Performance management systems: A guide to what, why & how

The modern globalized world of work, with all its upsides, has also brought unprecedented changes that have been hard for growing organizations to navigate. According to Gallup workplace research, the prevalence of hybrid work means teams are spending more time coordinating their collaborative efforts and often struggle with unclear expectations at work. To add to this, 64% of employees said their organization has given them more responsibilities due to restructuring (1). 

The unfortunate result? Employees aren’t satisfied with how their companies handle communication, feedback, professional development, or performance reviews. A recent Leapsome study found that one in three employees aren’t happy with their current performance evaluation system, calling for more frequent reviews, and another third are frustrated with their internal goal-setting processes.*

The good news is that putting the right performance management systems in place will help you tackle these issues head-on. The best PM systems can ease workloads and support company alignment, productivity, and growth, with features and automations for reviews, goal-setting, and feedback.  

Because there’s such an array of performance management systems out there, we’ve written this comprehensive guide to help you find the perfect solution for your business.

1. Gallup, 2023‍
2. Leapsome Workforce Trends Report, 2023

What is a performance management system?

A performance management program — also called a PM system — provides a centralized infrastructure for automating previously manual and disconnected people management processes. This way, HR teams and leadership 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 all in one place.

An effective performance management program should:

• Help teams streamline performance reviews so that every department follows the same process for monitoring employee growth and development.
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• Create more company-wide alignment around objectives and goal-setting.
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• Make it easier to give and receive meaningful feedback, praise, and recognition.  
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• Automatically break down data into easily digestible visualizations and graphics. 
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• Keep your compensation management practices connected to concrete development milestones rather than arbitrary metrics.
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• Offer integrated, holistic features so that users can quickly pull up the right data at any time.
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📋 Leapsome has templates for every kind of performance review

You don’t need to start from scratch when you use our best-practice templates and frameworks to set up your performance management processes.

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Why a PM system is essential for growth-minded businesses

If your business is laser-focused on growth, a comprehensive PM system is crucial to help you:

• Retain employees and improve satisfaction with more development-driven performance evaluations, which is crucial in the face of increasing worker stress and managerial burnout.
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• Scale your performance management cycles, leaving behind unsustainable solutions like multiple spreadsheets, forms, and outdated HR tools that don’t integrate well with each other.
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• Drive value alignment and boost productivity by allowing more company-wide collaboration on key goals and OKRs. 
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• Upskill your team members with customizable learning paths and courses.
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• Transform the way teams communicate with tools for providing instant feedback and recognition.

With that in mind, let’s explore the critical components that make a performance management system so beneficial for businesses.
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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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Key components of a performance management system

This graphic breaks down what elements a PM system should have at a glance.

Performance reviews

A great performance review tool should be fundamental to your performance system, especially if your company prioritizes continuous growth and development.

However, there are a few different types of performance reviews you can apply within different contexts. Specifically, you might benefit from running:

• 360° reviews — These are holistic performance appraisals based on data gathered from various sources (like colleagues, managers, and reports)
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• Probation period reviews — Managers typically conduct these at the end of a new hire’s trial period to assess whether the individual is a good fit for the role
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• Leadership performance reviews — These are designed to assess leaders beyond daily performance and focus on soft skills related to coaching, training, and setting goals

An effective performance management software should also help you to set review cycles so they recur automatically, with no need for external alarms or reminders.

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

Competency frameworks

Development-focused performance reviews emphasize team member growth and potential, while accountability-focused reviews tend to center around results and focus on where the employee has fallen short of expectations. To ensure you’re keeping reviews focused on development and not judgment, your company should establish clear competency frameworks, which are visual matrices highlighting skills that every team member should hone before moving to the next level. 

Implementing competency frameworks helps organizations set clear expectations and chart a career path for employees to follow as they improve their skills. 

For instance, a junior employee might excel at skills like motivating themselves and others, which are clearly outlined in their competency framework, but they may still need a bit of support and practice with active listening or managing expectations. 

Platforms like Leapsome make the process simple by consolidating all the data into one dashboard so managers and direct reports can have meaningful performance review conversations where they’re speaking the same language.

💙 Leapsome is the all-in-one solution for performance, engagement, learning, and goals you’ve been looking for

We make it possible to combine reviews, surveys, learning paths, goal-cycles, and compensation planning in one single platform.

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Goals, OKRs & organizational alignment

PM systems can also help you drive performance by ensuring that all employees at every level are bought into your organizational objectives. They do so by giving teams more visibility over:

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

• Objectives and key results (OKRs) — High-level goals broken down into specific milestones and results for teams and individuals

Leapsome simplifies achieving your objectives by making it easy to track progress with goal dashboards and progress timelines. Collaborators can also give feedback and leave notes directly within our Goals module so there’s an open conversation.

Learning & onboarding

A growing company needs customizable training and onboarding materials to return to when bringing new hires onto the team. Fortunately, PM systems can streamline that process, too, making onboarding even more scalable.

Platforms like Leapsome offer customizable learning paths that employees can follow on their own, which enables managers to focus on high-priority tasks like coaching their new team members. What’s more, our Learning Marketplace features expert-built courses that are easy to purchase and can seamlessly integrate with learning paths. 

In this way, effective performance management systems can facilitate your company’s culture of learning and acquaint new employees with their individualized career development paths.
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Feedback & engagement

Ongoing feedback, employee engagement, and recognition are essential aspects of performance management, as people crave growth and appreciation for their skills.

Only one third of companies currently measure staff engagement which is a missed opportunity for improvement. Companies must track engagement metrics to learn from their people and make data-backed decisions.

To that end, here are the feedback tools you should look for in your performance management program:

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

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 competency frameworks to make them more meaningful and outcome-oriented. Competency frameworks, in turn, should inform the learning paths your company chooses to create for employees. None of those elements work well in isolation — they’re better as a team.

Best-practice templates, customization & integrations

Updating your company’s approach to performance management is challenging without a flexible system. Rather than a PM prebuilt framework, you need features you can customize to your business’s 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 starts 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, asking about your specific company’s goals and time frame for rolling out your new PM system.

Customer support is also about education, and a powerful tool with many features takes time to adjust to. That’s why Leapsome’s customer support team provides office hours for users to speak with product experts.

How to choose the right performance management system for your team

The right performance management program should ease your current administrative workload and help you reduce your reliance on manual processes. In particular, the best PM system:

• Offers the performance review frameworks you need — If your company needs features optimized for performance reviews, 360° reviews, or leadership reviews, a solid performance management service should allow you to integrate, build, and customize templates.‍
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• Allows for customization — No two companies run their performance management cycles alike, so you need a PM software that meets your unique needs.‍
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• Provides communication between features — If you want dynamic, comprehensive data, look for a PM system with well-connected features. ‍
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• 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 to tools like Jira, Microsoft Teams, and Slack.‍
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• Goes hand-in-hand with an excellent customer care team — 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

It’s important to keep up with the latest performance management methodologies and best practices to drive progress and stay resilient in a rapidly changing world of work.

However, 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.

We brought these features together in one place because we want to ease the workload for growth-minded leaders, promote employee development, make performance conversations more fulfilling, and bring more companies and professionals into the future.
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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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👉 Request a demo