Analyzing the ROI of Performance Appraisal Software

by Mike Tannian on June 05, 2024

Find out how performance appraisal software built for the public sector can help agencies increase retention, boost productivity, and save time and money.

Article Highlights:

In the midst of staffing shortages and high turnover rates, the public sector could benefit from two things: 

  1. A way to accomplish more with less resources
  2. A way to increase retention

The right technology unlocks these benefits – specifically, performance appraisal software. It lets you set and track performance goals, conduct employee evaluations, and provide ongoing feedback. When used properly, these features lead to increased retention, higher productivity, and time and money savings.

Keep reading to learn more about employee appraisal software, how much it costs, and the return on investment (ROI) you can expect from it.

What is Performance Appraisal Software?

If you’re reading this article, you may be familiar with performance appraisal software already, but let’s explore what it is at a high level to make sure we’re on the same page.

Performance appraisal software goes by many names, including performance management software and employee evaluation software. As the name suggests, it’s a digital tool that automates and streamlines performance goal setting and tracking. 

It allows supervisors to schedule regular check-ins, implement PIPs (performance improvement plans), and avoid recency bias (more on that later). By centralizing all employee performance data in one place, HR and department heads get access to valuable reporting that can help them make more informed workforce decisions: 

  • Where is more training needed in your agency/department?
  • Which staff are eligible for pay raises or promotions?
  • Who needs a performance improvement plan?

At the end of the day, this software helps you automate employee appraisal processes that are often neglected due to being too time consuming and/or undervalued. Let’s explore pricing.

The Cost of Staff Appraisal Software

The cost of performance appraisal software is dependent on a couple key factors. As a result, many software companies don’t provide pricing upfront on their website. The cost could vary widely based on the pricing model (annual license, monthly subscription, etc.) and number of full time employees.

For example, an agency with 50 FTEs could pay roughly $6k–10k for the software license, setup, and training. An agency with 1000 FTEs will pay significantly more – potentially 3–5x as much. 

As you can see, despite the higher price, the cost per user is often cheaper for larger organizations. This is a similar concept to buying products in bulk at Sam’s Club. The more you buy, the cheaper it is per item (or in this case, per user).

Now that we have a loose understanding of the cost of HR appraisal software, we need to understand the cost of not using it. To put it another way, what benefits is your agency missing by not investing in it?

The ROI of Performance Appraisal Software

Employee goal setting and performance tracking take time and careful consideration. As a result, they often get deprioritized in favor of more “urgent” tasks. Or supervisors simply forget in the midst of their busy schedules. 

When strategic goals are set or an evaluation does occur, it usually happens once a year out of obligation. It’s treated like a box that has to be checked, not something that provides real value.

What most managers don’t realize, however, is that performance evaluations provide the insight needed to offer feedback, increase productivity, and improve employee retention. With public sector staffing shortages and turnover rates, anything that improves retention should be a priority. 

As mentioned above, performance appraisal software can help your agency accomplish more with less resources and keep employees longer. Keep reading to learn how.

Increased Retention

According to NEOGOV data, employees with at least one goal on their performance evaluation are 25% more likely to stay at their agency. Why? When employees have specific targets, they are more engaged in their jobs, especially when they understand how their targets support organizational goals. 

Employees want feedback and direction, and the frequency of feedback impacts retention. Manager-to-employee feedback takes various shapes, ranging from formal to informal. On the informal side, you have email, video, or face-to-face conversations. On the formal side, you have employee evaluations and “observational notes,” a medium for managers to provide consistent, documented feedback to employees based on competencies. 

Observational notes help managers avoid recency bias when it’s time for annual reviews. And according to NEOGOV data from 200+ public sector agencies representing over 250k employees, quarterly notes can increase retention by 19% on average.

Higher Productivity

When employees have strategic goals and engaged managers, they are more productive. It’s human nature. People need a larger purpose than themselves. Job satisfaction skyrockets when employees strive after a goal that is challenging but attainable, especially when they can see how it positively impacts the agency and community.

Despite this potential, employee goals are often created at the last minute. Not only does this hurt agency productivity – eventually, it lowers employee morale (let’s be honest, employees quickly learn whether their goals are purposeful or arbitrary).

Goals are particularly important for new hires, who can take up to eight months to achieve productivity. New employees need to understand their responsibilities, as well as their supervisor’s expectations, so goals should be clear, measurable, and achievable. Setting regular check-ins helps with this, giving employees an opportunity to ask questions and managers the time to provide direction.

Staff appraisal software gives you the tools to maximize productivity. By automating and simplifying check-ins, goal setting, and tracking, your leaders can easily support new hires and help long-term employees improve. It also helps managers create employee goals that align with department and agency goals.

Time & Money Savings

As most HR professionals know, employee turnover is expensive. According to SHRM, replacing an employee can cost 2–3x his or her annual salary. This includes both direct and indirect replacement costs:

  • Direct costs: posting or advertising job vacancies, recruiter wages, job fairs, conducting interviews, background checks, onboarding costs, training, etc.
  • Indirect costs: interrupted services, lost productivity as the new hire gets trained, potential burnout as other employees compensate for vacancy, decreased morale, etc. 

Employee performance appraisal software can save your agency money by increasing retention. It also helps your leaders make data-driven decisions regarding promotions, raises, and training needs. By identifying and addressing performance issues early, agencies can reduce turnover rates and enhance employee productivity, which lowers recruitment and training costs.

Not only that, it saves time by automating administrative tasks like tracking employee progress, scheduling reviews, and generating performance reports. This reduces the need for manual data entry and paperwork, allowing supervisors and HR staff to focus on more strategic activities.

The Best Performance Appraisal Software

Software for performance appraisals can help agencies reduce turnover and accomplish more with less resources. But it’s important to remember that not all software is created equal.

Have you ever purchased software that over-promised and under-delivered? Simply put, some software is developed better than others. Many tech solutions are built for private sector companies instead of government agencies. Before choosing a solution, understand what your agency’s needs are and complete a thorough vetting process with key stakeholders.

At NEOGOV, we understand that government agencies have unique needs when it comes to monitoring performance. That’s why we built Performthe only full-featured performance management software built for the needs of the public sector with a mobile-friendly interface. In addition to all the features mentioned in this article, Perform also lets you:

  • Enable multiple managers to collaborate on a single evaluation
  • Handle varying frequencies and approval workflows to maintain efficiency
  • Create custom approval workflows based on employee type and reporting structure
  • And more

Schedule a no-obligation appointment today to learn how Perform can help your agency  increase retention, boost productivity, and save time and money.

Mike Tannian

Mike Tannian is the Director of Content Marketing at NEOGOV. With a talented team of writers by his side, he aims to produce content that delivers real value to public sector HR professionals at every stage in the buying journey.

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