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How To Choose the Right Performance Management System

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How To Choose the Right Performance Management System

How To Choose the Right Performance Management System

A performance management system is a suite of tools managers can use to track employee performance. This software ensures performance management is implemented with fairness across the organization. 

A performance management system typically includes tools for performance appraisals, goal setting, coaching and feedback, development planning, and performance metrics. Most also have 1:1 capabilities to recognize and connect with employees. 

By using a performance management system, organizations can align employee goals with broader organizational objectives, identify areas of improvement, and provide employees with the support and feedback they need to grow and succeed.

The system can help managers make more informed decisions about promotions, compensation, and career development. Both recognition from managers and peer-to-peer recognition can boost employee engagement, productivity, and performance, leading to better business outcomes.

In light of these features, performance management systems are highly beneficial for organizations looking to improve overall performance. 

Implementing performance management software can help transform the culture to be more engaging through employee recognition, more strategic through goal setting, and more aligned to business outcomes. Still, figuring out which system is best for your business can take time and effort. 

This guide will help you recognize the features that contribute to an effective performance management system and choose which one will help your employees reach their full potential. 

What Is a Performance Management System?


A performance management system helps monitor employee performance by tracking a number of valuable metrics, such as quality, quantity, and efficiency of work.

This technology can reduce oversight by tracking the same data points across the board to ensure that all employees contribute positively to the organization’s goals. 

The key benefits of a performance management system are its consistency and ability to quantify performance metrics uniformly across the organization.

Employees and managers can also collaborate to create goals and expectations and agree on how to measure performance outcomes. Performance management systems also offer tools to share internal reviews and collaborate with continuous feedback, boosting organizational efficiency. 

These features motivate employees by establishing clear goals and opportunities for positive reinforcement. 

What Makes an Effective Performance Management System?

Performance management systems provide three essential services. First, they offer tools for creating and managing goals, such as ensuring employees are engaged and aligned with the organization’s values. 

Once these objectives are clearly outlined, performance management systems help monitor your team’s progress toward achieving them, providing opportunities for positive performance review and recognizing opportunities for improvement. 

Performance management systems also provide big-picture insights, such as whether your organization is meeting its goals and achieving desirable outcomes or if changes must be made to get back on track.

Finally, performance management systems use objective standards to continually analyze performance. This ensures that biases within the organization won’t affect which employees are recognized for a job well done. 

What Are the Benefits of Using a Performance Management System?

The table below illustrates some of the key benefits of performance management systems and provides a brief explanation of each, highlighting how they contribute to more efficient and effective operations.

Benefits of Using a Performance Management SystemExplanation
Enhances Employee EngagementIt provides employees with a clear understanding of their roles and responsibilities, increasing their engagement.
Facilitates Continuous FeedbackIt allows for regular feedback and conversation between employees and managers, promoting continuous improvement.
Supports Goal AlignmentIt aligns individual performance goals with the organizational goals.
Aids in Identifying Training NeedsBy tracking performance, it helps in identifying areas where training or development might be needed.
Improves Decision MakingBy providing data on performance, it aids in making informed decisions about promotions, compensation, etc.
Streamlines the Performance Review ProcessAutomated processes save time and resources while minimizing errors during performance reviews.

Implementing a performance management system in your workplace has numerous benefits. Utilizing this software will help maintain fairness across the organization regarding employee recognition, promotions, performance reviews, and performance management calibration. 

Using a standardized review process will reduce bias in performance appraisal, help you accurately reward high performers, and give your employees confidence in the objectivity of the process. 

How To Choose a Performance Management System

Now that we’ve covered the elements of a performance management system, how can you choose which is right for your business? By following the steps in this guide, you can ensure you pick the software that will most benefit your team and your organization. 

Assess Your Needs

The first step to choosing the right performance management system is identifying your organization’s goals and objectives. 

If a system is already in place, evaluate its strengths and weaknesses, and determine which performance management features are essential for your organization. 

You should keep your budget in mind during this process, but remember that cutting corners on a performance management system can cause you to miss out on its most important benefits. 

Research Vendors

Once you’ve recognized your organization’s needs, consider what features will best help you meet your goals. 

Determine essential features such as performance tracking, goal setting, feedback mechanisms, and optional features like reporting capabilities and integration with the software systems you already use. 

Once you’ve established what you need from a performance management system and how much you can afford to pay, create a shortlist of vendors whose products align with your wishlist. 

Review vendor websites and product demos, read online reviews, and consider asking colleagues about their experiences with the performance management systems they’ve used before. 

Make sure that part of your research evaluates vendor expertise and support options, as a sound support system can make or break your experience with a particular software system. 

Ease-of-use is another important factor to consider, as the best tools won’t do much if your employees can’t figure out how to use them!

Finally, review the vendor’s implementation process and research the level of support provided during and after implementation, such as the vendor’s response time to technical issues.

