Essential performance management system buying information
Performance management software automates the process of reviewing employee performance, setting new objectives, and managing individual development plans.
Performance management systems are generally used by human resource (HR) professionals and managers who are tasked to oversee employee performance. This software helps leaders ensure employees and teams meet their performance objectives and contribute to the business’s goals.
Most products in the performance management software market are priced monthly, and their entry-level plans typically range from $4 to $1,089 per month and support one to 99 users.1 This cost can increase if you need to add more users or additional features.
First-time buyers should begin product evaluation with a budget, number of users, specific use cases, and necessary integrations in mind. Ensure you’ve consulted with stakeholders on a list of critical questions to help you evaluate systems based on your needs, such as:
How does the software facilitate continuous feedback between managers and employees?
Can the goals be modified to align with specific business workflows and needs?
How does the software secure sensitive employee data?
Can this software integrate with other software in your existing HR tech stack for smooth data management?
What type of different performance evaluations (yearly reviews, quarterly feedback) does the software provide?
What are the most reviewed performance management systems?
Capterra Shortlist identifies the top performance management software based on a proprietary blend of user ratings and popularity, helping small businesses efficiently find the most effective performance management software solution for their needs.2 Here are the five most-reviewed products in our Capterra Shortlist for this category:
These rankings are determined by combining verified user ratings and publicly available web search popularity data:
Ratings score: Relative score of the software based on ratings given by users on Capterra, normalized for the number and recency of reviews.
Popularity score: Relative popularity of software based on web search trends and products’ web presence.
What is a performance management system?
A performance management system automates the process of reviewing employee performance, setting new objectives, and managing individual development plans. It provides features for goal setting, continuous feedback, performance evaluation, and employee development planning to align individual and team objectives with business goals.
Employee performance management software encourages timely communication between employees and managers, creating a culture of open feedback and accountability. It also uses data analytics to provide insights into employee performance, enabling HR management professionals to make data-driven decisions.
Capterra covers 568 performance management software products, and we published 11,059 reviews from users of this software in the past year.3
Performance management software pricing
Most products in the performance management software market are priced on a monthly basis and their entry-level plans typically range from $4 to $1,089 per month supporting one to 99 users. Advanced systems support over 250 employees and can range from $175 to over $3,750 per month.
Entry-level performance management systems include the core functionality of goal setting/tracking and performance review management.
A premium or advanced product that’s priced higher typically includes additional features such as customizable templates, advanced reporting, competency management, and performance metrics tracking.
First-time buyers should be aware that:
Installation and setup, license, customization, and integration are common upfront costs and these costs can increase if you need to add more users or additional features.
Subscription, maintenance, and support are common recurring costs.
Performance management software vendors often offer free trials, and some systems offer free versions. These can be leveraged to see if a product fits your needs before investing.
Performance management software features rated by users
All performance management systems come with goal setting/tracking and performance review management. Some additional features included in this software include an employee database, self-assessment, and individual employee development plans.
Core performance management software features
Performance review management: Create, fill out, and send performance reviews to individual employees. 91% rate this feature as critical or highly important.
Goal setting and tracking: Establish measurable employee goals and objectives and track their progress over a specific period of time. 82% rate this feature as critical or highly important.
Common performance management software features
Ongoing performance tracking: Helps monitor an employee’s performance against their goals and objectives in real-time. 85% rate this feature as critical or highly important.
Skills assessment: Observe employees over a period of time to gain an understanding of their abilities to perform certain tasks. 81% rate this feature as critical or highly important.
Employee database: Stores essential employee information, such as personal data, job history, training records, and performance evaluation, in a centralized repository for quick access. 78% rate this feature as critical or highly important.
Surveys and feedback: Enables organizations to collect employee insights and opinions on various aspects of their work and workplace environment. They also enable organizations to conduct regular employee surveys, pulse checks, and 360-degree feedback. 75% rate this feature as critical or highly important.
Self-service portal: Empowers employees by giving them direct access to their performance data, personal information, and HR.
Customizable templates: Provides personalized task fields and automates routine tasks through templates.
Peer appraisals: Peer/teammate feedback and review an individual's performance.
Top performance management software benefits identified by users
Improves team collaboration: A performance management tool improves team collaboration by helping managers with goal management, recognizing achievements, and fostering a culture of teamwork and accountability within the team.
“I love the ability to transparently share work and project plans within a team, but also the functionality of looping in other colleagues and teams on shared work.”
