AI in Performance Management: Key Applications for HR Success

The influence of artificial intelligence (AI) has permeated every business sector, and HR is no exception.

We've already talked about the various ways you can use AI in HR, so it's time to dig deeper.

We will show why AI has the power to revolutionize performance management, transforming it from a time-consuming administrative task into a strategic function that drives a high-performance culture and business success.

We've also talked to some AI and People Ops experts to see how they use AI for performance management.

⚡ What is AI-powered performance management?

AI-powered performance management is a process through which you can use artificial intelligence to make better decisions about how your employees perform now and in the future. 

It commonly involves measuring performance by considering far more factors than a simple rating or score. 

Plus, by using AI, you can better identify areas where an employee might need improvement and uncover strengths they might not even realize they have.

🤓 Note: It's essential to distinguish between performance management and performance measurement. The latter aims to quantitatively or qualitatively assess performance against set goals and objectives. 

On the other hand, performance management focuses on a more holistic approach to managing performance, encompassing a range of activities such as goal-setting, coaching, feedback, and recognition.

🤖 AI in performance management: Key applications 

In a healthy organization, performance management goes beyond classic performance reviews by including strategies for improving performance. 

Next are all the situations in which you might want to use artificial intelligence in performance management.

Remember: AI is only meant to be a tool that speeds up your work and improves accuracy. 

That being said, for all these applications, you'll need a human opinion and a real person in charge of managing the process and handling tasks AI can't take care of successfully (like meeting up with employees).

Identifying successful vs. unsuccessful employees 

You can tweak your recruitment and performance development processes by understanding which team members are successful and which are not. 

Knowing precisely what's boosting their performance or slowing them down allows you to tweak your workplace policies to ensure they won't hinder employee performance. 

Plus, you can enlist successful employees as mentors and on-team coaches. In contrast, those not performing as expected can receive additional training to help them reach their goals. 

For this, an AI system lets you track performance and behaviors against set success criteria. In turn, you'll be able to provide feedback and coaching, reward success, and prevent potential mishaps due to poor performance.

Strength and weakness analysis

Similar to seeing which employees are performing well and which ones need a little nudge, you can use AI performance management systems to get a detailed list of their top skills. 

A skills matrix, for instance, will give you a detailed look at your team's skills to spot strengths, talent density, and development opportunities. This makes for a fair and validated assessment without the manual work.

KPI completion 

By now, artificial intelligence has reached a stage where it can analyze past data to give you recommendations for KPIs (key performance indicators) worth tracking. 

On top of this, they assist you with real-time analysis in measuring employee progress to see if you're set to hit your KPIs on time.

💪 Check out our complete guide to mastering employee performance metrics to see the ones we recommend you track at every stage.

Analyzing past performance data and predictive analysis 

But it doesn't end with KPIs.

AI-based tools can help you see how long a person will take to finish a task, even if they're likely to postpone it. 

Time tracking tools, for instance, rely on AI to make better predictions on an individual's performance in time. 

Many human resources information systems have predictive analysis tools to automate performance tracking and reporting. Some will go one step further and recommend initiatives that can help you improve an employee's performance.

Automating the review process

Zavvy AI unlocks a whole range of shortcuts for your feedback and performance reviews. Just ask Zavvy AI to:

• Create a report of a recent feedback cycle. 
• Create a feedback cycle from scratch. 
• Create a survey cycle from scratch. 
• Create a check-in template. 
• Summarize feedback for reviewees and their managers. 

The best part? 

Our Zavvy AI will suggest growth area recommendations for employees by looking at the current and next career path level, the specific competency framework for the role and department, and feedback results from the last cycles to suggest concrete action items for development.

Offering a complete, AI-generated performance analysis 

Let's face it: It's challenging to keep up with employee performance and consider every piece of feedback. 

Imagine you're a manager with ten direct reports. You have to look through a self-review and four peer reviews for each reviewee. 

