If your small business is using performance appraisal software alone, you’re not necessarily working toward improving employee performance—you’d need to use performance management software for that.

Today’s tech-savvy HR managers need to understand the difference between performance appraisal and performance management software and understand how to use these two tools in the way that is most beneficial for their business.

Here are the primary differences between these two software types:

  • Performance management software helps managers provide regular (weekly, monthly, or annual) feedback to employees. It automates time-consuming tasks such as creating feedback questionnaires, deriving feedback results, and building employee performance analytics. It also helps managers identify the top talent and provide employees training on how to manage their goals.
  • Performance appraisal software helps managers review employees’ individual performance and contributions. This process is usually carried out once or twice a year, depending on the business. The software streamlines this process by collecting employee goals, appraisal histories, development plans, etc.


Confusing these software types may mean that businesses could be trying to use the wrong software for the wrong purpose. This could be why businesses that use performance evaluation tools say that they do not provide accurate information.

  • Ninety-five percent of small business managers are dissatisfied with their existing performance management system.
  • Sixty-three percent of employees believe that their performance is not rewarded, resulting in a decrease
    in employee retention and higher levels of turnover.

Small businesses that don’t choose the right software for their needs will end up overspending on their HR tech budget, never get the desired ROI, and fail to carry out successful employee performance reviews.

To help you decide whether you need performance management or performance appraisal software, we’ll cover:


 

  • Differences between performance management and performance evaluation software
  • Key features of each type of software
  • Which tools are out there?
  • More about performance management and performance appraisal

Differences between performance management and performance appraisal software

Performance management

Performance management is an ongoing process that involves tracking, managing, planning, and developing employee performance. It involves providing continuous feedback from peers, supervisors, and HR managers. This process helps employees understand job expectations, boost their efficiency, and align their individual goals to business goals.

Performance management software automates the performance evaluation process, allowing managers to track the status of feedback in real time.

PerformYard Talent goal setting and tracking

PerformYard Talent‘s goal setting and tracking feature (Source)

These are the key features of performance management software:

  • 360-degree feedback: Collect employee performance feedback from multiple stakeholders (line managers, peers, HR managers, etc.), and store it in a centralized database. This helps you pull performance metrics and easily summarize employee feedback in reports.
  • Goal setting and tracking: Create and assign employee goals for a specific time duration (annually, monthly, or weekly). Align these goals with your business objectives and track their status in real time.
  • Feedback management: Monitor feedback data from multiple providers to analyze the key performance indicators (KPIs) of individuals or an entire team. Also, observe performance trends and compare the results with the managerial feedback reports.
  • Training management: Evaluate employee performance reports and compare them with peer-to-peer feedback to identify key strengths and weaknesses. This helps managers create personalized training development plans for employees. Also, allow employees to view their feedback and areas for improvement.
  • Real-time updates: Create automated notifications and reminders for employees who haven’t filled out their performance review forms on time.

In addition to these main features, other common features include interdepartmental communication, performance notes, and comparison of employee performance reports on parameters such as peer-to-peer behavior and team engagement.

Performance appraisal

Performance appraisal is the process of evaluating employees based on set criteria (length of service, quality, quantity of output, etc.). It involves managers giving top-down assessments to direct reports at regular review meetings based on their job performance and competence.

Performance appraisal software automates the process of reviewing and managing employee promotions (i.e., upgrade in salary and role) on a single platform.

Performance Pro evaluate competencies dashboard

Performance Pro’s anchored rating scales measure competencies (Source)

Here’s a list of the key features of performance appraisal software:

  • Milestone tracking: Track employee goals and provide real-time feedback on an employee’s ongoing projects.
  • Competency management: Measure and document employee performance to support decisions such as a promotion, relegation, or termination.
  • Performance report: Get detailed employee performance reports to rank top performers based on skills such as leadership, decision-making, and workplace ethics.
  • Compensation management: Align employees’ compensation (rewards, bonuses, etc.) to business objectives and goals.
  • Analytics dashboard: Compare performance appraisals from all departments, managers, pay scales, and employment types (full-time or contractor). This is intended to help you identify performance trends and issues, as well as forecast next year’s workforce budget.

Other notable features of performance management software include appraisal history tracking, goal management, and automatic scheduled feedback alerts.

The below graphic summarizes the difference between performance management and performance appraisal software.

Graphic that summarizes the difference between performance management and performance appraisal software

Which tools are out there?

Now, let’s look at some of the software options in these categories that suit businesses of all types. The tools below offer most or all of the performance management and performance appraisal capabilities we mentioned above. Note that many solutions offer both performance management and performance appraisal features.

See the methodology section at the bottom of this article for more insight into how the apps for each section were chosen.

