Performance Management vs Performance Appraisal Software: Which One Should You Choose?


Classic wisdom dictates that just as maintaining existing customers is an easier, more cost-effective and more sure-fire way to pick up sales. Surprisingly, that same wisdom has not extended to how organizations look at maintaining existing employees. As such, it’s not surprising that HR departments have traditionally looked at talent management from the standpoint of grading appraisal as opposed to quantifying employee value.

This traditional lack of focus on performance management and engagement is not surprising, particular in organizations that are people power-strapped and where multiple roles are frequently combined into one person.

However, as business models and overall conditions are changing faster than ever, even the best employees can quickly find themselves in the wrong job at what should be the right time. This has placed a greater focus on going beyond mere assessment and looking at total performance management and the collection of assets and skills that each member brings to the organization.

From an HR perspective, it’s clear that having an automated solution can benefit an organization in speeding up and organizing the evaluation of talent. But considering that performance appraisal software has a lot of features that touch into performance management, it’s worth asking whether performance management software really has any incremental benefit for an organization or is automating the existing performance appraisal system good enough.

When Performance Appraisal Software Is Enough

In general terms, performance appraisal software packages are tools that essentially shift goal setting and the evaluation process into an automated form. Unlike the traditional PA that is often delivered once a year and then revisited only later on, performance appraisal software does have a lot of benefits in allowing managers and employees to plot out new goals in the middle of the year, to amend existing goals and to view overall progress.

However, performance appraisal software often falls short in the same way that viewing performance appraisal processes fall short in developing talent in the organization. Performance appraisals generally offer a very narrow view of one part of the talent process; that is, they tend to look backward at employee goals without determining what processes can take place to help an employee not only achieve their existing goals, but to prepare them to be in the right place at the right time as the organization’s (and in fact, the employee’s) situation changes over time.

This isn’t to say that the performance appraisal software and process is low-value for an organization; clearly, it’s not.  For organizations starting with a largely manual system that want to create more professionalism and encourage more substantive conversations in this process, performance appraisal software does help. However, in the context of talent retention and organizational development, performance appraisal systems serve as just one of the branches of a much larger tree.

Sowing the Seed: Performance Management Software

Whereas many view the performance appraisal system as a relatively rigid system of established goals, performance management speaks to something more dynamic. That is, the general theory that the employee’s year is more like a journey than a destination made up of both the employee’s goals and their skills. This evokes the idea that the employee and their job is continually evolving and that not only do certain measures have to be hit, but certain skills need to be acquired over the course of the year in order to be sustainably successful.

When you think about it, this holistic approach to managing employees makes perfect sense. Consider that we generally we hire new employees based on their skills while at the same time compensating existing employees based on their goal achievement (and based on the skills they brought when they were first hired). Not only does that prospectively create issues in absorbing new employees to an existing culture, it also potentially creates very big imbalances and opaqueness in the way the two types of employees are compensated.

It is in this context where performance management software like Compass really has big advantages over the traditional model focusing on performance appraisal. Both performance management and performance appraisal software can help to track achievement of goals. But where performance management software adds value is by mapping and tracking development goals as well.

By doing a continuous feedback system including manager and employee ratings of goal completions, skill development and competencies, employees can get a better view of their overall personal value within the organization. For the HR team, the ability to quickly perform broader analytics can allow them to spot managers who are not just achieving their team goals but who are developing their employees in such a way that they are adding to the employee’s total value to the organization and to quickly coach and correct any deficiencies.

Progress and Performance

Depending on the organization, at its highest level of utility, performance management software can allow you to systematically adjust compensation based on competency and skill development. Not only is this a plus in achieving success in the medium to long term, but it can be used as a justification to progress the employee in the form of mid-year incentives or position mobility whereas before this was generally limited more to year-end or after the personal appraisal.

As we know, upward mobility (aka progress) is a major determinant in happiness, both in our personal and our professional lives. If we assume that employees feel most fulfilled when their contributions are fully recognized and when they can see for themselves that they are moving forward, the potential of performance management software on an organization can be profound. Already we know that engaged employees are 44% more productive than a satisfied one. So, if you consider upward mobility in both pay and positions as tools to get employees into the “engaged” column, performance management software can be used to achieve incredible results by automating a process that once required a huge time and manpower investment and by delivering deeper analytics to address opportunities and challenges within the team.

Ultimately, whether a personal appraisal software or performance management software is the right choice for an organization depends a lot on its capacity to maintain the discipline and commitment that are required to implement continuous skills and goal feedback. Nevertheless, a great performance management software solution can be a real help to make the impossible in prior times suddenly very possible indeed.

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