As your business grows, performance management can (and should) become a key area of concern. Stronger teams, smarter processes, and more adaptable approaches can all give your small business a cutting edge to succeed and grow sustainably.
As one category within the broader area of talent management, performance management strategies and tools can play a significant role in helping your organization grow.
However, for smaller businesses or organizations, developing concrete policies and practices can easily fall by the wayside. Performance management software is an increasingly effective way to fill those gaps and give you a real HR and management foundation.
For small businesses, the software landscape can become overwhelming, and it can be difficult to know exactly what would work best for your business. We’ll walk through the essentials of performance management software and what you need to know to make an informed decision. Here’s what we’ll cover:
- The basics of performance management software
- Key features to look for
- How to choose a solution
- Long-term considerations
Use this list to jump ahead, or follow along with us from the top. Here at Astron Solutions, we’re experts in helping small to medium sized organizations develop sturdy HR and talent management infrastructures, so feel free to reach out directly if you want to discuss more personalized support. Let’s get started.
1. The Basics of Performance Management Software
Let’s start by walking through some frequently asked questions about talent management software for small business, starting with the very basics.
What is performance management software?
Performance management software is any digital tool or platform designed to support how an organization engages with and manages its employees.
These solutions range in scale from single tools or online services to comprehensive platforms that support a number of different HR needs. The type of performance management software you choose should depend on your exact needs and goals. We’ll walk through how to choose an ideal solution in a later section.
What are the core functions of performance management tools?
As a set of various internal activities, performance management includes documenting and reviewing employee performance, defining the responsibilities of roles in the business, and generally ensuring the alignment of goals across the whole team.
Performance management software can support one or all of these core tasks through performance reviews, job description editors, and goal-setting tools.
Software can also support the broader activities of talent management, which generally includes performance management, compensation strategy, recruitment, and employee engagement. Flexible talent management software can also be a great choice for small businesses that need more comprehensive HR support.
What are the benefits of performance management software?
In general, the biggest benefit of implementing performance management software is that it can give growing businesses a solid starting point for growth. Built-out HR and talent management processes play a huge role in helping organizations grow sustainably, by keeping their teams engaged and aligned.
Performance management software can also provide these particular benefits:
- Consistency and increased objectivity across your performance management processes.
- Quick identification of gaps or lags in your training processes.
- Consistent feedback for employees, which can boost engagement.
- Improved employee engagement by showing how their work fits into the company’s goals.
- Streamlining the physical logistics of performance management and reviews.
Is there performance management software for small businesses?
Yes, small businesses can implement performance management tools into their HR processes.
Previously, comprehensive talent management systems and performance management platforms were best-suited to enterprise-level organizations with huge teams and budgets to take them on. Now, there are plenty of properly-scaled options for small businesses.
Plus, more providers are designing their software with a modular approach that can grow along with you. These are increasingly popular choices for growing businesses that don’t want to re-invest in a new platform down the line.
When should a small company consider performance management software?
A growing company should consider adopting performance management software in two general contexts:
- When they’re expecting a period of sustained growth. Having performance management tools and policies in place will help you to grow your team sustainably.
- When they don’t have any HR tools or policies in place yet. Performance management is a great starting point for building a more comprehensive HR approach.
With more options appropriate for any budget on the market today, cost is less of a concern than it once was, but it still plays a role in a business’s decision to adopt performance management software.
Often the primary consideration to make is whether or not your team will have the time and attention to devote to choosing the new tools and then ensuring adoption across the business. There’s little point in adopting a new tool only to have it fall into disuse. This is why working with more flexible, modular tools that provide personalized implementation, documentation, and support is often the smartest move.
2. Key Features to Look for in Performance Management Software
Today’s performance management tools address a wide variety of needs. For a business of any size, though, these are the core features to look for:
- Performance review management. Taking your performance reviews online and streamlining your rating, note-taking, and documentation steps can significantly improve the process for everyone. Look for tools that allow you to set key areas for evaluation, create rating scales, set objectives and metrics, and offer self-evaluation forms.
- Organizational chart creation. Being able to create and update an organizational chart of your company’s structure can be a surprisingly valuable resource as your team grows. A centralized overview is helpful for new hires and especially for your HR and management teams.
- Job descriptions editor. Creating concrete job descriptions for each role at your business and then being able to update them as needed is the foundation of all your broader HR processes. Today’s software can also help you remain legally compliant by making it easy to explore Fair Labor Standards Act (FLSA) implications and attach role-specific documentation to each description.
- Staff advancement tools. Track competencies and areas for growth to give staff transparency into the development process and to give your management team a solid basis for making promotion decisions. This will be most helpful when combined with other tools like organizational charts and performance review management.
- Exit interview facilitation and analysis. Create custom online questionnaires, take notes on exit interviews, and track results against third-party benchmark data. Use these direct insights to start reducing unwanted turnover and strengthen your organization’s team.
Each of these features can be added to your toolkit as standalone tools or web-based services, or they can be included in broader talent management software suites. Let’s walk through how to determine which types of tools will be the right fit for your business.
3. How to Choose a Performance Management Software Solution
As with making any kind of tech investment for your business, it’s important to understand your needs and weigh your options carefully when researching performance management software. Consider these best practices:
Find the right balance between your size and your needs.
