Performance Management: How It Can Make or Break a Business

October 12, 2020

Performance Management

Communication between employees and managers can do a lot for an organization.

If it isn’t strong enough, an employee won’t feel like their needs are being supported, meaning they won’t work hard to accomplish their strategic goals and objectives to better the company.

A key part of building a strong communication, and ensuring all employees are conducting their role to the best of their ability, is creating an effective performance management strategy. 

Essentially, it’s the ongoing, continuous practice that incorporates goal-setting, performance reviews, check-ins, engagement surveys, and more.

Conducting performance management ensures not only that each employee is working as well as they can, but also that they’re actively engaged, growing in their work, and invested in your company’s success for the long haul. When done correctly, performance management begins when a job is defined and ends when that hired employee leaves your organization. 

As an HR professional or a manager, it should define your interactions with an employee every step of the way while making these interactions an opportunity to learn, while measuring, managing, and improving the contribution of the employee to the organization. 

While performance management is typically the role of a manager or department lead, an HR professional should contribute by encouraging managers and supervisors to take responsibility for managing performance within their team and plan for performance improvement across the organization. They can also promote the understanding that even if one employee’s work area, team, or department is lucrative, this won’t always result in a happy customer or successful company. 

Because all components of an organization are part of a system that creates value for customers, all components should come together seamlessly.

Why performance management is important

Performance management can impact your business significantly, no matter the industry or size of your organization, because it has the power to make or break employee performance and engagement. When performance at a company is well-managed and employees are working at their full potential, organizations reap the rewards.

Because performance management is about understanding and motivating employees to perform effectively, while supporting the broader goals of the organization, not only will the company achieve peak performance and reach new heights, employees will do the same.

Employees in every department and within every role will know exactly what’s expected of them, which will hopefully motivate them to improve their skills, development, and deliver the results needed for success.

While some companies think checking in with an employee once or twice a year during a performance appraisal is enough, those that utilize performance management are likely to get better results, since they can more easily solve what isn’t working and double-down on what is. Employees will benefit from a continued push to reach their goals and progress, rather than rush to meet objectives once reviews roll around. 

Basically, performance management is about measuring and improving the contribution of the employee to the organization, and should never be overlooked.

Remember that the goal of your employees is to achieve the company mission and vision, but this isn’t possible unless their own mission and vision aren’t accomplished, too.


of HR professionals agree that conducting performance management on an ongoing basis is more effective than yearly or twice yearly performance reviews.



Components of a performance management strategy

Performance management is an essential tool that helps employees to realize their full potential while assisting management and HR to get the most out of the workforce. Since performance management is a process that aims to bring individual goals together with group and organizational goals, it’s a strategic and formal process. 

When building a strategy, here are the common components you should include. 

Employee check-ins

Employee check-ins have the power to make or break the feedback culture. These casual one-on-one conversations are typically between an employee and manager about the employee’s performance, progress toward their goals, and what they need from their manager to be successful within their role.

Frequency matters when it comes to employee check-ins. They should be performed weekly to create a comfortable tone and to urge an ongoing and evolving conversation. This helps to build a strong feedback culture where employees feel heard rather than simply managed, and can receive feedback thoughtfully.

Sufficient feedback

No employee wants to be left in the dark regarding how they’re doing at work – they want to know how they’re performing. Because they want to be sure they’re doing a good job, managers need to regularly communicate with their employees regarding their performance. 

This feedback can entail:

  • What the employee is doing well
  • What the employee can improve on
  • How the employee can evaluate their own work

The more feedback a manager gives to an employee, and vice versa, the better for everyone. 

Goal setting and management

Part of a well-thought-out performance management strategy will enable SMART (specific, measurable, achievable, relevant, time-bound) goals to be aligned throughout the organization. Goals can be created or cascaded down by managers. The goal management functionality also facilitates the tracking of goal progress.

To make sure goals are driving employee engagement, it’s crucial that managers work to ensure their employees’ personal goals are closely aligned with the organizational goals, and that progress toward these goals is part of their regular check-in conversations. 

In addition to SMART goals, other types of goals that are a part of performance management include:

  • Project goals: Goals that are based on the achievement of a project objective. These goals often change as projects are completed, but they essentially iron on what needs to be accomplished for success.
  • Behavioral goals: Goals that are based on certain behaviors consist of how things need to be accomplished. They can also entail working on ways to improve any behavioral issues that have occurred in the past. 
  • Stretch goals: Goals that are set to be especially challenging to reach. These can be anything that expands the knowledge, skills, or abilities of a high-performing employee. 

360-degree performance reviews

One of the most valuable elements of performance management strategies is the 360-degree performance review. This method is when employees are given the opportunity to both receive and give constructive feedback regarding the performance of their peers, managers, and direct reports. This creates a well-rounded view of their performance, instead of only receiving feedback top-down from only their manager.

This can be incredibly useful for employees as they get a better understanding of their strengths, while also providing new opportunities for development and where they need additional coaching. Having these varying perspectives allows for employees to get a full picture of their strengths, weaknesses, and new ways that they can grow. 

