Most personnel software seems to make sense only for big companies with multitudes to manage. If you have only a few employees, why not use pen and paper?

Dennis McKain, owner of McKain's Centurion Security and Investigation, in San Jose, Calif., believes his small size is precisely what makes having an appraisal software program so essential. McKain, who employs from 20 to 25 people, says his software helps create the chain of evidence required to protect his company against employee disputes. "Here in California you find yourself being pulled into the California Labor Relations Board every time you turn around. As a small business, I don't have the cash flow to handle a lawsuit," he explains.

McKain uses a program called Employee Evaluator and Salary Manager ($195, from Hi Tech Enterprises, in Monterey, Calif., 800-437-1222) and believes it has several benefits:

* Documentation. This is the employer's most important backup in a wrongful-termination lawsuit. Because it never gets lost on his desktop and is easier to manipulate than folders of papers, the software program spurs McKain to make entries consistently, particularly in the 90-day probation period.

* Easy evaluation. McKain finds analysis is quick, mainly because the program is so supple. For example, each position can be ranked in five or six categories of preformance, such as productivity, attendance, and basic communication skills. McKain designed the criteria for measuring each of those categories by posing questions to be answered under each one.

Finally, you decide how to weight each category, so an employee's punctuality might constitute only 10% of her overall ranking, whereas her relationship with clients would make up 50% of her grade. Employees can be compared with one another in just one category or in total ranking. Or an employee's recent performance can be compared with his own past rankings.

* Job assignments. The record of performance gradually becomes a management tool. McKain gives employees a copy of the evaluation, complete with graphics and McKain's answers to the performance questions, every time he evaluates an employee. He also uses his documentation to match employees with clients. -- Ellyn E. Spragins