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Anna Schosser31.08.202311 min read

Top 5 Features to Look For in Performance Appraisal Tools

HR departments across industries are in a constant search for new ways to improve employee performance, boost employee engagement, and eliminate critical performance gaps that are hindering the growth of the company's success.

The core of this growth lies strongly in the structure of a performance appraisal process where feedback flows openly and productively between the manager and employees. Performance appraisals (also known as performance reviews) are an essential part of human resource management, as they help employees and managers align objectives, identify areas of strengths and areas for improvement, and discuss career development plans.

However, not all performance appraisals result in success. Therefore, in order for performance appraisals to be a successful process, there are key features to look out for to ensure that your performance management process delivers positive outcomes.

Selecting the right performance appraisal tool for your organization is not just a matter of convenience; it is essentially a strategic decision that shapes the development of the company's culture, productivity, and overall success. Of course, there are a plethora of components to look for when finding the right performance appraisal tools, so how can you truly decide which of the many features makes a difference in your employee performance appraisals? Read on to find out.


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A performance appraisal too is what makes a performance review more enjoyable than what most employees and employers are used to experiencing. It guides both parties into a productive conversation and generates a motivating outcome. 


What's in this post?

  • What are performance appraisal tools?

  • Features to look for in performance appraisal tools

  • Benefits of using a performance appraisal tool


What are performance appraisal tools?

Let's get started with the basics. What are performance appraisal tools?

Performance appraisal tools are operational tools that help HRM enhance the work efficiency of employees within an organization. When it comes time for managers to go through an employee performance appraisal process, managers often turn to performance appraisal software to help them organize and conduct a successful performance appraisal that automates the employee review process.

What is the purpose of a performance appraisal tool?

The main purpose of a performance appraisal tool is to provide managers with all the necessary information required to analyze an employee's performance. The information includes a thorough review of an employee's contribution to the company, their accomplishments, strengths, and areas for improvement. It also includes any relevant KPIs and performance metrics that reflect the employee's job performance over a certain time period.

It also usually involves the collection and analysis of qualitative and quantitative data such as teamwork and communication skills, task completion, and the achievement of goals. Managers can use a performance appraisal tool to provide employees with insights into their performance and boost employee productivity by investing in their skill development and giving continuous feedback.

Why should you use a performance appraisal tool?

Along with the positive results that a performance appraisal tool provides, using this tool automatically generates transparency and fairness when it comes to performance reviews. This is because performance appraisal tools analyze employee performance from a set of criteria that focuses on the organization's ambitions and objectives.

Therefore, when implementing modern performance appraisal methods into the tool such as the 360-degree feedback method, managers and employees can develop a healthy conversation around concerns regarding an employee's past performance and create an action plan on what can be done to improve the outcomes.

Performance appraisal tools are also great for identifying Learning and Development (L&D) opportunities for training programs or workshops and recognizing any employee professional development needs.

Furthermore, it allows for effective performance tracking which comes in handy when employees begin a specific training program to reach a certain outcome, thus producing a consistent evaluation that highlights what an employee achieved.


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Leaders may find it challenging to navigate conversations during performance evaluations, but with the help of personalized training, uneasy meetings will turn into productive conversations. 


Features to look for in performance appraisal tools

When searching for a performance appraisal tool that fits your organization, it can become overwhelming to know which ones are the most important ones. That is because the more features a performance appraisal tool has, the better!

Let us mention this first: A good performance appraisal tool should be customizable, meaning that it should work well with any performance appraisal method. It should also generate accurate performance analysis, and ongoing feedback to enhance the employee's future performance.

But what are the five main features to keep both eyes out for?

SMART Goal Setting

It is always good to be smart when setting goals, especially since the goals that you set with your employees will be a reflection of their dedication to the company and the effectiveness of their work performance.

Goal setting is inevitably one of the most important features in any appraisal process. Goal setting increases employee productivity and improves a variety of productivity skills such as decision-making, time management, and teamwork.

Setting SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) goals helps to keep the objectives of the employees' roles and responsibilities aligned with the vision and mission of the company.

A good performance appraisal tool should, in this case, contain the following:

  • An effective goals module that allows employees to set, track, and manage their SMART goals easily.

  • The goals are stated clearly in the tool and can be tracked by both the employee and manager to keep accountability.

  • Employees should also be able to change their goals and add more objectives if needed (perhaps even include smaller goals they would like to achieve)

  • A section for a plan of action is dedicated to each goal. This follows the discussion on how the employee will attain their objectives through training programs, workshops, or whichever development plan is most suitable.

360-degree feedback

360-degree feedback has become an integral part of several performance management tools throughout organizations due to its unbiased nature.

In a 360-degree feedback process, feedback has been collected from everyone with whom the employee has a consistent working relationship. These working relationships include managers, coworkers, customers, and vendors.

This method of garnering well-rounded feedback allows managers to get full acuity into an employee's performance not only from the manager's point of view but from the organization as a whole.

Therefore, a good performance appraisal tool should include a 360-degree feedback option for employees and leaders, enabling HR to easily underline the positive performances of each employee as well as the areas of improvement.

Oftentimes, receiving large amounts of feedback can be overwhelming to sort out and select the ones that really matter. With a performance appraisal tool, each feedback can be categorized and easy to comprehend for HRM before handing it over to managers for each appraisal process. 