That means 50 reviews per feedback cycle. And suppose some of those reviewees also happen to be team leaders. In that case, you will need to consider some additional input from their direct reports. 

And you would have to summarize all input into a report to discuss during your performance review meeting. That is a lot of work! 

But what if there were a way to summarize all feedback from all sources automatically? 

Zavvy AI speeds everything up by analyzing employee feedback even when you're away. You'll then get a report of this performance for each individual report.

Linking areas of development with concrete steps and training resources 

But what happens once you have feedback results? For many companies, not much. Some people receive promotions, others might receive performance improvement plans, and it stops there. 

But performance management is more than just rating performance and sharing feedback. There has to be a next step involved.  

One common such "next step" is training related. 

So if you've ever wanted to connect the dots between people skills, career progression plans, and training opportunities, AI does just that. You could let these tools instantly create AI-generated employee development plans and define career progressions.

AI performance coaching

AI-driven nudges are proven to improve performance for both employees and supervisors. 

And their capabilities are endless. 

Zavvy's AI Coach can join your Slack workspace to share productivity tips, answer queries, and offer support for solving all kinds of problems. It can also help employees write feedback, find better learning resources, or establish development goals.

AI competency-based coaching 

AI can analyze performance feedback and data, suggest concrete goals, and provide coaching opportunities to develop new missing or lacking competencies. 

Competency coaching goes perfectly hand in hand with strength-based goals. They focus on expanding people's skills and competencies to get them closer to their ideal career goals.

Competency-based coaching extends to leadership roles as well. 

Zavvy's AI Leadership Coach will assess leadership strengths, help team leaders identify areas where they'd like to grow, and create personalized action plans. 

👉 Check out our complete look at AI in HR examples for more ideas about applying AI processes and tools in and outside performance management.

🏆 What are the benefits of using artificial intelligence in performance management?

While using AI for performance management is still in its initial stages, HR and People Ops leaders have already identified its benefits:

• Reducing human error and improving the accuracy of performance data collection.
• Being able to provide real-time feedback to employees.
• Offering personalized performance improvement suggestions.
• Predicting employee performance with higher accuracy.
• Creating actionable and motivating employee development plans and an improved employee experience.
• Increasing employee productivity and engagement over time.

💡 For a more in-depth discussion of AI for improved employee engagement and how other experts use this new tech, check out our guide to using AI in employee engagement.

🏢 Which companies use AI in performance management?

Spotify 

Spotify's employee performance review system relies on continuous planning and lots of one-on-ones then help managers and employees discuss performance goals and any challenges they face. 

Additionally, there are two annual development talks where the company aims to match their needs with every employee's ambitions.

The final performance scores are listed as part of a "Talent Snapshot" overview of the team's performance (including strengths and weaknesses). 

These replace entirely performance ratings in favor of workshops meant to equip leaders and employees with the necessary skills.

To further help their team scale, Spotify's internal talent marketplace, Echo, relies on AI-based recommendations to help employees find new growth opportunities within the organization. The goal is to avoid human subjectivity to guarantee a workforce and work environment based on diversity, inclusion, and belonging.

Echo also covers the organization's learning and development needs. They offer stretch assignments, mentorship, internal mobility roles, and more opportunities that ensure employees learn and improve their skills and performance. 

In fact, one year after Echo launched, Spotify reported that 6,000 employees engaged with Echo, 70% of employees had accepted their recommended project assignments, and 50% picked the mentorship opportunities offered to them.

👉 Read more on how Spotify enables employee growth and development as part of its performance management process.

Singular Design

Singular Design is a specialized software development company based in Miami, Florida that uses a very intricate leveling system for its employees' roles. 

They have five levels and 15 sublevels distributed as follows:

• (0) Junior (level) A, B, or C (sublevel)
• (1) Advanced A, B, or C
• (2) Specialist A, B, or C
• (3) Expert A, B, or C
• (4) Senior Expert A, B, or C

Singular Design kicked off their partnership with Zavvy by assessing all employees and assigning them to a level on their intricate leveling matrix. Once they identified the level of each employee, it was time to create detailed competency-based role descriptions. 