Different Types of Performance Management Systems

There are currently five primary varieties of performance management systems utilized by businesses, which vary by the method used to collect performance management data and how those results are presented. 

1. Forced Distribution

Forced distribution performance management systems distribute employee ratings across a bell curve, with a certain percentage of ratings allocated to each performance level by the supervisor. 

This model makes it easy for managers to rate their employees on a fixed scale and allocate certain ratings to each performance level. The forced distribution system encourages differentiation and helps to distinguish between high, average, and low-performing employees. 

This can be useful for identifying top performers and addressing low performance. In addition, the forced distribution system can motivate employees to improve their performance to achieve a higher rating, increasing employee engagement and helping to create a culture of continuous improvement.

However, the forced distribution system can also have drawbacks. For example, it may create a sense of competition among employees, leading to resentment and a lack of collaboration. This system can also be challenging to implement fairly and may facilitate subjective ratings based on personal biases.

2. 360-Degree Feedback

360-degree feedback is a process that gathers input from an employee’s supervisor, colleagues, and subordinates regarding their work-related behavior and its consequences. 

By gathering feedback from multiple sources, the 360-degree feedback model provides a comprehensive view of the employee’s performance instead of just one person’s perspective.

Because the employee receives feedback from multiple sources, the 360-degree system can increase self-awareness and help the employee identify areas where they need to improve, often leading to greater personal responsibility and a desire to improve performance.

This system can also foster collaboration and teamwork by promoting open communication and feedback among employees and increase employee engagement by providing opportunities to give and receive feedback. 

Overall, the 360-degree performance management system can effectively gather feedback and improve employee performance. However, it’s essential to implement the system carefully and ensure that feedback is constructive and focused on improving performance rather than criticizing or blaming the employee.

3. Competency-Based

The competency-based performance management system measures performance based on specific skills and abilities that are required for each position, rather than just the completion of tasks or activities. 

This provides a more accurate and relevant assessment of employee performance that can be aligned with your business’s objectives, helping to ensure that employees are working towards the same outcomes. 

The competency-based system also provides clarity and consistency in performance expectations and helps to identify areas where employees need additional training or development to progress in their careers.

4. Management by Objectives

The management by objectives (MBO) system allows employees to set individual goals aligned with the organization’s overall goals. This helps to ensure that everyone is working towards the same objectives and can improve organizational performance.

These systems utilize clear objectives to track performance and facilitate a collaborative goal-setting process for the organization and individual departments. You’ll find that when employees are involved in setting their own goals, they are more motivated to achieve them. 

The MBO system also provides clarity and direction to employees by outlining specific objectives and expectations, reducing confusion, and improving communication between employees and their managers.

5. Graphic Rating Scales

Graphic rating scales characterize an appraisal method that lists various factors, such as general behaviors and characteristics, for which a supervisor assigns a rating based on a three to five-grade scale. 

This type of system enables the rater to evaluate an employee’s performance on a continuum and helps ensure the same standards are used to review each employee. 

The graphic rating scale can be used to provide ongoing feedback to employees rather than just during formal performance reviews. This can help employees to identify areas where they need to improve and take corrective action.

Additionally, the graphic rating scale is easily customizable to fit the organization’s or department’s specific needs, allowing for greater flexibility in the evaluation process. 

Be sure to check that the rating scale is well-designed and relevant to the specific job being evaluated and provide managers with adequate training on how to use the rating scale effectively.


Performance management software provides the data necessary to determine which employees are worthy of special recognition. After all, if someone’s hard work goes unnoticed, it may discourage that employee from working hard again in the future. 

By zeroing in on individual performance, performance management software can give employers an accurate idea of how work is performed across the organization.

Though a performance management system can make a significant impact on your organization’s productivity and employee morale, the wide variety of market options makes it important to carefully evaluate which option will provide the most benefits. 

Even once you’ve made a decision and implemented your chosen system, don’t hesitate to continually evaluate its effects on your company and adjust as necessary. Finding the right system for your organization may take some time, but the benefits will far outweigh the effort of the selection process. 

FAQs on Choosing the Right Performance Management System

Should I choose a performance management system based on price?

Price is certainly a factor to consider, but it shouldn’t be the only one. Choosing a system solely based on price could result in a solution that doesn’t fully meet your organization’s needs.

How important is user experience when choosing a performance management system?

User experience is critical because if the system is difficult to use or confusing, employees may not use it effectively, undermining its effectiveness.

Should I choose a performance management system that integrates with other HR systems?

Yes, choosing a system that integrates with other HR systems, such as your applicant tracking system, can help streamline your HR processes and improve efficiency.

What type of support should I expect from the vendor?

You should expect ongoing support from the vendor, including implementation support, training, and ongoing technical support. Ensure you understand the level of support each vendor offers before deciding which performance management system to implement.

How long does it typically take to implement a performance management system?

Implementation timelines can vary depending on the size and complexity of your organization and the system you choose. Some systems can be implemented in a matter of weeks, while others may take several months.