Employee engagement surveys

Not sure what matters most to your employees? That’s where an employee engagement survey comes in.

As the name suggests, the main reason that organizations carry out an employee engagement survey is to discover if employees are feeling engaged or disengaged. While there’s no right way to measure engagement, you can start by implementing employee engagement software to your company’s tech stack.

Doing so can help organizations solicit and track feedback from their employees, recognize employee achievements, and promote positive activity.

Some commonly assessed factors within these surveys include:

  • Career advancement
  • Recognition
  • Pay and benefits
  • Training and development opportunities
  • Leadership
  • Work environment

Aside from measuring engagement, it has the added benefit of giving employees an opportunity to voice their concerns and comment on what is being done well within the company. These results, in turn, highlight areas for improvement and development.

Recognition and rewards

A little recognition and praise can go a long way, and it’s a big part of performance management. Whether you decide to use feedback apps or collaboration tools that can empower employees and encourage them to celebrate small successes, or simply announcing an employee’s success in a team meeting, they can give your company a big productivity boost.

Managers should be offering recognition and rewards for goals met, values demonstrated, and work well done keeps employees engaged and working toward your organization’s goals.


of employees note that they feel motivated to work harder when their boss shows appreciation for their work.

Source: Kazoor HR

The performance management process

Now that we’ve laid out a clear understanding of why performance management is important, and the components you’ll need to include to get it right, let’s break down what the performance management process will look like.


Before the performance manager discussion officially begins, here are some things that managers, supervisors, and HR professionals should be sure to do.

  • Clearly define the purpose of the role, duties, responsibilities, goals, and measurable outcomes.
  • Iron out the priority of each responsibility and goal.
  • Maintain a record of performance through incident reports. These notes should focus on both the positive and negative.
  • Create a coaching and improvement plan should employees not meet the desired expectations.
  • Get the meeting scheduled and gather all necessary documents needed for references.
  • Examine how the employee is performing against previously laid out criteria and think of areas for improvement.


During the performance evaluation, remember to:

  • Establish a comfortable and private setting to conduct the discussion.
  • Agree upon the objective of the meeting and create a performance development plan.
  • Have the employee discuss their achievements and progress, as well as how they’d like to further develop in their role. 
  • Discuss performance with the employee and suggest ways they can further develop and areas of improvement.
  • Clearly define job responsibilities for the coming quarter or half and come to an agreement.
  • Set goals for the upcoming quarter or half and come to an agreement.
  • Discuss feedback and constructive criticism both for the employee and the supervisor.
  • Set a time frame to follow up.


Once everything is said and done, below is what you should remember to do after the conversation has come to a close:

  • If a performance improvement plan (PIP) was needed, follow up during the established time.
  • Follow up with performance feedback and discussions throughout the quarter and half.
  • The supervisor should act upon any feedback from employees and relay to their team if any changes will be made.
  • Forward all appropriate documentation to the HR department and retain a copy for easy referral when the next performance management discussion occurs.

How to automate performance management

Between HR, leadership roles, and C-suite executives, performance management should be top of mind in order to ensure that employees are completely aligned with the business to see success on all sides. 

Once you have a strategy in place, it’s time to invest in performance management software to get it all streamlined. 

When on the hunt for an application to help your business regulate performance management, look for features like:

  • Development planning
  • Career succession planning
  • Performance tracking
  • Goal management
  • Reviews and feedback
  • Compensation management
  • API integration
  • Reporting and dashboards
  • Data security
  • Specific user, role, and access management

Tools that incorporate these features can be used by any business looking to improve and promote the effectiveness of their employees while using a tool that makes it all easy.

Best performance management software

When you need an application that can help establish employee performance standards while also evaluating an individual’s job performance, then it’s time your organization implemented performance management software.  Doing so can help your business facilitate both meaningful and ongoing discussions between managers and their direct reports.

Typically, these tools are implemented into a tech stack as an easy way to support HR managers as they conduct employee performance reviews, maintain a record of discussion topics, iron out employee goals, and give constructive feedback. They can be a standalone tool or part of an HR management suite. 

In order to  be included in this list, software must:

  • Facilitate the employee performance review process.
  • Allow for feedback between managers, employees, and peers.
  • Assist in tracking goals for individual employees.
  • Help users evaluate employee performance in relation to the company goals. 
  • Create dashboards and reports from employee performance.
  • Retain historical performance review data or integrate with third-party solutions where historical data can be stored.

* Below are the top five leading performance management software solutions from G2’s Fall 2020 Grid® Report. Some reviews may be edited for clarity.

1. Paylocity

When you’re in need of an all-in-one tool that helps HR professionals streamline payroll, workforce management, talent, benefits, and more, look no further than Paylocity. This flexible application makes it easy for its users to tackle even the biggest HR and payroll challenges so that they can focus on the task at hand.

What users like:

“I like that Paylocity provides a one-stop place for employees to retrieve all information related to them and the company! As a small employer, it’s extremely satisfying to provide features and benefits from Paylocity products that you would think could only be provided by large organizations.

