More and more leaders are turning to performance management systems to help them embrace the future of work, invest in employee growth, and create people-first workplace cultures.

Business leadership has also realized that modern employees want managers who help them grow personally — not just professionally. In fact, as much as 82%* of employees want their employers to see them as people who have their own goals and skills to develop.

Performance management systems are rising to meet challenges beyond the typical annual performance reviews. Because there’s such an array of performance management systems out there, we’ve written this comprehensive guide to help you find that perfect solution for your business.

*Gartner, 2021

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What is a performance management system?

A performance management system allows company leaders and managers to automate people management processes. This way, they can run regular performance reviews, track and encourage employee growth, keep everyone aligned with company goals and OKRs, and use data to create a culture of continuous feedback and praise.

An effective PM system should:

• Ensure your company can create agile processes for performance management and employee development
• Save you time, so you can focus on what matters — creating and maintaining a thriving company culture
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📋 Leapsome has templates for every kind of performance review

Use our best-practice templates and frameworks to help you set up your performance management processes. And with our customizable templates, you don’t need to start from scratch! 

👉 Learn more

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Why a PM system is essential for growth-minded businesses

If your business is laser-focused on growth, here’s why finding a robust, comprehensive PM system is crucial: 

• Retain and satisfy employees in the face of The Great Resignation and the The Great Reshuffle
• Scale your performance management processes, leaving behind unsustainable solutions like multiple spreadsheets, forms, and outdated HR tools that don’t integrate well with each other
• Drive value alignment and boost productivity by collaborating on and tracking OKRs across your company
• Get your people enablement processes in one place with a flexible, all-in-one solution like Leapsome

With that in mind, let’s dive into the critical components of performance management software and discuss how implementing them can benefit your business.
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Key components of a performance management system

Short on time? This graphic breaks down what elements an effective performance management system should have at a glance.

If you’re searching for a new performance management solution and want to dig into specific tools and features, this next section is for you. 

Making the right choice for your business will help minimize the product learning curve, make your transition smoother, and allow you to scale your processes quickly.
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Performance reviews

A great performance review tool should be fundamental to your performance system — especially if you’re a growing company implementing a continuous performance management cycle. 

But there are a few different types of performance reviews.

First, spend some time thinking about what kinds of reviews you need. You might benefit from running:

• 360° reviews — Employee reviews based on data gathered from various sources (like colleagues, managers, and reports)
• Probation period reviews — These are usually sent out towards the end of the probation period and help companies assess if a new hire is a good fit for the role‍
• Leadership performance reviews — Designed to assess leaders beyond daily performance and focus on soft skills related to coaching, training, and setting goals

If those frameworks sound useful, choose a PM system with dedicated features and best-practice templates to help you get started. 

Top performance management software should help you automate all of those processes. Specifically, you should be able to set review cycles to recur automatically, so you don’t have to use manual tools to remind you to run them.

The PM system you choose should also integrate your review data with development frameworks; this way, you can see how the employee’s improvement corresponds with progression along their customized career path.

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Development frameworks

For forward-thinking companies, the performance review process should go hand-in-hand with a clear and customized development framework for every employee. To do that, you’ll need a tool that lets you create a visual matrix of skills to support multifaceted talent development.

Performance reviews and development frameworks should feed into and inform each other. So the right PM system will let you integrate every employee’s career development path into your regular performance reviews and the employee’s individual OKRs and goals.

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Goals, OKRs & organizational alignment

As you scale your people enablement efforts, you’ll find that a sound PM system should help keep everyone aligned with your:

• Organizational goals — Long-term company objectives that will guide the development of team-wide and individual goals

• Objectives and key results (OKRs) — Set high-level and granular goals to measure and track over time.

Once you’ve established your objectives and chosen your metrics, you can use a performance management system to automate your quarterly goal tracking.

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💡 If you need a step-by-step guide to OKRs, we’ve got you covered!

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Learning & onboarding

A growing company needs a playbook to return to again and again when onboarding new hires. And a PM system’s ability to automate that process will make your onboarding even more scalable.

Why? Because you won’t have to take the time to oversee their learning. Instead, you’ll create an automated learning path for new employees to follow on their own and free up time to focus on high-priority tasks like coaching your team members.

