Performance Management Tools: The Ultimate Guide

Mar 2, 2023 | Performance Management

Performance management tools have become essential to HR operations. These solutions belong in every HR toolkit. Not only do they assist the HR department; they also help managers throughout the organization to guide their teams to success.

With the right software, companies can offer their employees a new level of support and a greatly enhanced employee experience.

Consider that only 2% of companies feel they have a great approach to performance management. And 70% believe they need to better inform their talent management decisions with good performance management insights. When companies don’t have the right tools in place, it leaves employees feeling disempowered.

They don’t gain the feedback they need for growth, and they lack a structured approach to improving. But good performance improvement solutions have the power to transform talent management in any company.


At this point, you may have several burning questions on your mind:

  • What do performance management solutions involve?
  • How can they transform my organization?
  • What are the best types of tools for my company?
  • How can I deploy these solutions effectively?
  • How should I augment the use of these tools?
  • How will I know if they’re actually working?

We’ll cover each of them in turn, beginning with what performance management tools are and how they work.

Table of Contents

1. What Are Performance Management Tools

2. Benefits of Performance Management Tools

3. Finding the Best Performance Management Tools

4. Launching New Performance Management Tools

5. Making the Most of Performance Management Tools

6. Measuring the Success of Your Performance Management Tools

What Are Performance Management Tools

Diverse group of employees in office using performance management tools
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Let’s first look at the key function of these tools. Then, we’ll explore emerging trends shaping their development.

Purpose of Performance Management Tools

Performance management tools help managers understand how each direct report is performing. Using this software, managers can easily evaluate how they’re progressing. Likewise, they can spot current strengths and weaknesses at a glance—and provide the right support.

How does this work? These tools track employees’ progress toward goals and KPIs they’ve set with their manager. The best systems let managers specify steps toward each goal to track progress as accurately as possible. Then, they highlight progress made in real-time. 

On hybrid and remote teams, these tools prove especially critical. Since managers can’t directly observe people at work, they rely on these tools to deliver daily insights on performance.

Good performance management tools also share robust data on employee behaviour. Over time, they evaluate overall performance across a set of relevant metrics, like engagement. They analyze patterns in productivity, quality of results, and even turnover. By doing so, they help pinpoint the factors influencing employee behaviour.

For example, one company might find that coming to the office once a month boosts its hybrid team’s productivity. Another may find that short daily meetings greatly boost engagement. Another may realize that its incentive program isn’t having the desired impact, leading it to a more effective solution. 

Primalogik performance management tool buyer's guide

Trends Shaping Performance Management Tools

These tools have been responding, in recent years, to the demands of changing performance management practices:

  • More frequent (and less formal) performance reviews
  • Employees’ expectations of ongoing feedback
  • The need to keep up with fast-changing organizational priorities

“In some cases, vendors have even driven the changes in performance management approaches,” says Kyle Lagunas, research director at consulting firm IDC, in an interview with the Society for Human Resource Management (SHRM).

“They understood the process needed to happen differently in today’s business climate, with tighter feedback loops … and with goal systems that can change easily as strategies or team objectives change.”

In turn, advancements in performance management technologies are changing the role of managers, Gartner asserts.

“As the use of technology grows, and employees become more proactive in the day-to-day management of their own performance, the focus for managers will turn from performance management conversations to supporting employee career pathing and development,” they predict. 

Benefits of Performance Management Tools

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Why are performance management tools important? Let’s explore the key benefits at every level.

Individual Benefits

Individual contributors benefit personally from good performance management tools. According to Gartner, companies with strong performance management practices can improve performance by 24%. Plus, employees’ belief that their organization uses equitable performance management practices climbs by 50%, and the percentage of high performers grows by 7%.

Improving Skills

Performance management tools show employees exactly where they need to improve. Through these insights, they also keep managers in tune with employees’ needs. Coaching conversations grow more productive because they’re both on the same page. As a result, they can spend less time identifying problems and more time growing their abilities. 

