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How performance management software can improve retention

6 min read

Over the past few years, working realities have gone through major changes. From the rise of hybrid and remote work to the use of performance management software, employers are looking for new ways to retain employees and keep them engaged. 

Since 2020, employee engagement in the United States has seen a steady drop. According to Gallup’s 2022 State of the Global Workplace Report, only 21% of workers are actively engaged in the workplace. The same report says that employees who are not engaged or actively disengaged cost $7.8 trillion in lost productivity.

In many ways, employee engagement, retention, and performance management go hand-in-hand. First of all, evaluating performance allows employers to gain insight and recognize their team’s accomplishments. Which can lead to an increase in engagement and retention.  Secondly, performance reviews can provide an opportunity for employees to provide feedback, opinions, and air any difficulties that they might be facing. This helps managers to catch issues before they snowball into bigger problems.

For employee performance management to run smoothly, it’s imperative to have the right system in place. In this article, we’ll talk about performance management software and go over some of its key features and uses. Then, we’ll discuss the many reasons why it can improve the employee experience and make team members want to stay.

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Performance management software and its purpose

The purpose of using performance management software is to gain insights into your team’s efforts, and leverage feedback to make more informed decisions. Ideally, you’ll want performance management software with features that allow you to:

  • Create custom performance management questions to tailor reviews to each member of your team.
  • Generate automatic reports to have a well-informed understanding of each individual team member’s efforts and contributions.
  • Easily visualize employee progress and potential with graphics, such as a 9-box or heatmap.
  • Recognize achievements that deserve recognition and opportunities for training and career growth.

While using performance management software, there’s a twofold increase in benefits. It can make your processes more efficient and transparent while simultaneously positively impacting your company culture. You can track and streamline the way that you evaluate employees while driving high-performance company values and a growth mentality.

How PMS helps employee retention

With the right software and management processes, you can maximize the potential of your team while boosting motivation and employee morale. In this section, we’ll go over ways that performance management software can boost retention and spur career growth.

Identify top performers

In today’s labor market, more and more companies are searching for ways to attract and retain top performers. However, in many cases, managers are juggling many priorities and employee achievements and contributions go undetected

Eventually, employees begin to feel underappreciated and that their hard work yields them no results. Employees who feel undervalued may choose to eventually leave. Or, instead, they might just put forth the bare minimum effort, a phenomenon known as “quiet quitting”.

With the right performance management system, employers have employee data and performance records in a centralized place. Meaning that they will be able to quickly spot areas of progress and distinguish high-performing employees. 

By recognizing growth, employers can watch retention rates go up. Recognition, whether it be monetary, through benefits, or simply comments, boosts confidence and motivation levels and leads to a more committed and enthusiastic workplace environment.

Regular feedback sessions

When performance reviews are conducted correctly, they can encourage a mutual exchange between employees and managers. Leaving both parties with the opportunity to benefit from the interaction and grow. If employees do not receive adequate feedback or only receive comments with little explanation about things that they’ve done wrong, it can be easy for them to feel unsupported and get demotivated very quickly.

Certain performance management software allows you to create feedback templates for both managers and employees. If you are evaluating which performance management system is right for you, be sure to check to see the types of surveys and appraisal formats that are available. The objective is to encourage a dialogue between team members. And the best systems allow you to do this through personalized questions, anonymous surveys, and qualitative and quantitative feedback options.

Consistent, clear communication

For employees who don’t know what to expect, performance evaluations can be a stress-provoking experience. And this kind of job-related anxiety can actually inhibit high achievers from doing their best work. 

Ideally, you want employees to feel psychologically safe during performance reviews and encourage them to be open about issues that could lead to bigger problems down the road. If employees feel confused and overwhelmed, this can be near impossible.

While using performance management software to deliver evaluations for employees, you can provide them with a consistent experience during every stage of the performance management cycle. Evaluations will be clear, organized, and easy for both employees and managers to follow. Some software even allows you to send employees anonymous feedback surveys. Which ultimately translates into long-term, trusting work relationships.

Development planning

With performance management software, managers have access to a wider range of background information. Through this, they can build a better understanding of an employee’s entire growth trajectory. This is crucial for teams looking to increase retention by creating a culture of learning. Here’s why development planning is a make-or-break for many teams:

  • Statistics shared by Deloitte suggests that companies with a more learning-focused company culture have 30-50% higher engagement and retention rates.
  • LinkedIn’s 2022 Workplace Learning Report indicates that employees who feel that their skills are not being put to good use in their current job are 10 times more likely to be looking for a new job.
  • According to Glint Data, having a learning culture is the number 1 factor that defines an exceptional work environment. 

In many ways, employees prefer to work for companies that are invested in their professional growth and those that take into account their personal career growth. Having access to records of previous surveys and performance reviews will help to ensure that employees’ career paths are always front and center. 

Managers will be able to better understand employees’ professional goals and their current skill sets, making it easier for them to facilitate the training and development resources that employees need and want.

Data analytics

In today’s working reality, teams are up against a new set of challenges regarding changing leadership models and performance evaluations. Data analytics are playing a bigger role than ever before in the decision-making process, especially for hybrid and remote teams. While there are advantages to work-from-home setups, many are finding it difficult to monitor productivity levels and ensure equitable evaluations across their team. 

To make performance reviews fairer, many teams are choosing to take a more data-driven approach and base performance reviews on metrics that reflect the quality and quantity of their output.

With performance management software, it is much easier to adopt this management-by-objectives approach and encourage employees to take more control over their schedules and their workloads.

Monitor employee development

Whether you are deciding to promote employees, or are tracking their progress while they are taking part in a mentorship program, a performance management system can help you to visualize professional development and make more data-informed decisions.

Using performance management systems, like Factorial, you can gather qualitative and quantitative feedback data from employee evaluations. Which makes it easy to keep track of growth and professional development. For example, you easily see when employees complete training courses and how they apply their knowledge to new projects. 

Additionally, performance management tools allow you to assess employees’ skill sets. This information is particularly useful when it comes to assigning tasks, evaluating strengths, or finding resources to overcome skill gaps. 

Whichever way, you can provide employees with a more tailored, personal experience and become actively involved in their professional success.

Reduce micro-management

Part of a manager’s role is to encourage employees to adopt the right mindset to perform their roles with success. Unfortunately, this is not always the case. Rather than encouraging professional autonomy and growth, managers who are fearful that employees are slacking off might resort to micro-management. 

This, in turn, causes employees to feel frustrated and less confident about their capabilities to do their jobs correctly. As a result of this unhealthy practice, productivity levels drop and turnover rises.

Performance management software allows managers to have more information about employee progress and training needs. With this level of visibility, they can provide more focused and supportive meetings and one-on-one sessions, and have less of a need to constantly check in to see how things are progressing. 

Additionally, performance management software with 360-degree feedback encourages more participants to take part in the review process, which means that employees will receive feedback from more than one party. This provides employees and managers with more perspective and affirmation about the steps that they are taking to achieve their goals.

Provide personalized performance reviews

When it comes to making the performance review process more automated, personalization isn’t always the first thing that comes to mind. However, with paper processes or Excel, creating customized appraisal templates can be time-consuming and hard to manage. 

With certain performance management software, like Factorial, you can have the best of both worlds. You can easily automate and customize reviews so that you can boost efficiency while providing employees with a more personal experience than ever before.

Automation shouldn’t come at the expense of providing your employees with personalized interaction, especially while evaluating performance. While finding the right performance management software, remember that it should ultimately serve to support your biggest investment, your team.

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