–Verified reviewer., owner, marketing and advertising
Encourages dialogue between managers and employees: Timely feedback and continuous dialogue encourage transparency and open communication, reinforcing a culture of trust and collaboration. Performance management tools support ongoing feedback exchanges among managers, peers, and employees, enabling timely discussions about performance, achievements, and areas for continuous improvement.
“The reward feature, where colleagues can share successes and appreciation, is a great feature for appraisals and boosting morale.”
–Anthony S., therapist, mental health care
Streamlines HR management: Performance management systems can streamline HR processes and help companies efficiently manage HR-related tasks in one place.
“Not only has it alleviated administrative burden on HR, but our managers have more information at their fingertips that allows them to make sound decisions and perform efficiently.”
–Erika R., director, HR systems & operations
Creates an easier employee onboarding experience: Users say that they can easily onboard multiple employees to the system.
“Easiness of use Cost-effective and time-efficient for training sessions, making it an excellent option for companies looking to streamline the onboarding process for new employees.”
–Omar H., investment advisor, financial services
Common challenges of performance management software
The most common challenge of performance management software is underutilization, according to Capterra advisor Daniel Harvey.4 “If users aren’t properly trained on the system, they may feel it’s too complicated and stop using it, which then makes them feel like they're wasting money.”
To safeguard against underutilization of performance management software, Harvey recommends investing more time and resources in training. “Get as many hands on deck as possible. Spending time on proper implementation is most crucial for avoiding headaches and getting things going.”
Other common challenges identified by performance management software users include issues with performance reviews, employee scheduling, and document management. To help you avoid these challenges, we recommend looking for a tool that offers:
A user-friendly interface: Participants should be able to navigate the software easily and provide feedback without encountering unnecessary complexities.
Customizable evaluation forms: Customizable forms ensure that the feedback collected aligns with your unique performance criteria.
Anonymity and confidentiality: Confidentiality is important for fostering open and honest feedback.
Reporting and analytics: Built-in analytics should enable you to identify patterns, strengths, and areas for improvement across individuals and teams.
Integration with existing systems: Integration with your existing HR system and processes can streamline data management, reduce manual effort, and ensure a seamless experience.
What is performance management software used for?
We analyzed our extensive performance management software reviews and found that the most common use cases are:
Task management: Makes it easy to carry out project and task management through workflow automation. Automated workflows can save them time and result in reduced human errors.
Easy interface navigation: Allows users to explore the software and use its features to the fullest, increasing adaptability.
Employee tracking: Allows employers to monitor, measure, and enhance employee performance through goal management, continuous feedback, and analysis of performance metrics.
Goal tracking: Helps users track goals by providing tools and a framework that ensures employee goals are clearly monitored and achieved.
Who uses performance management software?
Performance management software is used by different industries to track employee performance, conduct performance reviews, and set goals efficiently. This software helps leaders ensure employees and teams meet their performance objectives and contribute to the business’s goals. They are typically geared toward one or several of these categories:
HR departments
Educational institutions
Non-government organizations
Based on our analysis of verified reviews of performance management software in the last year on Capterra, 51% of those who review this software are from small to midsize businesses having 11-200 employees, and 40% are from enterprise-grade companies with over 200 employees.
Common performance management software integrations
We analyzed our extensive reviews database and, based on that, we determined the three software categories that most often integrate with performance management systems are:
HR software: Integration capabilities in performance management software typically allow your system to connect with other HR tools such as payroll, benefits administration, and recruitment platforms. Such integrations can help businesses align performance reviews with compensation decisions.
Time tracking software: Integrating your performance management software with time tracking tools allows users to generate detailed productivity reports and analytics that help identify inefficiencies and optimize team performance.
Employee engagement software: Integrating employee engagement tools with performance management software can help align individual employee goals with business goals by way of analytics and reporting capabilities that allow managers to track progress and measure the impact of engagement initiatives.
Performance management software buyers have the option of selecting an integrated suite or a best-of-breed product, which is a standalone system that needs to be integrated with other software like the examples given above. Of almost 8,000 human resources software buyers that our advisors spoke to in the past year, a little over half (52%) are looking for integrated suites only and 47% are looking for best-of-breed products.5
Recent trends in performance management software
GenAI in performance management: According to Gartner research, by 2025, it's expected that 60% of organizations will effectively use generative AI (genAI) in their performance management processes.6 Many performance management vendors have already integrated AI-powered features (e.g., ongoing performance tracking) into their platforms to enhance employee experience, HR efficiency, and overall job performance quality.
Learn more how about performance management software can help your business