Similarly, employees can set flexible goals using these tools. In fast-changing environments, personal goals can adapt to the changing reality. “As business strategies, team objectives, and individual goals change more frequently in disruptive markets, the more-agile of these systems can adjust by automatically updating goals and associated learning plans,” says SHRM.

Enhancing Engagement

Good performance management greatly boosts engagement. How? First, it keeps employees dialed into the key objectives they need to achieve. As a result, they never lose sight of the steps they must take to reach their goals. In turn, they become more deeply engaged in their work.

Further, employees can set short-term (weekly) goals to make their work dynamic and exciting. When they look at their personal dashboard, they can see their goals and progress at a glance. They can also see milestones they’ve hit, greatly boosting morale.

In turn, increased engagement raises productivity by 14% and reduces absenteeism by 81%, reports Gallup. Plus, it plays a crucial role in building a strong culture. 

Ensuring Fairness and Inclusivity

Having a standardized system can promote inclusivity by making sure all employees receive equal treatment. Using a performance management system combined with performance evaluation software, you’ll hold all employees to the same standards. The best systems use a well-crafted rating scale with a clear rubric, helping ensure fairness.

Further, good software will detect assessment bias between managers so HR can address it.

Improving Employee Experience

As employees benefit in all of the above ways from the use of performance management tools, the quality of their experience improves. They enjoy their work more, and loyalty grows, in turn, reducing turnover. 

Team-Level Benefits

As individual contributors grow stronger, whole teams benefit in important ways. Effective performance management tools can quickly deliver the following results.

Boosting Productivity

Teams work together more efficiently with strong performance management facilitated by great tools. First, this software keeps projects moving along smoothly, ensuring a good workflow. Second, performance management software can help detect hidden causes of lower performance (among teams or individuals).

Companies can then work to optimize their operations based on what they’ve found. They can even examine whether particular combinations of individuals make better teams!

Strengthening Communication

Managers and employees communicate more effectively with the right tools. So do teammates. They can easily share instant feedback, for example. This helps them address any problems as soon as they begin. And effective collaboration boosts individual performance by over 20%, notes Gartner.

“Organizations can prevent or remedy many performance problems by ensuring that two-way conversations occur between managers and employees, resulting in a complete understanding of what is required, when it is required, and how everyone’s contribution measures up,” says SHRM. This applies equally to teams.

Benefits for Busy Managers

Performance management tools support overworked HR managers—and all managers—in three key ways, as we’ll discuss.

Facilitating Continuous Management

Performance management tools streamline continuous performance management. They allow managers to easily see which employees are struggling most and in what areas. Plus, they assist in decision-making by putting the necessary information at managers’ fingertips.

Additionally, all of the benefits discussed above enhance talent management while reducing the time and energy required from managers.

Reducing the Administrative Burden

Today’s managers have a huge volume of work on their plates. Agile goal-setting, the need for continuous feedback, more frequent performance reviews, and weekly one-on-ones can increase their workload even more. However, good tools can help. A well-chosen performance management tool will reduce administrative tasks and perform valuable analysis to guide their efforts.

This frees them to focus on meaningful work, like coaching.

Empowering HR as Organizational Leaders

Further, HR managers can leverage the insights from these tools to act as an HR business partner to senior leadership. They can easily generate reports to illustrate the ideas they’re proposing. In this way, HR can offer greater strategic value to the company. By elevating HR directors as organizational leaders, these tools are reshaping the landscape of HR. 

All of the benefits for employees and managers build up to the company-level benefits we’ll discuss next.

Company-Level Benefits

Using great performance management tools can strongly influence a company’s success. Let’s examine how the right software can drive outcomes.

Creating Alignment

Good performance management aids companies in meeting their strategic objectives. By ensuring alignment on goals, it helps all teams drive toward them together. In doing so, it plays a vital role in strategy execution.

According to McKinsey, good performance management allows organizations to “translate strategy to clear priorities, point resources to the initiatives that matter most, and help individuals understand where to focus their time and energy.” Organizations then become more resilient in times of disruption as well.

Increasing ROI

Heightened productivity brings increased ROI across operations, moving a company closer to its goals. All of the individual and team-level benefits discussed above support this enhanced productivity and increased ROI.