An excellent PM system should also let you introduce new hires to your company’s culture of learning and acquaint them with their individualized career development paths.
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Feedback & engagement

Employee feedback, engagement, and recognition are essential to performance management and employee retention, as people crave growth and appreciation for their skills.

Companies must also track engagement metrics to learn from their team and use these insights to make data-backed decisions and improve.

To that end, here’s what you should look for in your performance management system:

• An employee survey tool — An excellent performance management system should give you access to templates and let you build custom surveys; your surveys should provide actionable insights into what matters most to your employees

• Built-in features for a culture of feedback and praise — Regular encouragement and feedback from leadership and coworkers help foster a happy, development-oriented culture

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Communication between features

There are so many tools that offer different performance management functions, but a strong performance management system allows those features to communicate seamlessly with each other.

Companies are holistic and interconnected, like the parts of the human body. So the various arms of people management shouldn’t be siloed ⁠— they’re more effective when they feed into and inform each other. 

For example, performance reviews need development frameworks, and development frameworks should encourage learning paths. None of those elements work well in isolation; they’re better as a team.

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Best-practice templates, customization & integrations

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Taking a truly holistic approach to performance management is difficult for companies if they can’t customize their processes. Rather than a PM framework that’s prebuilt and ready-made, they need features they can customize to their specific needs.

That means looking for a performance management system with dedicated functions for customization — ensuring that even if you start with ready-to-use templates, you can create your own processes as you grow.

If you’re not ready to break up with your favorite tools, modern PM systems should also have built-in integrations so you can bring them along.
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Customer support & experience

‍What should a robust customer experience look like for a PM system? It should start with a single point of contact who guides you through the product onboarding process. Even if the software is easy to use, an expert customer success manager can help expedite that journey for you.

Your customer success manager should also be mindful of your needs and ask about your specific company’s goals and time frame for rolling out your new PM system company-wide.

Customer support is also about customer education, and a powerful tool with many features takes time to adjust to. So, once you go through the onboarding process, your performance management system’s customer support should have office hours where you can speak with a product expert — like Leapsome offers.

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The different types of PM systems

Traditionally, there are two types of performance management systems:

• OKR-driven performance management — This framework allows you to measure an employee’s performance and development according to a few clear, specific goals that connect directly with your company’s objectives

• HR-driven performance management — In this framework, managers can measure employee performance beyond their specific OKRs and see how they’re moving forward in their career path and embodying the company’s culture and values

Leapsome brings together both OKR- and HR-driven performance management models to create a holistic, all-encompassing system for keeping employees aligned with your team’s long- and short-term goals.
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How to choose the right performance management system for your team

To summarize, here’s what you should consider when choosing the right performance management system for your company:

• Offers the performance review frameworks you need — If your company needs features optimized for performance reviews, 360° reviews, or leadership reviews, a good PM system should allow you to to integrate, build, and customize templates

• Is customizable — No two companies run their performance management alike, so you need a PM software that meets your unique needs

• Communication between features — If you want dynamic, well-rounded data, look for a PM system with features that work together rather than in silos; they should rely on each other to give you the insights you need to develop and scale

• Integrates with the tools you already use — It should be easy for you to sync with and import data from an HRIS you already trust (like Personio, BambooHR, or Workday), and connect tools like Jira, Microsoft Teams, and Slack

• Provides excellent customer care — A good customer care team should be available to support you when you need it, as well as share resources and provide educational content
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How Leapsome helps you upgrade your people enablement

Keeping up with the latest people-enablement methodologies, research, best practices, and HR conferences can introduce you to more future-oriented people processes.

But if you want a truly all-in-one solution for your company’s people-enablement processes, Leapsome is the only software that integrates performance management, employee engagement, and learning in one customizable, easy-to-use platform.

Why did we bring these features together in one place? Because we want growth-minded companies to ‌be able to automate, sync, and scale their development efforts not just on a company or team level, but on an individual level too.
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🚀 Leapsome helps companies upgrade their performance management

Our holistically designed platform helps companies customize, automate, sync, and scale their performance management processes effortlessly.

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