Rewards and recognition

The third key feature of a good performance appraisal tool is being able to keep track of an employee's achievements and reward them by notifying managers or HRM.

A study has shown that 63% of employees feel like their managers don't praise them enough. The true value of a performance appraisal lies in constructive criticism and praising an employee's hard work and valuable efforts. 

An employee's contribution to the company's success should always be recognized and rewarded in a fair, consistent, and transparent manner. Therefore, rewarding their efforts can take place in several forms including verbal praise (expressing gratitude and that you notice their hard work), written comments, certificates, incentives, promotions, and further job opportunities if possible.

Recognition and reward should also be personalized to each individual employee and their personal preferences and requirements. It should also always be delivered at the appropriate time.

A good performance appraisal system should therefore include a rewards management system that utilizes the data retrieved from feedback and KPIs to discover and track high-potential employees to train them for future leadership roles. The rewards system should also notify employers when an employee deserves recognition and reward for their outstanding achievements.

Ongoing performance tracking

One of the best features that a performance appraisal tool can have is being able to continuously track employee performance.

Managers and HR should be able to keep track of an employee's professional development by using a performance appraisal tool that includes the ability to gather data from frequent check-in conversations and formal performance reviews.

The data that the performance appraisal tool collects can be incorporated into the employee's goals and can be utilized by management to provide constructive feedback and see how their progress is going and where the employee may seek support.

Furthermore, performance appraisal tools should also keep note of any praise or feedback given by peers or management for use in a performance-related conversation.

Employee involvement

Last but not least, a good performance appraisal tool always makes sure to include and empower employees in their own performance management.

Employees should always be encouraged to reflect on their own performance, create their own objectives, and action plans, and seek feedback and coaching from peers and management in the assessment process.

Employees should always be given the opportunity to voice any concerns and expectations they have. They should also be able to discuss their performance progress with their management. Therefore, each concern and progress conversation should be documented by the performance appraisal tool for future performance appraisals. This keeps track of the employee's development journey as well. 

Keeping employees involved in the appraisal process creates a healthy and productive two-way conversation. As a result, employee engagement increases, which boosts the dedication that employees have toward their job and the organization.


Benefits of using a performance appraisal tool

If you are a manager, you will understand how important it is to conduct quality performance appraisals. A performance appraisal tool can do wonders when working towards reaching organizational objectives.

Benefit Explanation
Streamlined performance reviews: 
One of the best benefits of using a performance appraisal tool is being rewarded with less work to be done. Performance reviews can be stressful enough, and the tools are here to help you manage your time with your employees productively and positively. By being able to add comments and questions to the tools, keep track of performance progress, and set goals easily without the chaos of paper forms and assessment sheets, performance appraisals just got much easier.
We can all appreciate how time-consuming it must be for HRMs to prepare for the process of conducting appraisals. From fathering feedback from various stakeholders to reviewing employee performance and sending reminders, (and not to mention analyzing the collected feedback), performance appraisal tools do it all for you and free up a lot of time for managers. They can use that extra time for other productive tasks and feel even more prepared when entering the appraisal process.
Increased employee engagement and productivity: 
This is an obvious, yet important one to highlight. Regular follow-ups are key in making sure that employees meet their objectives and are continuously progressing in their roles. Having a performance appraisal tool holds employees accountable for their goals through performance tracking and therefore keeps them engaged and allows managers to provide them with regular feedback.
Increased L&D opportunities:
Performance appraisals are the best time for you to discuss development plans with employees. Figure out what is missing and how you and your organization can improve to generate better work outcomes. Pinpoint what training is missing, what workshops can be implemented, or what skills are missing that the organization can look into to improve their learning and development program to enhance success.
Built-in performance evaluation template:
Without a proper evaluation template, managers can end up evaluating employees differently lose consistency in their appraisals, and allow biases can come into play. Therefore, a performance appraisal tool makes the appraisal processes easier for managers when having a template that contains all relevant areas for discussion and is compatible with all employees across the organization.
To conduct a productive performance appraisal is to cultivate a positive work environment and harmonious working relationships. However, communication is a skill that everyone continues to improve on. 
Retorio's behavioral intelligence platform understands the process of learning and how important it is to do it at your own pace to ensure successful results. By training in a psychologically safe space with AI-powered roleplay, becoming a master at conducting effective and positive performance reviews is just a fingertip away. 
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Retorio's AI-powered training platform prepares you to handle any real-life situation and provides you with real-time feedback personalized to your learning style. 
Click on the button below to immerse yourself in Retorio's expansive training library that offers high-quality training to become a trustworthy and successful leader, and unlock your team's full potential in no time! 
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The 4 key measures of performance are the following: (1) Profitability indicator, (2) productivity indicator, (3) employee turnover indicator, and (4) customer lead conversion indicator.  However, these can vary depending on your company objectives and ambitons. These indicators are also known as KPIs that quantify the performance of organizational processes according to tthe organizational goals. 

A 360-degree appraisal is a well-rounded employee review process that garners feedback from everyone that a certain emloyee has a working relationship with. These stakeholders include coworkers, managers, clients and direct reports which is used to give HR and managers an in-depth overview of how the employee is performing. 



Anna Schosser

I create engaging and informative content about the importance of artificial intelligence and video-based AI technology for recruitment. I discuss cutting-edge AI developments and new technology with storytelling skills.