In all of these ways, the right performance management software can be a game-changer in any organization. Whether the company is already thriving and wants to aim higher or is struggling and needs urgent assistance, these tools have much to offer.

Improving Strategic Planning

Organizations can make stronger talent allocation decisions with the insights provided by a performance management system. Plus, they can make better compensation decisions. Such data are “vital inputs” for succession planning, asserts SHRM.

Are there any drawbacks to using performance management tools?

Not when good managers are using the right ones. But several drawbacks could emerge if the tools are mismanaged. For example, if a manager tries to rely solely on the tools, employees will likely become disengaged. Performance management tools are intended to strengthen personnel management, not replace it.

Finding the Best Performance Management Tools

Two colleagues in office researching in books
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How can you identify and adopt the right tools? We’ll discuss how to find them now.

  1. Opt for a robust suite of tools focused on performance management. For example, look for software that includes options like these (hint: Primalogik’s performance management software):
  • Performance-tracking tools. This software tracks progress toward goals and KPIs. It’s the heart of a good performance management suite of tools, providing a real-time progress report.
  • Performance review tools. These tools streamline the review process, providing templates and letting you track results between cycles. The best options automatically generate questions tailored to each employee’s position and level.
  • 360 review software. These tools allow you to easily conduct 360 reviews and interpret the results, providing rich feedback on performance. Such feedback typically focuses on interpersonal skills. Good 360 review software lets you compare self-assessments with other respondents’ ratings.
  • Feedback-sharing tools. Such tools allow managers and coworkers to easily share bite-sized feedback on a daily basis.
  • Analytics. The best performance management tools provide clear analytics and reporting. They can easily generate compelling reports on a given topic. Managers, HR staff, and other leaders can use this data in decision-making.
  • Survey tools. Such tools allow you to gain employees’ perspectives on key issues affecting their performance.

Side note

With the best software, your performance review tool will pull data from the performance management tool. That way, managers will go into evaluations as informed as possible. With Primalogik’s software, they’ll see each employee’s rate of goal completion, progress toward goals, and key results achieved. Some tools will automatically generate goal-centered

But wait, there’s more …

2. Look for tools that can sync with other HR software to provide a comprehensive set of tools. For example, Primalogik can sync with BambooHR

3. Choose tools that can scale with you. This will avoid the hassle of changing over to a new system as you grow.

4. Opt for tools that allow for tracking team goals as well as individual goals. This will show whether individuals are working together effectively.

5. Look for an easy-to-use, intuitive system. There should be no learning curve for getting started. Simplicity is the way to gain buy-in for a new platform!

6. Select a vendor that offers as much onboarding support as you need. Even if the system is intuitive, make sure your vendor will share tips and guidance.

Generalization vs specialization

Importantly, some tools focus solely on performance management. Meanwhile, other performance management tools make up one component of a broader suite of HR tools spanning a range of functions. So, you’re faced with this question:

Is it better to choose one of the very best performance management tools out there? Or should I choose a full human resource management system that includes performance management tools?

In reality, you can have both! Choosing a tool from a provider specializing in performance management will typically deliver the best results in this extremely important domain. You’ll gain an intuitive system designed by the people who understand performance management best rather than a system that approaches it as an afterthought.

But when you look for a tool that also syncs with the other software you need, you’ll gain a comprehensive system. 

As mentioned, Primalogik syncs with BambooHR in this way, giving companies access to a full HRIS system coupled with the best performance management software. This covers everything from onboarding and payroll to 360 reviews and performance evaluations.

Further, as an intuitive tool that can grow with you—whether you have 12 employees or 50—Primalogik provides an exceptional package of performance management tools for small- and medium-sized enterprises. Offering a full-spectrum solution that includes all the features discussed above, Primalogik delivers the ultimate in performance management.

Launching New Performance Management Tools

How to successfully introduce new performance management tools? When introducing new technology, provide plenty of support—even if you don’t think it’s necessary. Sometimes people fear that new technology will be too challenging to use or too tedious to learn. Work to eliminate that fear by holding their hand through the implementation phase. 

