Best Practices for Achieving Talent Success Maturity
Understanding the Competency-based Performance Review
Who it’s for:
What you’ll get:
An understanding of competency-based performance reviews and an example of one
Why you need it:
Competency-based models help to measure why employees succeed or fail in a role
When it applies in the talent success process:
During the performance review cycle
Competency-based performance reviews focus on developing the behaviors — the competencies — that are essential for developing employees as A-players in their roles. Competency-based performance reviews look at how an employee’s actions over a defined time led to meeting or missing defined objectives, so you gain an understanding of where an employee stands at present and what additional behaviors they should develop for future success.
This article gives you a step-by-step guide to developing and using competency-based performance reviews to hire more A-players by:
The Advantages of Competency-based Performance Reviews
Competency-based reviews allow for evaluation along strategic (company-wide) as well as execution-level (job-specific) lines. This is a crucial intersection for most businesses. As PricewaterhouseCoopers found in its 17th Annual Global CEO Survey (2014), 78 percent of global CEOs intend to transform their business, but only 54 percent are satisfied with the execution-level ability to get there.
Competency-based reviews help solve this problem. They provide a more detailed and nuanced understanding of the behaviors necessary for success that are:
- Specifically related to the company (for example, a small, fast-moving company might expect and benefit from different behaviors than a large, heavily process-oriented one)
- Related to an employee’s specific role (success as a salesperson requires different competencies than a service technician)
This understanding by HR and talent management leaders provides a foundation for making better talent decisions at every stage — from recruiting to individual training and development plans to promotions and transfers. A strong understanding of competencies enhances your ability to predict success in a role and apply the right tools to improve performance when needed.
Defining Competencies and Roles
To execute a competency-based performance review, you need to understand two concepts. The first is competencies, and the second is specific job roles. This page addresses how to determine and define competencies and roles in your business.
Competencies: A Short Definition
Competencies are employee behaviors.
HRSG, a world leader in competency-based talent management, defines competencies as “the observable behaviors of top performers — not just WHAT they do, but HOW they do it.”
Definitions vary slightly among different competency models, but the basic ideas are fairly consistent. ClearCompany’s integrated competency partner, HRSG, defines these four types of competencies: *
Core competencies define, in behavioral terms, the key values and strengths that help an organization differentiate itself in a competitive marketplace. By connecting employee behaviors to organizational objectives, core competencies can help the entire workforce align its performance in support of common goals.
Leadership competencies capture the essence of powerful, effective leaders and translate it into measurable and observable behaviors. Leadership competency frameworks enable you to build and customize a leadership blueprint based on transformational, business, and personal dimensions.
Technical competencies describe the application of knowledge and skills needed to perform effectively in a specific role or group of jobs in the organization. They are closely aligned with the knowledge and skills needed for successful performance in specialized fields such as IT, oil and gas, accounting, and many others.
General competencies describe the combination of abilities, motivations, and traits required to perform effectively in a wide range of jobs within the organization. Also known as soft skills, general competencies are an integral part of on-the-job success in virtually every context, every level, and every occupation.
Company-wide Competencies and Role-specific Competencies
Company-wide competencies reflect behaviors that are important to organizations. These can be company values, attitudes, or the way in which you and your employees approach your work as a holistic organization. Role-specific competencies are more focused on how each employee will excel at their individual jobs.
Competencies, in turn, help define roles. The behaviors you expect in a specific job become part of that job’s definition.
Roles: A Short Definition
The job role defines the daily expectations and responsibilities of a position in your business.
While competencies are employee behaviors, job roles include the job title, the employing department, the hierarchal position of the job, and the daily responsibilities. The job role is often what you put forth in the job description when hiring.
Job competencies define the employee behaviors that lead to successful execution of the job roles and responsibilities.
How Do Competencies Become a Performance Review?
To make sure that competencies are aligned with successful performance in a job role, you’ll need to be able to measure how those competencies interact within your organization. The best way to do this is to create and conduct competency-based performance reviews. This section addresses the connection between job competencies and the performance review itself.
Creating the Review
The focus of the competency-based performance review is on the behaviors, and how the behaviors tie back to successful execution of the goals. This type of review aims to link the objectives and the competencies in a very clear, transparent way.
Within the actual review, then, the focus should be on behaviors — and how the display (or lack) of those behaviors connects to the achievement (or not) of goals.
Conducting the Review
The manager must begin the actual review process by setting expectations for the review, re-clarifying the employee’s job objectives and goals, and reviewing the competencies associated with the job role.
