5 best performance management systems for small business

As a small business owner, you have a fair share of issues to manage. One of the biggest hurdles is making sure your team members perform at their best. To tackle this, having a performance management system is crucial. Think of a performance management system as a secret weapon that helps you boost productivity, promote growth, and make things run smoothly. It provides a structured way to measure, evaluate, and improve employee performance, which benefits both individuals and the whole company.

What we’ll cover in this article

In this blog post, we'll explore the best performance management systems for small business. We'll explore how these tools can help you better manage your team and grow your business.

What is a performance management system?

A performance management system is defined as “a proactive system of managing employee performance for driving individuals and organizations towards desired performance and results.” That sounds complicated, doesn’t it? It’s really not though. Simply put, it’s a system to manage the performance of a company and its people. That sounds a lot easier and you’re probably already doing some of the steps without knowing it.

How a performance management system helps you

When we speak with operators about “performance management,” they’re reluctant to jump on the bandwagon. They envision spending hours on end at their desk, tracking metrics and writing up employee performance reviews. While those are certainly pieces of the puzzle, a well-oiled PM system doesn’t mean more work on your plate. In fact, it should actually mean less because everyone will be on the same page. Plus, the positive benefits for everyone are too good to pass up.

6 components of a performance management system

The goal of a PM system is simple: Ensure that everyone – management, staff, the company as a whole – is working together to meet overall operational and company performance goals. There are six components you should focus on to develop a system that will work within your own four walls.

Clear expectations

It's important to communicate clearly with your employees about what you expect from them. Give specific instructions and guidelines for their tasks and overall performance. Encourage open communication, so they feel comfortable asking questions and seeking clarification. Provide feedback regularly to help them understand how they're doing.

Performance reviews

Performance reviews help you keep an eye on team performance and measure how well your employees are meeting your expectations. When everyone understands their roles, these reviews become easier. If reviews don't go well, it may mean that your team members don't fully understand what's expected of them. Take the chance to explain expectations again and offer guidance on how to be great team players.

Teaching and Coaching

Support your staff by teaching and coaching them. Sometimes, we all need a little help or guidance. Be there for your employees, communicate openly, and invest time in their growth. Coaching is a powerful tool for change and learning. Even a few extra minutes of coaching can make a big difference and leave a lasting impact.

Reward and Recognition

Creating a positive work culture where employees feel motivated is important. Implement reward and recognition programs to make work enjoyable. Rewards don't have to be expensive. Simple gestures like a thank-you note or public recognition during a meeting can go a long way. Authentic employee appreciation means more than extravagant rewards.

Improvement plans/check-ins

Regularly check in with your staff to see how things are going. Ask about their understanding of expectations, their thoughts on reward and recognition programs, and any suggestions they have for reaching organizational goals. Keep it positive and focused on their self-development. Avoid using this process to document problems or find fault.

Corrective action

Corrective action is challenging but sometimes necessary. It involves addressing performance issues through disciplinary measures when other methods like mentoring or coaching haven't worked. Use a corrective action form to ensure proper documentation and meet legal requirements. Remember, it should be a last resort. Approach it with fairness and transparency, and exhaust all other options before taking this step.

Benefits of performance management systems

In HR departments today, there's a constant need for actionable data when it comes to managing talent. Instead of relying on old-fashioned filing cabinets, companies now use employee performance management software to simplify the performance appraisal process and goal setting. This kind of software offers several advantages:

Making HR operations more efficient

HR and compliance work can be a bit tedious, but with digital file management and searchable databases, employee performance management software helps keep things organized. It allows HR teams, managers, and employees to easily see where each person fits in the company.

Providing motivational feedback

Nowadays, employees crave continuous feedback. Unfortunately, traditional feedback methods often fall short, leaving employees feeling unsatisfied and unsure about how to improve. Employee performance management software changes that by providing real-time, detailed feedback. It helps employees understand their strengths and areas for improvement, giving them the motivation to strive for better performance. Leveraging employee strengths and addressing weaknesses Each employee is unique, with their own set of strengths and weaknesses. Performance management software lets managers analyze individual performance data, making it easier to identify areas where employees excel. This way, managers can assign tasks that align with their strengths. On the flip side, the software also helps pinpoint areas where employees may be struggling, providing opportunities for improvement. Encouraging performance with incentives Performance management software allows managers to align employee goals with the company's objectives. This makes it simpler to recognize and reward exceptional employees. By tracking performance against set goals, managers can quickly identify top performers who deserve recognition and rewards. Spotting problem employees Every workplace has its fair share of problem employees. Whether it's consistent poor performance or complaints from colleagues, it's crucial for HR teams and managers to identify these individuals promptly. Performance management software helps in this regard, allowing companies to address issues before they cause further harm to team morale and productivity.