With that in mind, here are a few tips that can help the launch go more smoothly:

  • Survey managers about “pain points” to address with performance management tools. Hold follow-up conversations to dig into specific issues they’ve mentioned. Then, choose software that meets these needs. 
  • Do a test run with a pilot group of managers and employees. If they find the tools useful, they’ll become ambassadors for the new software. This doesn’t have to be a lengthy test. Just let them get their feet wet, so they can coach others along!
  • Lead a workshop for managers on how to use these tools. Even though the software may be intuitive, they’ll feel more confident with this coaching. Plus, learning alongside peers will boost enthusiasm for the new tools. Share strategies like the ones we present in the next section for optimizing their use.
  • Check in with managers daily to make sure they’re using the tools effectively. Ask them to share learning moments and success stories. Then, share highlights with the whole group.

Using these tips, you’ll create excitement and engagement around the launch of your new software. Now, let’s explore how to optimize your use of these tools.

Making the Most of Performance Management Tools

Group of coworkers discussing performance management tools
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How can you use performance management tools to your best advantage? 

Techniques to Use with Performance Management Tools

Use the following techniques to guide your team to success with the help of these solutions.

Link Business Strategy with Performance Management

Ground performance management targets in business priorities, as McKinsey advises. Leaders who set business performance management targets should work hand-in-hand with HR. Talent management shouldn’t be viewed as separate from setting business strategy

“Holistic performance management requires a streamlined process that links business strategy to individual goals, necessitating clear ownership by business leaders,” asserts McKinsey.

Hone in on team goals.

Make achievement a team sport. First, set team goals. Then, discuss metrics of success with each team. In these conversations, ask if they’d add or change anything. Sometimes teams have smart ideas for evaluating their own success—and this will make them more invested in meeting the metrics.

Establish a fairly small number of metrics, such as 8–10, urges McKinsey. They’ll then remain more front-of-mind, while longer lists will get lost.

Finally, hold team appraisals as well as individual evaluations. Discuss whether you achieved your goals and why, addressing how you’ve measured success. Identify skills gaps and strengths on the team, just as you would for individuals. Then, talk them through as a team.

Use a continuous performance management approach.

Within the continuous performance management cycle, managers rotate through the four key elements of performance management on an ongoing basis. These stages—planning, monitoring, reviewing, and rewarding—occur in a continuous loop rather than over the course of the year. Managers (and employees) may cycle through them in the span of weeks. 

Why should leaders use this management technique? Today’s fast-paced workplace moves too quickly for the traditional review cycle. Disruptive changes often force teams to adapt on their feet. So, goals and management need to adapt in turn!

Coach employees to success.

Coaching and performance management systems go hand in hand. The performance management tools inform the coach’s perspective, as well as the employee’s. Then, the coach provides personalized advice on how to move toward goals. A good coach will work with the employee to collaboratively set goals and a plan for achieving them.

Further, a good coach helps employees set learning goals that feel meaningful to them. They help identify where the employee’s passions align with the organization’s mission. Then, they lay out a plan for professional growth.

Review performance frequently.

Delivering frequent performance reviews creates a continuous feedback loop that enhances performance substantially. Organizations are opting to deliver quarterly or even monthly reviews for this reason. Some are even switching to project-based reviews. Through these in-depth talks with managers, employees can identify and work to resolve any performance issues.

Share daily feedback.

Managers should share feedback at least several times a week—ideally, every day. They should make feedback future-oriented, says Gallup. Rather than harping on blunders, they should make suggestions for what to do moving forward. They can also ask questions that prompt critical thinking. 

Provide the right incentives.

Incentives come in several forms, from the short-term to the long-term:

  • Shorter-term financial incentives like bonuses. Introduce a fun challenge by having people work toward a quarterly bonus.
  • Social rewards like sharing appreciation. Delivering ample praise in meetings and one-on-ones is perhaps the best motivator of all.
  • The potential for longer-term career rewards like promotions and raises. Most employees want advancement opportunities; let them know exactly how to work toward them. Discuss realistic pathways to the career of their dreams.

