It is important for organizations to implement performance management software/system. Most organizations do use some form of performance appraisal system in their workplace. They use performance appraisal system as a communication tool that bridges the barrier between employees, top level and the management. It is also an integral part of the compensation system. However, a lot of times, appraisal related processes are poorly designed and implemented which is why organizations feel that performance appraisals are not done effectively.

A few signs that performance appraisal system isn't working are described below.

All employees evaluated on same factors: Evaluating employees of all levels and from different departments on same factors or competencies is not correct. For eg. A marketing professional and an IT professional will have different factors and competencies to be considered for evaluation.
Measuring attributes are not well defined: The difference between poor, average and outstanding should be well defined and understood by the employees and the appraiser.
Inconsistent evaluation among appraisers: The system should prompt the appraiser to give consistent comments and numbers to the individual employees.
All the employees are rated on an average scale: When all the employees are rated to be average or below average, low performers will never make an attempt to improve and very high performing employees will be demotivated.
Appraisals are not complete in time: Top levels are always occupied with number of other things that participating in appraisals might just slip out their mind. Reminding them to post their feedback manually is next to impossible and without their comments and ratings, the appraisal process is not complete. Therefore, it is better to have an automated system.
No slot for employees input: Self evaluation also holds great value during performance appraisal. If a system does not have a slot for employees input, the process is again incomplete.
System lacks customization: If the system isn't tailored to an individual employee's position, strengths, weaknesses or career path are not particularly useful.
Lacks confidentiality: If the system is not programed to be confidential, the employees will begin to compare themselves to what others do and receive. This creates low morale among the employees and conflicts.