Hitting the Mark with Performance Management Software

As we’ve helped our clients navigate performance management issues over the years, BambooHR has noticed several trends as they search for the best performance management system for their needs. Along their journey, the organizations we serve move through several different phases:

1. No performance management
2. Homegrown performance management
3. Customizable performance management
4. Targeted performance management

Let’s walk through this journey phase by phase and see the challenges that organizations face before they develop a performance management system that works.

Stage 1: No Performance Management

In the first days of running a small business, employee recognition can be as easy as turning around in the one-room office and delivering a crisp high-five.

But as organizations grow and add complexity, it becomes harder for employees to interact regularly with everyone else. And while high-fives might seem less critical as the business matures beyond the “we’re really doing it!” stage, the opposite is true. Employee recognition is more than just a courtesy—it’s an essential component of performance management. To stay engaged with their work and your organization, employees need to know that leadership understands how they make a difference.

Anthropologist Robin Dunbar found a pattern in the societies he studied: Most towns and communities tended to split when there were more than 150 people. While Dunbar’s Number isn’t a complete limit to how many people you can know, it does limit how many people you can know well, and this matters when dealing with employee recognition. You may have noticed this in a large meeting when someone is recognizing a group effort—they’ll name the people they work with closely and generalize when they don’t understand individual contributions in a group. “I’d like to thank Alex for putting together the keyword research, Seetharaman for scoping the project, and everyone on the creative team who made it look great.”

While group recognition is better than no recognition, it’s easy to see how constantly receiving it in place of individual recognition could eventually backfire, even if it’s delivered with the best intentions. Without individual recognition, how do employees know that the people in charge of their future recognize the quality of their specific performance? And how can those in charge of compensation and promotions make the best decisions? The answer lies in an effective performance management process.

Stage 2: Homegrown Performance Management

Few things are more important than efficiency in a small or medium business, and many startups take pride in how much they can lift with their bootstraps. But there’s a point where even the most dedicated spreadsheet do-it-yourselfer can’t match the efficiency of performance management software. It turns out that consistent, effective, and measurable performance management involves overcoming several complex challenges:

Dealing with subjectivity is a complex, involved process.

One of the first steps in bootstrapping a business process is to find the minimum viable solution—to get a project working well enough for now while planning to improve it later. Because performance involves subjective measurements, it takes more than one viewpoint to mitigate bias when managers assess their employees. Without these safeguards, performance management can become a source of contention and office politics instead of a tool for motivation and insight. This sets a high bar for developing a minimum viable solution in-house, as there are no shortcuts in developing subjective assessment questions and training managers and employees on the purpose and process of performance management.

Timely performance communications can’t get buried.

After performance data has been recorded, everyone involved needs to ensure the data goes to the people who need to see it. This takes time—time employees spend formatting documents or spreadsheets, time managers spend compiling the performance data, and time searching through notifications for the most recent submissions.

It’s hard to keep up.

For performance management to change behavior, it needs to happen while the behavior is recent. Otherwise, employees and managers may extrapolate from their current mood and recent experiences during the performance conversation, instead of accurately remembering what happened. Helping employees set and review goals helps keep focus on performance, but multiplies the DIY time commitment.

Performance data needs to be submitted and decoded correctly.

Data doesn’t tell stories. People tell stories using data, connecting the dots in a way that makes sense. For the right message to get from the bottom of the organization to the top, it has to be recorded in a way that leadership can analyze meaningfully. This means sharing access to file storage, maintaining version control of any department-shared spreadsheets, and a host of other administrative tasks.

Taken all together, trying to support these performance management standards with grit, determination, and basic office software becomes untenable. Performance management can’t enable great work if it takes all the time employees need to do great work.

Stage 3: Customizable Performance Management

There are two large challenges to overcome with any performance management system: determining the right strategy for measuring performance and deciding which tools to use to support that strategy.

It takes technological tools to get a good return on investment in performance management,  so some organizations invest in performance management software with deep customization options. However, having too many performance management features (and the decisions that come with those features) can hamper a performance management strategy just as much as not having enough, especially in smaller organizations.

Smaller organizations tend to have simpler structures, just by virtue of their numbers. A large organization might find great value in a tool that lets branch managers add custom performance management questions that apply solely to their 50-employee teams. But an organization with 200 employees total and much smaller teams could likely achieve similar results with regular performance conversations and simpler tools.

Even if an organization finds performance management software with infinite potential for processing data, they still need to consider the limits on how much data humans can process. Sooner or later, someone will need to connect all the dots recorded in the performance management software if your organization wants to use this data to influence decisions.

Think of it this way—when developing a performance report, the only difference between navigating five different filing cabinets and clicking through five different submenu chains in search of information is that one will provide more exercise. Saving enough time to make performance management software a good investment means keeping the learning curve low for everyone involved, so adding steps through custom features involves tradeoffs and time costs.

In addition, performance management software is only as good and reliable as the data employees choose to report. If employees feel performance management is a waste of time or a test of loyalty, you run the risk of low participation or sanitized responses, which can lead to inaccurate conclusions.

Stage 4: Targeted Performance Management

With all these challenges, what does it take to develop a performance management system that introduces some formal structure, doesn’t take too much time to manage, compensates for subjectivity and human biases, and encourages everyone in the organization to participate? Here are a few pointers for developing a performance management strategy and pairing it with software that stays on target:

Keep it simple.

Determine the purpose of performance management in your organization and develop a strategy that sticks to that purpose. This doesn’t require a technological analysis for everything—sometimes the most effective way to improve performance is as simple as open and honest monthly check-ins between managers and employees. Technology should support reporting on long-term trends, helping employees track their goals, and empowering leadership to track employee engagement by team, position, and other demographics.

Automate employee reminders.

Breaking performance assessments into a regular cadence helps everyone know what to expect. When performance management software sends out automated reminders for everyone involved in quarterly, semi-annual, or annual performance assessments, it’s one less thing for managers and employees to forget. Sending unobtrusive reminders for brief assessment questions lets employees provide their feedback during less-demanding parts of their workday.

Spacing out performance assessments into smaller segments also helps avoid the year-end crush of annual reviews. Instead of managers tracking down a whole year of data for each of the employees they manage, they can refer to previous results of monthly meetings and the previous formal performance assessment to guide the conversation.

Standardize Performance Assessment Questions

Standardized performance assessment questions are important guardrails to protect performance management from unintentional bias and overlong assessments. Keeping assessments the same throughout your organization doesn’t prevent you from including questions relating to your organization’s mission, vision, and values. Instead, standardized questions make it clear what managers need to ask, how they ask it, and how they report the results.

Add Software Tools Wisely

Performance management can be part of an extensive employee experience toolkit. Supplementing performance management software with rewards and recognition, employee satisfaction surveys, and compensation research can provide more insights for retaining employees and helping them do their best.

Choosing the Best Performance Management Software

It takes more than one superlative to be the best. The best performance management software for your organization will align with your current needs, respect the value of your employees’ time, and provide clear, accurate insights on how your people can grow and succeed.