Performance management software comes in three general forms:
- Standalone tools. These are designed to address one specific need and are often web-based. They can be a smart move for smaller companies that have a very particular HR need or performance management gap that needs to be filled. However, building out a toolkit of standalone software or services can become unsustainable and ineffective as you grow.
- Comprehensive platforms. All-in-one performance management or HR software solutions will definitely address any needs that might arise for your business, but they’re often only feasible investments for large organizations that can afford the time and money to adopt them. Smaller teams can grow into these solutions, but at the risk of overwhelming them or wasting a lot of resources along the way.
- Modular solutions. Suites with performance management software and HR tools that can be combined and adjusted as needed is the smartest choice for most growing businesses. They grow along with you without overwhelming your team, which helps ensure complete adoption. Check out our solution, Flare®, for an idea of the features to look for in this type of performance management software.
These three categories should help your team get its bearings as you begin researching your options.
Prioritize scalability in your performance management software.
By scalability, we mean the ability of the software to expand and include additional functions or features as needed. The three categories mentioned above each offer a different level of scalability.
Avoid committing to any solution that’s not properly scaled to your business or that you’ll quickly outgrow. HR or performance management software is a major investment, not just of your company’s resources but also in your ability to grow your team in a sustainable, scalable way. Growing organizations frequently make the mistake of investing in a platform that’s more heavy-duty than necessary, leading their teams to never fully adopt it into their day-to-day processes. This should be a chief concern for any growing business looking to invest in management tools.
Clearly understand your needs and goals.
This best practice applies to anytime you’re researching new technology. Without understanding why you need a new tool, it can be difficult to focus your research effectively, and you run the risk of ultimately choosing software that won’t be fully adopted or that you’ll quickly outgrow.
Consider your long-term goals, as well. How large do you want to grow your team within the next year? Five years? How many distinct departments does your business have now, and what kinds of departments do you see it developing within those next five years? What new needs or compliance requirements will you have to consider over that timespan?
Take the time with your team to write down, in concrete terms, your organization’s performance management needs. Talking and thinking through your needs, goals, and ideal features ahead of time can save a lot of wasted effort down the line.
Bring in outside help when needed.
If you’re unsure of where to start, it might be a good idea to bring in an external expert. Human resources consultants can help you determine the gaps in your current processes and develop a strategic roadmap to help you address them. They can then point you in the right direction in terms of the performance management software that will best fit your needs.
For more thorough updates or overhauls of your talent management processes, an HR consultant is definitely the better choice than going it alone, for a number of reasons. Check out our complete guide to HR consulting for small businesses to learn more. It walks through some top providers and the steps to get started researching your options.
Consider how you’ll secure executive buy-in.
Adopting new performance management software, especially for the first time, represents a significant change for growing companies that are often going from having few (or no) concrete processes in place to having a stable infrastructure. Plus, it’s an important investment of organizational resources, as well. This means you’ll need to secure buy-in from the leadership team before moving ahead with any new tools you select.
For instance, if your business has a CTO or tech lead, work with them early in the process. They can help you understand your organization’s technology needs, current toolkit, and long-term plans. If you’re pitching a new performance management solution to a president or CEO of your business, make sure to reiterate the broader purposes of these tools as discussed at the top of this article:
- Documenting and reviewing employee performance
- Defining the responsibilities of roles
- Ensuring the alignment of goals across the whole team
Taken together and pursued strategically, these three functions can significantly improve your organization’s employee retention and engagement rates. These benefits translate to stable growth and a healthier bottom line that’s not disrupted by high turnover.
For more thorough HR or management updates that will entail adopting new software, working with an HR consultant can also help to secure buy-in, as the objectivity of a third-party expert can be much more persuasive for executives than proposals from internal staff.
4. Wrapping Up: The Long-Term Value of Performance Management Software
To recap a few of the main points touched on throughout this article:
- Performance management software and additional HR or talent management tools can be a valuable investment for growing businesses. Concrete HR processes and policies give you a sturdy framework for growing your team and help you tackle costly issues like retention early on.
- Performance management software comes in three main forms – standalone tools, comprehensive platforms, and modular software suites. The right type of software and the features it includes will depend on the size of your organization, its long-term goals, and your specific performance management needs.
- Scalable performance management software that can grow along with your team is the best bet for small to mid-size organizations. Expensive or overwhelming platforms can waste more time and resources both upfront and down the line, while sets of standalone tools are quickly outgrown.
Additionally, don’t be afraid to reach out to HR experts for their recommendations and suggestions. When your performance management software is approached as a long-term investment, it’s much more likely to actually support and facilitate the long-term growth that every business is looking for.
Performance management software can unlock new levels of growth for your organization. Take your time considering your needs and goals, then start researching!
If your business is new to talent management, check out a few additional resources, as well:
- Top Compensation Consulting Firms for Any Sector. Compensation strategy is a key part of your overall retention and engagement goals. Learn more about the top experts in the field.
- HR-Related Finance Terms Made Simple. If you need to make the case for new HR tools or strategies, familiarizing your team with a few core finance terms can be a big help.
- Guide to Hiring a Compensation Consultant. If an expert compensation strategy sounds like a smart move for your organization, check out our guide to choosing and hiring a consultant.