered the basic definition, different types of performance management models and how a performance management system can benefit your organisation. 

As an SMB, you should closely consider your budgetary requirements – as well as your business needs. Often, an integrated HR system with performance review capabilities will be a more cost-effective solution. This way, you can stay on top of your reviews whilst effectively managing your other HR responsibilities.  

If you’d like to test Access PeopleHR for yourself, take advantage of our free trial.

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