If you’re looking for performance management software…

ClearCompany

ClearCompany is cloud-based HR software that offers performance management capabilities such as 360-degree feedback and goal management.

The solution helps track, manage, and measure employee performance continuously in real time. It lets users capture employee metrics based on department, designation, or experience.

ClearCompany’s nine-box grid template determines employee competencies (leadership, technical, or general) that match business objectives. For instance, it measures an employee’s on-time delivery and number of absent days with a core competency, such as “reliability.” This helps managers identify evidence-based employee capability.

ClearCompany 360-degree performance review dashboard

ClearCompany‘s 360 performance review dashboard (Source)

People

People is cloud-based HR management software. Its built-in performance review feature helps managers evaluate employee performance and track their progress in real time.

It provides customized templates to create graphical visualizations of performance metrics (work efficiency, skills, time management, etc.) to compare employee performance. This helps managers identify their employees’ key strengths and weaknesses. It also helps them invest in the right training and development resources.

People performance review dashboard for managers

People‘s performance review dashboard for managers (Source)

Zoho People

Zoho People is a cloud-based performance management tool that lets HR managers create and identify goals, track employee performance, and provide feedback on a regular basis (monthly, quarterly, or annually).

Managers can create comprehensive feedback reports that compare feedback from all managers, an employee’s self-review comments, and feedback from their peers.

Zoho People performance reviews dashboard

Zoho People allows managers to create a comprehensive feedback report (Source)

If you’re looking for performance appraisal software…

Bonusly

Bonusly is a cloud-based employee recognition and rewards platform that allows publicly giving gift cards, donations, company-branded accessories, etc., to workers and peers. The automated recognition and rewards administration feature lets employees redeem rewards without having to ask for permission and speeds up the recognition process.

Bonusly also lets HR managers evaluate recognition trends within their companies. With the help of detailed analytics and reporting, managers can track which employees have performed well and which haven’t. This way, they can provide training and resources to under-performing employees.

Bonusly

Bonusly provides digital rewards for recognizing employees (Source)

15Five

15Five is cloud-based performance appraisal software that facilitates communication between managers and their subordinates. It uses pulse surveys, individual meetings, and employee recognition to improve employee engagement, track objectives, and measure key results.

15Five lets employees record one-on-one meetings to review feedback later. Employees can access these records later to better understand the feedback provided by their manager and analyze the areas of improvement. They can even refer to action points from each meeting that can help them achieve their goals in a more organized manner.

15Five pulse survey feedback dashboard15Five‘s pulse survey feedback reports trends over time (Source)

Trakstar

Trakstar is cloud-based employee appraisal software that offers performance evaluation capabilities such as tracking employee progress, creating rating distributions, scheduling appraisals, and setting reminders. The detailed reporting of employee appraisal history gives managers a holistic view of employee performance over time.

If your employees are mostly in client-facing roles (customer service, help desk), you could consider Trakstar. Managers can request customer feedback on the service offered by their employees. Add this feedback to the employees’ appraisal documents, so that you’re able to better assess your employees on their professional capabilities.

Trakstar

Trakstar‘s appraisal dashboard (Source)

More about performance management and performance appraisal software

Let’s recap what we’ve learned so far about these two software categories:

  • Performance management is carried out on regular basis—weekly, monthly, or annually—while performance appraisal is done usually once or twice a year.
  • A performance management tool is usually owned by managers and helps plan, monitor, and evaluate employee objectives. Meanwhile, a performance appraisal tool helps determine employee promotion based on set rating parameters.
Many software vendors offer performance appraisal as a part of their performance management suite. Here’s a list of common functionalities in both kinds of software:

  • Set goals and employee expectations.
  • Set employee KPIs.
  • Review target deadlines and identify roadblocks to effective performance.
  • Develop strategies to help employees achieve goals.


METHODOLOGY

Applications highlighted in this article are selected based on several criteria: the current market definition for the category, the Category Leader rankings, and business size.

As part of our formal research efforts, a series of market definitions are developed and leveraged across all of our content for that category. These definitions determine an application’s suitability for the category under analysis. If a formal market definition is not yet created, the individual analyst uses his/her market experience and knowledge to assess an application’s suitability for the category.

After suitability is established, the applications are analyzed against GetApp’s Category Leader ranking for that category of software; this ranking includes user reviews, integrations, mobile app availability, media presence, and security features. Where a Category Leader ranking does not exist, individual apps are chosen based on the highest average overall ratings. Each app has a minimum of 10 reviews written in the past two years in order to qualify for inclusion.

Lastly, applications are then filtered for business size using GetApp’s filtering tool to include options that are suitable for businesses ranging from 0 to 500 employees.

Note: The information contained in this article has been obtained from sources believed to be reliable. The applications selected are examples to show a feature in context, and are not intended as endorsements or recommendations.