5 best performance management systems for small business

Best overall choice: Homebase

Homebase’s employee attendance alerts and reports keep you in the know about team performance. You can also use the team roster to track certifications and evaluations. You should be providing feedback on your team’s performance more than just when you sit down with them for an evaluation. Luckily with Homebase, real-time feedback can be dispersed with our free employee messaging app. You can also help improve your team’s performance with automated reminders. Send your team automated shift reminders to make sure they show up on time, add notes and instructions that they can see when they clock in for a shift, and share stats with employees so they can keep track of how they’re doing themselves. Key features:

1. Goal Setting and Tracking: Set and track performance goals for employees.
2. Feedback and Communication: Facilitate continuous feedback and open communication between managers and employees.
3. Performance Reviews: Streamline the process of conducting performance evaluations.
4. Real-Time Feedback: Provide instant feedback through a free messaging app.
5. Automated Reminders: Send automated shift reminders and share notes and instructions for improved performance.
6. Performance Statistics: Share performance data with employees for self-tracking and improvement.
7. Integration with Workforce Management: Seamlessly integrate with scheduling, timesheets and the Homebase time clock app for comprehensive performance management.

Pros of Homebase as a Performance Management System:

• User-friendly interface and intuitive design.
• Integrated solution with additional features like scheduling and time tracking.
• Mobile accessibility through the Homebase app.
• Affordable pricing plans, including a free option for basic features.
• Efficient data collection and analysis for better feedback and constructive employee evaluations.
• Real-time feedback and communication capabilities.
• Automated reminders to improve employee punctuality and task management.

Cons of Homebase as a Performance Management System:

• Limited customization options compared to more advanced PM systems.
• Can lack advanced analytics and reporting features.
• Integration with other HR systems may be limited or require additional configurations.
• May not be suitable for larger organizations with complex performance management needs.

Next we’ll compare Homebase vs. BambooHR and break down other top performance management systems.

Best for HR tools integration: Bamboo HR

BambooHR offers a user-friendly performance management tool that makes goal tracking straightforward and engaging. It provides automated notifications, reminders, and reporting tools to create and monitor employee work goals. You can set assessments for 30, 60, or 90 days based on your needs. It's best for organizations that already use other HR solutions, as BambooHR easily integrates with popular tools like payroll, applicant tracking systems (ATS), time tracking, and learning management systems. However, it has limited support for HR apps and can only connect to payroll tools. Keep in mind that BambooHR's performance management tool is a paid add-on, meaning you need to subscribe to their Essentials or Advantage Plan first. If you only need a performance management tool and nothing else, it may not be the right choice. Key features

• User-friendly performance management tool
• Goal tracking with automated notifications and reminders
• Built-in reporting tools for monitoring employee work goals
• Flexible assessment periods (30, 60, 90 days)
• Integration with popular HR solutions like payroll, ATS, time tracking, and learning management systems
• Paid add-on to BambooHR's Essentials or Advantage Plan
• Limited HR app support, primarily focused on payroll integration
• Custom pricing requiring a conversation with a sales representative
• Lower scoring in pricing and reporting categories, but positive ratings in performance management aspects

Pros

• User-friendly and intuitive platform
• Simplified goal tracking with automated notifications and reminders
• Built-in reporting tools for monitoring employee work goals
• Integration with popular HR solutions like payroll, ATS, time tracking, and learning management systems
• Flexible assessment periods (30, 60, 90 days)
• Highly rated by users for performance management aspects

Cons

• Limited HR app support, primarily focused on payroll integration
• Performance management tool is a paid add-on to BambooHR's Essentials or Advantage Plan
• Lack of transparent pricing on the website, requiring a conversation with a sales representative
• Poorly rated by users for pricing and reporting categories

Best for employee development: Engagedly

Engagedly is a performance management software that goes beyond the basics. It allows you to create goals, schedule performance reviews, and fosters employee engagement, collaboration, and communication. With features like peer-to-peer feedback, a user-friendly interface, and a mobile app for real-time feedback, it's great for HR managers focused on professional development. Key features:

• Goal Setting and Performance Reviews: Engagedly allows you to create goals and schedule performance reviews to track employee progress.
• Employee Engagement and Collaboration: The software goes beyond traditional performance management by fostering employee engagement, collaboration, and communication.
• Peer-to-Peer Feedback: Engagedly enables employees to provide feedback to their peers, promoting a culture of continuous improvement and teamwork.
• Real-time Feedback: With a mobile app, employees can receive real-time feedback, enhancing communication and timely recognition.
• Identifying Future Leaders: Engagedly provides tools to identify potential future leaders within the organization, allowing for targeted development opportunities.

