Why and How to Use Competencies in the Performance Management Process

Performance management is one of the core pillars of HR. Unfortunately, it is also an area riddled with unclear expectations and personal bias. For example, a recent survey found that 25% of respondents were negatively impacted by their supervisor’s biases during their performance reviews. These faults act as fractures in the pillar, threatening to crumble under the weight of lofty organizational goals. Competencies can strengthen your performance management process, and elevate your people as well as your organization.

What is performance management?

The goal of performance management is to help employees achieve results that align with organizational expectations. In the performance management process, employees are given feedback on how well they are executing their essential job functions.

An effective performance management program includes the following features:

• Setting goals the employee must achieve within a defined review period;
• Standards and criteria by which to evaluate employee goal achievement and performance;
• Linking individual goals to larger organizational and business goals;
• Evaluating employee results and behaviors;
• Regular, recurring performance reviews;
• Performance plans that address changing demands and skill gaps;
• Training for employees and managers on how to give proper feedback; and
• Training for managers on how to provide fair and objective performance reviews.

Performance management is often tied to professional development activities. These activities are designed to close existing gaps (found in the performance evaluation) or prepare employees for new roles. Career and professional development initiatives were rated the number one priority for Gen Y and Gen Z workers. Employers can retain these key demographics by offering better constructive feedback and more growth opportunities.

Competencies in the Performance Management Process

By integrating multi-level competencies into the performance management process, the company can provide more thorough and accurate feedback on employee performance. This is because competencies provide information not only on what the employee accomplished, but also how the work was performed.  

Additionally, competencies help resolve common issues associated with the performance management process. These include bias (particularly against equity-deserving groups) and lack of transparency, especially in promotion decisions. Multi-level competencies help evaluators stay objective, reducing the influence of bias in performance reviews. With well-documented behavioral indicators, employers can also accurately compare employee performance and make better promotion decisions from a logical perspective.

Competency programs aim to enhance individual, team, and organizational outcomes. Assessing competencies as a part of the performance management process can help employees better understand performance expectations and how to do their job better.

Competency-based Feedback

To assess competencies in performance management, evaluators should look to the behavioral indicators within the employee’s competency profile. Using multi-source, 360-degree feedback, various evaluators (from peers to managers) can rate the employee’s proficiency in each competency based on the employee’s behaviors.

The results from these evaluations can help supervisors develop learning plans with the employee.

How to Integrate Competencies into the Performance Management Process

There are two ways to integrate competencies into the performance management process.

#1 Define the Competencies Needed to Perform Each Performance Goal

In this method, the employee and their supervisor must identify the key competencies needed to achieve each performance goal. These competencies may or may not coincide with the competencies laid out in the employee’s competency profile. Typically, there are one to three competencies needed for each goal.

At the end of the review period, the supervisor will evaluate the employee’s performance based on the goals and the competencies associated with each goal. This method ensures that all the competencies being assessed are relevant to the employee’s performance goals. However, this method may also mean that not all the competencies listed in the employee’s competency profile will be evaluated during that review period.

#2 Integrating Competency Profiles into the Performance Management Process

In this method, the performance plan includes performance goals for the review period as well as the complete list of competencies from the employee’s competency profile. This includes the core competencies everyone in the organization should demonstrate.

Unlike the previous method, all competencies within the competency profile will be evaluated. However, competencies not listed under their competency profile but that are necessary to complete the goals will not be considered or evaluated.

Steps to Upgrade Your Company’s Performance Management Process

Medium to large organizations can use the following steps to implement competencies in their corporate-wide performance management processes.

Stage 1

• Create a policy for integrating competencies within the performance management process.
• Design a performance management process consistent with the policy.
• Design communications and a training program to support implementation.
• Pilot the process.
• Revise and finalize the process to be ready for full implementation.

Stage 2

• Communicate and implement the performance management process.
• Review and evaluate the process during the first cycle of implementation (e.g., the first year) and make revisions, as required.

Get Started with Competencies

If you’re already using competencies, you can use the steps provided in this article to help you elevate your performance management process. If you’re new to competencies, learn how you can benefit from and get buy-in for a competency program in our free guide.