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How to Implement a Competency-Based Approach to Performance Management

7 min read
implementing a competency-based approach in your performance management

Performance management can be tricky. It’s easy for businesses to make mistakes with their performance management strategies, leading to demotivated team members that don’t know how their career is progressing.

One way to help your people understand how to achieve their goals is to implement a competency-based performance management approach. This type of performance management strategy focuses on the specific skills, knowledge and behaviours required to perform a job effectively – and helps you to show your team members how to develop these skills.

In this guide, we’ll explain what a competency-based approach to performance management is and show you how to implement this strategy in your business to get the most out of your team.


What is a Competency-Based Approach to Employee Performance?

A competency-based performance management approach is a method of evaluating and improving performance in companies that focuses on the specific skills required to perform a job well.

Usually, team members are evaluated against a set of pre-defined competencies or job-related skills that are deemed essential for good performance and success in their roles. That could be technical, interpersonal, leadership or problem-solving skills. The key to a competency-based approach is ensuring that you communicate these competencies to your team.

This approach also involves setting goals that align with the organisation’s overall strategy and providing training and development opportunities to help teams acquire the right skills and knowledge.

By focusing on specific competencies rather than vague or subjective performance measures, this performance management technique helps to ensure that you evaluate employees fairly and consistently and that they have a clear understanding of what you expect of them in their roles. It also helps managers to identify areas where employees may need extra support or development and to provide targeted coaching and feedback to help them improve their performance.


What’s the Difference Between ‘Competences’ and ‘Competencies’?

The terms ‘competences’ and ‘competencies’ are often used interchangeably, but they do have different meanings.

Competence‘ and ‘competences‘ refer to the overall ability of an individual to perform a specific job or task. Competences are usually evaluated based on past performance, qualifications and other factors that show an individual’s ability to perform effectively at work.

On the other hand, ‘competency‘ and ‘competencies‘ refer to a specific set of skills or behaviours that a person needs to have to perform a particular job successfully. Usually defined by an organisation based on the specific needs of a role, competencies may include skills based on both technical and interpersonal skills.

Both concepts are important in the workplace, as they help businesses to identify and develop the talent they have to achieve their organisational goals now, as well as help them to make decisions about future hires.

Why Use a Competency-Based Approach?

Using a competency-based performance management strategy allows managers and HR professionals to understand how skills are distributed throughout the organisation so they can make hiring and promotion skills with confidence.

In addition, a competency-based approach helps managers to identify areas where team members might need extra support or development to help them achieve their goals. Then, they can provide targeted coaching and feedback to help them improve their performance.

a manager and team member having a goal setting meeting

With an effective competency-based performance management system, businesses can attract and retain top talent as team members know that managers will identify areas for improvement, up-skilling and career development.

So how do you put a competency-based performance management system in place?

How to Implement a Competency-Based Approach to Performance Management

  1. Set core competencies

These competencies usually apply to all roles. They support your organisation’s values and mission. These competencies should also be competitive advantages that distinguish you from other companies. For example, a core competency might be excellent customer service – your business focuses on providing better service than competitors which helps you stand out.

  1. Define job-specific competencies

Great people want to know what they need to do to succeed and further their career in your organisation. It’s important to define their role’s competencies so they have the tools to progress. Without them, you could end up with a problem with employee engagement and retention.

Your job-specific competencies should tie in with organisational and individual goals. You should define technical competencies for each role, but you’ll also need to consider leadership competencies for some jobs – for example, a content writer will need excellent writing skills and an in-depth understanding of the English language, while a content manager will also need to have skills in conflict management.

Some leadership competencies will be essential to the effective management of all businesses, but you should also consider the leadership attributes that are distinctive to your business to create a competitive advantage.

  1. Create job descriptions

Once you’ve defined your competencies, you can develop them into job descriptions for each role within the business. This will help current team members to understand what they need to do to succeed and help motivate them to do better in their roles.

While you’re creating these job descriptions, make sure you plan for future job roles – what roles might you want to recruit for in the future? Liaise with your department managers to plan for these positions and put a timeline on when you might be ready to start hiring for them.