To speed up the process, they used Zavvy's AI-powered career Frameworks to create all descriptions for these roles.

The AI's ability to generate all these descriptions in Spanish, Singular Design's corporate language, showcases how technology can enhance customization, making performance management more accurate and culturally inclusive. 

Singular Design’s innovative use of AI thus aids in: 

• Aligning employees' skills with their respective roles. 
• Fostering a more effective, fair, and transparent performance management process.

🔮 Future trends for AI in performance management

Using artificial intelligence in performance management is expected to look different with each passing year as more and more new tools are getting out there. 

Sometimes faster than we can even adopt them. 

So we talked to a couple of AI and People Ops experts to get their own predictions on the future of AI for managing employee performance.

Emanuel Williamson, AI Advisor at Employ, says that one key future trend for AI in performance management is the exciting integration of natural language processing and sentiment analysis:

"By harnessing the power of AI to analyze communication patterns and employee sentiment, organizations can gain advanced insights into team dynamics, collaboration effectiveness, and overall engagement. This data-driven approach empowers companies to proactively identify areas for improvement, optimize communication strategies, and foster a positive work environment."

Emanuel also notes that leveraging AI algorithms for real-time feedback and personalized recommendations enhances employee development and drives continuous growth. 

The potential of AI in performance management is immense, offering opportunities to boost productivity, engagement, and organizational success.

Alex Santos, Owner and Chief Human Resources Consultant at Nimble Advisors, has been an HR Consultant for over ten years and is now starting to see "an evolution in the use of AI to provide employee feedback in real-time, even having an AI provide suggestions so that employees can course correct their performance on the job."

On the same feedback note, Felicia Shakiba, Founder of CPO Playbook Consultancy, remarks that AI has the potential to challenge managers and promote fair practices by encouraging them to provide less biased and more objective feedback:

"By analyzing performance data and patterns, AI systems can identify potential biases in managerial feedback and highlight instances where there may be inconsistencies or disparities.

Through this feedback loop, AI can serve as a constructive critic, nudging managers towards fairer evaluation practices. By providing insights and recommendations based on objective metrics, AI can encourage managers to assess performance more impartially, focusing on measurable outcomes and competencies rather than subjective impressions."

Marek Nebesář, Operations Director at Behavio Labs, observes that the trend that will bring the highest value to his team in terms of AI-driven performance management is undoubtedly assistance with learning and development:

"As a startup, we have a wide variety of expertise within our team. So it can be is challenging to track and implement individualized development plans. A solution that can analyze robust data on individual performance and deliver tailored learning and development plans is of immense value to us."

➡️ Enable higher employee performance and motivation with Zavvy AI

There are hundreds of different ways of tracking and improving employee performance. So you need one unified tool for managing employee growth, performance, and feedback. 

Zavvy's AI tool connects all these elements beyond what you can handle manually. 

❌ No more feedback collected with no change. 

❌ No more development plans made just for checking some boxes. 

❌ No more untapped people potential. 

❌ No more teams drowning in manual tasks. 

❌ No more boring training plans that don't improve employee knowledge and competencies. 

❌ No more disconnected people processes. 

📅 Book a demo of our Zavvy AI tool for job performance management, employee development, and more!

❓ FAQs on AI in performance management

What is an automated performance management system?

An automated performance management system (also known as performance management software or employee appraisal software) is a tool that helps organizations manage the performance of their employees. You can use such tools for many use cases, including creating and managing the employee performance review process or analyzing employee data to spot trends that could impact business outcomes such as turnover rate and absenteeism.

How is AI used in performance reviews?

Managers use AI-powered performance reviews to automate processes like robust data analytics, finding areas of improvement and highlighting employee strengths. 

AI can also give you personalized insights into how employees perform and help you collect employee feedback that you can then use to run tailored and actionable performance reviews.