Pros :

• Comprehensive Performance Tools: Engagedly offers a range of performance management tools and functionality.
• Employee Engagement Focus: The software prioritizes employee engagement and collaboration, promoting a positive work culture.
• Real-time Feedback: The availability of real-time feedback through the mobile app facilitates timely communication and recognition.

Cons:

• Engagedly's pricing information may be challenging to find, impacting the evaluation process.
• Users may face difficulties in accessing documentation and support resources.

Best for ease of use: PerformYard

Performyard users appreciate its user-friendly interface, intuitive design, and overall ease of use. It offers competitive pricing and provides essential tools for conducting regular evaluations, including features for peer praise and informal check-ins. PerformYard also allows ranking employees to identify high performers and potential leaders. But its higher pricing compared to other options impacted its score, as did the absence of a mobile app and new-hire evaluation tools. Nonetheless, it received high scores in popularity, reporting, and ease of use. Key features:

• Intuitive and User-Friendly Interface: PerformYard offers an interface that is easy to navigate and understand, ensuring a user-friendly experience.
• Tools for Regular Evaluations: The software provides essential tools to conduct regular employee evaluations, allowing for effective performance assessments.
• Peer Praise and Informal Check-ins: PerformYard facilitates peer-to-peer recognition and informal check-ins, fostering a culture of collaboration and continuous feedback.
• Employee Ranking for High Performer Identification: PerformYard enables the ranking of employees to identify high performers and potential leaders within the organization.
• Competitive Pricing: PerformYard offers pricing that is competitive in the performance management software market, providing value for the investment.

Pros:

• PerformYard has received high ratings and positive feedback from real-world users, indicating its effectiveness and user satisfaction.
• The software's intuitive interface makes it easy for users to navigate and utilize its features without a steep learning curve.
• PerformYard's pricing is competitive compared to other performance management software options, offering affordability and value.
• PerformYard provides the necessary tools to conduct evaluations and gather feedback effectively, promoting a comprehensive performance management process.
• With its employee ranking feature, PerformYard assists in identifying top performers and individuals with leadership potential.

Cons:

• PerformYard's pricing may be relatively higher compared to certain alternative performance management software options, which could impact budget considerations.
• PerformYard does not offer a mobile app, limiting accessibility and convenience for users who prefer mobile device usage.
• The software lacks specific tools for conducting evaluations and assessments specifically tailored for new hires, which may be a limitation for organizations with a focus on onboarding and performance tracking for new employees.

Best for employee improvement: Lattice

Lattice is a performance management solution designed with a focus on employee improvement. It offers essential tools for conducting thorough reviews, providing consistent feedback, and managing goals. The system is intuitive and customizable, allowing for a personalized experience. Lattice facilitates meaningful dialogue during meetings and helps organizations acknowledge significant achievements. Key Features:

• In-depth Reviews: Lattice provides tools for conducting comprehensive employee reviews, enabling a thorough evaluation of performance.
• Consistent Feedback: The software facilitates ongoing feedback to foster continuous improvement and development.
• Goal Management: Lattice offers features to set and track employee goals, ensuring alignment with organizational objectives.
• Intuitive and Customizable System: The platform is user-friendly and can be tailored to meet the specific needs of the organization.
• Meaningful Meeting Dialog: Lattice helps facilitate meaningful dialogue during meetings, promoting productive discussions between managers and employees.
• Recognition of Key Wins: The system allows the recognition and celebration of significant achievements within the company.

Pros

• Lattice places employee improvement at the forefront, supporting professional growth and development.
• The software allows for in-depth and thorough employee reviews, providing a holistic assessment of performance.
• Lattice fosters a culture of continuous feedback, encouraging regular communication and development discussions.
• The goal management feature helps align employee goals with organizational objectives, promoting a sense of purpose and direction.
• Lattice offers an intuitive and customizable system, allowing organizations to tailor the platform to their specific requirements.

Cons:

• As with any new software, there may be a learning curve for users initially adapting to Lattice.
• Organizations may face challenges during the implementation process, such as data migration or integration with existing systems.
• The pricing structure of Lattice may vary depending on the organization's size and specific needs, which could impact budget considerations.

A performance management system is essential for small businesses to improve team performance. Among the top choices, Homebase stands out as the best option. It has an easy-to-use interface, tracks performance effectively, and provides valuable insights. With Homebase, you can optimize your team's performance and drive success in your business.