"When recruiting people to join our team and providing them a list of all the employee-friendly benefits that CRP provides, and the ease of access through Paylocity, everyone is very impressed. From recruiting to exit interviews and everything in between, Paylocity makes our HR department stand out!”

- Paylocity Review, Rachael S. 

What users dislike:

“Sometimes when they roll out a new platform, it's clearly created by a developer and not from the insight of a payroll or HR Manager. Also, it can be one way of thinking, leaving the company to find alternatives to a process. This hasn't been too much of an issue for us, as we are always looking to improve our process - Paylocity has taken our feedback and has made improvements over time.”

- Paylocity Review, Meredith M. 

2. ADP Workforce Now

For companies with more than 50 employees, ADP Workforce Now is the easy-to-use human capital management solution that can do it all. Users will be able to access this tool as a single source of truth for payroll, benefits, talent management, time and labor management, HR analytics, compliance, and more. 

What users like:

“I love that you can access the system anytime from anywhere. It's very user friendly. The guides are great as backup support, along with the screenshots to help you feel at ease that you are following instructions precisely and in the proper menu. The customer service is also fantastic! They are quick to assist and ensure your payroll is processed properly.”

- ADP Workforce Now Review, Linda C. P. 

What users dislike:

“The system updates a lot, causing changes regarding where and how the data is located on the screens or within the system. Sometimes this can be a little confusing but proper notification is given with detailed instructions. I have also had issues with pulling old data. Sometimes it works and sometimes it doesn't even with the ADP Support Team.”

- ADP Workforce Now Review, Zandreal M. 

3. Lattice

Lattice is an easy to use people management platform that allows people managers to develop engaged and high-performing teams. Lattice makes it simple to share feedback, facilitate one-on-ones, set up goals, administer employee engagement surveys, and so much more.

What users like:

“I really enjoy the Perform module as it contains the critical components an employee needs to chart and track performance such as goals, one-on-ones, and performance reviews. It also contains a public praise mechanism by which our team can provide continuous feedback, routed directly into our shared Slack channel so everyone can see when someone gets props!”

- Lattice Review, Rebecca A. 

What users dislike:

“It would be useful to have freeform text updates outside of the scope of the weekly update process. For instance, our business is currently operating on quarterly cycles for goal review and creation. At the end of each quarter, we have to use the "weekly update" feature to evaluate progress on all of our goals for that quarter and provide additional information in one place. Not the end of the world, but it would be a nice addition.

- Lattice Review, Matthew J. 

4. 15Five

If your company is in need of a solution that can not only guide employee growth and development but allow people to become their best selves, look toward 15Five. Managers will have access to complete visibly surrounding employee performance, OKR tracking, one-on-ones, engagement surveys, and more. 

What uses like:

“I love the simplicity of it! It’s very attractive at first glance and easy to use. I also love being able to give praise to my team on the same platform. In the past we used three different platforms just to complete what 15Five does for our company, the switch was MUCH needed. I really like that I can attach goals to monthly tasks that I am completing. 

"I feel like this platform really makes it to where our employees WANT to participate. I love the instant feedback on submitting to 15Five  and also being able to see all the high-fives given to our company. I have seen a lot more interaction with corporate staff that I normally do not work with. I also love how I can create Career Goals that my supervisor can see! This helps me be transparent in what I want.”

- 15Five Review, Amanda H. 

What users dislike:

“I cannot customize how I view my data. It would be great if I had more control over the dashboard experience, in order to make it more useful in my day-to-day planning. I find that action items from one-on-ones can get lost too easily.”

- 15Five Review, Benjamin B. 

5. UltiPro

UltiPro is a cloud-based HR, payroll, and talent solution to help companies improve the employee experience. It offers personalized recruiting and onboarding, in addition to role-based access to pay, benefits, and career development information. With its “people first” mentality, UltiPro helps businesses drive smarter and people-focused results. 

What users like:

“This is a platform that allows you to efficiently manage the payroll of employees, comprehensive human resources, strategy management, among others. It is easy to use, the tools and functions are truly useful, and provide great help and solution to the mismanagement and control of staff time. In a short time, you can see the results such as greater responsibility and performance of the work team, increased productivity, increased profits, time savings, and fluidity. It has an organized interface where we can navigate without a problem.”

- UltiPro Review, Sara G. 

What users dislike:

“This tool is not so effective when it comes to implementation of compliance. I tried to seek guidance from their customer support but they are very slow in replying. This is very irritating when you are stuck at a particular point. Moreover, they should focus on their premium plans, too.”

- UltiPro Review, Aliya W. 

Do your best

Performance management is a crucial part of the success of any business. When done correctly, it can ensure that all members of each department are aligned with the objectives of the company and fully understand how they can benefit the organization for the long haul. 

If your team works hard and continues to hit goals set out by performance management plans, then consider merit pay for their commitment to improving their performance.

performance management software
Stronger performance. More success.

Discover the best performance management software to better establish employee performance standards.

performance management software
Stronger performance. More success.

Discover the best performance management software to better establish employee performance standards.

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