Once the employee has expressed an understanding of the expectations, the manager can go into providing feedback. Again, because this is a specific type of performance review — the competency-based review — the feedback needs to be focused on behaviors, not just achievement of goals.
Connecting Goals to Behaviors: An Example
If evaluating a sales professional who missed their quota, a performance review without competencies would say, “Your goal was 12 percent growth and you only hit 9 percent. You missed that objective.”
A competency-based review would state the missed goal, and then link that to weaknesses in competencies identified by the review, such as, “Qualification” and “Closing,” for example. Then the employee and manager would discuss the employee’s daily work habits and practices around each specific behavior and discuss how to improve it.
The competency-based review requires more initial work to build, but it is easier for the manager to complete accurately, and provides much more specific guidance for coaching and counseling. This makes it especially useful for less-experienced managers. And by focusing discussion around clearly defined behaviors, it helps to minimize the interpersonal conflict that can occur when discussing weaknesses.
The feedback should lead to a dialogue between manager and employee. The ultimate goal is to move to the third stage, development, where manager and employee agree on a course of action, next steps, and a commitment around specific competencies that will increase overall performance.
Here are three additional considerations when conducting a competency-based performance review as well:
Managers and non-managers must be assessed differently.
We’ve put together an article on performance reviews for managers that you can access here.
Role definition needs to fit into the performance management life cycle.
See our article on recruiting with roles. This is important because, without well-defined roles, a competency-based performance review won’t be as effective.
Competency-based reviews are especially useful when assessing employees whose performance is harder to quantify through simple metrics.
It’s easy to measure the revenue a salesperson brings in, or the average time it takes a service technician to complete a call. But many other employees, many of whose contributions are extremely important, are much harder to measure. A midlevel engineer might play a contributing role on several large projects over the course of a year, where it is not easy to identify exactly what that individual contributed, or define simple transactional goals. For these roles, competencies provide a framework for more-objective benchmarking of each individual’s performance. This enables employees without a direct bottom-line connection to be evaluated on a similar field as one who generates a significant amount of revenue.
Interpreting Competency-based Reviews Is Crucial to Talent Management
As you collect more information from your competency-based reviews, you need to interpret the data you’re getting. Nothing in the talent management life cycle is static. All of it needs to be adjusted according to real data you’re getting back. That’s how you continue to make your hiring process better toward the acquisition of A-players.
How to Interpret Competency-based Reviews
Based on the data you collect from competency-based reviews, there are a number of different scenarios that could present themselves for interpreting and acting on what you learn. Here are three common situations and how they might each be interpreted.
The situation and data: Most employees are achieving goals but not scoring well in terms of the actual competencies associated with a role.
Interpreting what you learned
It’s time to change the competencies to more accurately reflect success within the role. This often results when our headcount needs to be filled immediately and in the interest of a quicker hiring process, the job role and competencies aren’t updated. After someone’s in the role, it’s time to revise the competencies.
The situation and data: Employees are being evaluated well in terms of competencies but aren’t achieving end goals.
Interpreting what you learned
An employee is performing the right behaviors but not seeing the desired results. It’s time to adjust the competencies necessary for the role, because despite the behaviors meeting what was desired, they aren’t driving success in the role.
The situation and data: The company overall is performing well, and a majority of your competency-based reviews seem to be above-average.
Interpreting what you learned
You’ve reached a place of successful alignment (for now) between job roles and job competencies that lead to goal achievement. Continue to monitor feedback from your competency-based reviews for areas where competencies can be adjusted to better reflect the goals of the overall strategy.
Two Samples for the Competency-based Performance Review
Here are two samples for the competency-based performance review that show how these types of reviews often look and connect the various elements mentioned in this article.
Competency-based Performance Review: Client Focus
The first sample here is based on the overall competency of delivering service excellence to internal and external clients. It defines five levels of the competency, from dealing with immediate client needs to ensuring continued service excellence. Under each level are examples of specific behaviors associated with it.
Providing service excellence to internal and external clients.
Competency-based Performance Review: Compensation and Benefits Administration
This example might commonly be used to assess HR professionals. It centers on the competency of administering employee benefits and compensation in line with HR strategies and the recruitment of top talent. As with the previous example, this one (also from HRSG), also uses five levels and a series of behaviors at each level.
Compensation and Benefits Administration
Developing, managing, and administering employee compensation and benefits policies, ensuring cost efficiency and alignment with human resources strategies, and attracting top talent.