  1. Identify skills gaps

Now that you’ve developed your competencies and job descriptions, you may notice skills gaps within your teams. This isn’t a problem – it’s completely normal in most organisations to find skills gaps as teams grow and people come and go. In fact, according to a World Skills UK study, 69% of business leaders believe they have a skills gap among their staff.

To help you identify skills gaps, you can use performance appraisals, coaching sessions or one-to-one check-ins to help determine what your team members need to know to perform well in their roles. You’ll then have a better idea of whether your team needs any additional support in getting there.

Performance appraisals are a great way to spot holes in your teams – you might realise that there’s a job type you’ve never hired for that would be the perfect addition to your team.

  1. Set goals and communicate them effectively

Goal setting is vital to your team’s success. Use the competencies and job descriptions to set goals for your team members, but make sure to set objectives for them at department- and company level too.

Your goals should be SMART: Specific, Measurable, Achievable, Relevant and Time-Bound. SMART goals help individuals to understand what they need to do, when they need to do it and how it will be measured. It gives team members a clear path to success that they can follow to get measurable outcomes and help increase their performance.

Make sure you communicate why it’s important to have these goals and competencies in place – how will they help achieve the company objectives? Set clear expectations so your teams know if there are deadlines to complete training or to provide feedback.

Giving your teams steps on how to achieve their goals will help them meet them more quickly – and therefore boost productivity, improve performance and help you reach company goals faster.

  1. Build a training and development programme

To help meet business objectives and help with your team’s personal development plans, you should build a training and development programme. Work with your department leaders to develop personal development plans, then use them to come up with a calendar of training opportunities for your teams.

It’s important to keep reviewing team performance and keep an eye out for skills gaps all the time. According to a McKinsey study, 94% of the workforce doesn’t have the skills they will be required to have by 2030 to perform their jobs well – so keeping on top of employee skills development will be vital to your organisation’s success.

Examples of training and development activities to add to your programme include:

  • Company-wide training days to help increase employee engagement
  • One-to-one management-team member check-ins
  • Continued professional development (CPD) qualifications specific to certain job roles

By developing these training plans, you’ll help to bridge skills gaps in your teams. It’ll also be easier to identify high-performers for potential new roles, whether in management or new technical roles.

  1. Monitor, document and assess

close up of person's hands flicking through paper documents on employee development

You must continue to monitor employee performance if you want an effective performance management system. You should:

  • Monitor your learning and development activities so you can see where you need to make changes, and monitor your team’s progress using performance appraisals.
  • Keep detailed documentation so you can use it to make improvements using data going forward
  • Assess how the training and development programmes are doing – what’s working? What do you need to change?

You should also assess an individual employee’s performance regularly too – an annual review should be the minimum. During this assessment, you can provide constructive feedback on your team member’s work. You can also check whether they have met their performance goals and identify whether they have their own development needs that fit with business priorities.

  1. Continually review and revise your performance management strategy

As much as we’d like to say you can, unfortunately you can’t set and forget your performance management strategy. You can use performance management tools to help keep on top of your plan, but you’ll still need to set aside time to review it to ensure it still aligns with your company objectives.

Make sure you collect frequent feedback from managers and team members to help you see where to make changes. This collaborative process helps create a great company culture where everyone feels involved and as if they’re moving in the same direction.

Continue to motivate your team by setting clear expectations on how meeting their goals can lead to career growth and progression within your company. And when they perform well, recognise and reward them. A few doughnuts in the office or a team activity goes a long way to show teams that you appreciate the hard work they put in to help the company succeed – in fact, a study by Deloitte showed that organisations that recognise their people had 14% higher engagement, productivity and performance in their teams.

The Key Takeaway

Creating an effective performance management strategy that uses a competency-based approach doesn’t have to be hard. Utilise performance feedback from department leaders and team members to help you identify competencies for each role and identify skills gaps.

The most important thing to remember is to always keep your organisation’s key goals at the forefront. Develop your strategy and keep it up-to-date as employee performance and personal development needs change to ensure you’re always working towards your company’s strategic objectives.


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