While gratitude is a fantastic motivator, don’t overlook the importance of tangible rewards. Today’s employees want to know they have long-term job and career security. And especially in tough economic times, short-term financial incentives can make a big impact.

Essential Performance Management Software

Learn about the solutions that will help you accurately measure employee progress and provide the support that will bring them closer to their goals. Download our free ebook today.

Empower employees to direct their growth.

Today’s employees want more control over their development, asserts Gartner. So, give them direct access to resources for professional growth. Empower them to grow at their own pace by deciding when to take action. (At the same time, managers should also provide the right suggestions and encouragement.) 

For instance, provide a list of workshops they can take when they’re ready. Offer to connect them with a mentor who can help them grow a new skill. Or connect them with online training resources.

Get employee feedback.

Getting employee input is essential to gaining buy-in, improving satisfaction, and enhancing their experience. Conduct regular pulse surveys related to key performance topics. For instance, ask for their feelings on flexible working hours, incentives, and the coaching they receive. Then, take action to meet their needs!

Review and coach managers

HR should assess managers’ fairness in performance reviews. Good performance management software can help detect bias in performance reviews by comparing results among managers. You’ll be able to see their lowest, highest, and median scores. You can compare these scores with how well their team actually performed, as shown by your performance management software.

Using the same method, you can identify bias toward individual contributors. Then, you can make managers aware of any bias and work to address it.

Further, HR should coach managers on how to evaluate employees and deliver reviews. You can share examples of the types of language they can use in performance reviews, for instance. And importantly, you can coach them on how to use the rubric provided.

Measuring the Success of Your Performance Management Tools

After implementing performance management tools, you must have a method of evaluating them. Observe their effect on ROI and productivity over time. Answering questions like these will help you do that.

  • How have team productivity and engagement changed over time? Have teams achieved their objectives on time?
  • How does your ROI this quarter compare to the last quarter? Calculate this by subtracting the amount you’ve invested in your employees from the revenue they’ve brought in.
  • Are teams goals and objectives becoming more ambitious? 
  • Do individual goals and objectives support the company mission and vision?
  • Have ratings on performance evaluations improved overall compared to last quarter? 
  • How do customer leads and conversions compare to the previous quarter?

Additional Metrics

Here are some additional metrics you can use to assess the success of your system. As Herman Aguinis writes in Performance Management for Dummies, surveys can help reveal how your staff feels about the new tools.

  • Completion rate: What percentage of your workforce is completing surveys and 360 reviews on time?
  • Inclusivity and equity: Is performance improving at a similar rate across all demographics? (And, in turn, are new opportunities opening up for employees of all backgrounds?) Do employees perceive their organization as growing more inclusive?
  • Satisfaction with the tools: Do employees and managers find them useful? Do they need more guidance in using them? Find out by administering a survey. Ask how and when they’re using the tools, which features they find most useful, and which ones they use the least. After spotting gaps in understanding, you can work to address them.
  • Satisfaction with performance reviews: Do employees feel they’re getting the personalized support they need from their manager? Survey them about guidance received, such as in-depth feedback and help with goal-setting.
  • Customer satisfaction: According to customer surveys, has customer satisfaction improved? Is their net promoter score increasing, along with your customer retention rate? 
  • Employee attrition: Has it changed since launching the new tools? Are you retaining recently onboarded employees at a higher rate?

Wrap Up

Look at leading indicators for performance as well as results, urges McKinsey. For instance, look at the percentage of employees pursuing advanced training opportunities. Look at whether they’re enthusiastically using feedback-sharing tools as well. This will show whether they’re on track to level up. 

Keep in mind that it may take weeks or months to see results across all these dimensions. While the tools can quickly begin to improve engagement, for instance, documenting improved ROI and customer satisfaction will take longer. Be patient, observing the outcomes over several months, urges Aguinis.

When you place the right performance management tools in the hands of capable managers, the possibilities will be unlimited. Managers will be thrilled to have the constant support of these tools, and employees’ enthusiasm and commitment will grow in turn. Stand back and watch your workforce shine!

Want more insights on how performance management software will benefit your organization? Demo our product!

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