Competency-based performance management

Performance management is about achieving results in a manner that is consistent with organizational expectations. Integrating competencies within the performance management process supports the provision of feedback to employees not only on "what" they have accomplished (i.e., performance goals), but also "how" the work was performed, using competencies for providing feedback. Assessing competencies as a part of performance management is an important means of assisting employees in understanding performance expectations and enhancing competencies. Multi-source feedback, while not an HR application per se, is a method that is often used in performance management to assess and provide employees with feedback on "how" they performed their work (i.e., their demonstration of the competencies).

Best practices

Performance management

Performance management programs are set up to provide feedback to employees on how effectively they are performing in their jobs. Such programs normally include a set of goals or objectives the employee must accomplish within the review period as well as the standards or criteria for determining whether the defined goals have been accomplished.

Effective performance management include the following features:

Linking individual goals to the corporate and work unit business plans and goals;
Focusing on results, behaviours (competencies) as well as process improvement;
Regular reviews and updating of performance plans to address changing demands;
Training for both managers and employees on how to effectively give and receive feedback, including providing feedback to employees who experience challenges in performing to the standards required in their jobs / roles;
Training for managers on how to provide performance evaluations that are valid, fair and unbiased.

Integrating competencies in the performance management process

Competencies can be integrated into the regular performance management (PM) process in one of two ways:

By defining the competencies needed to perform each Performance Goal / Objective

In this case, the manager and employee identify the key competencies required to achieve each performance goal / objective (typically 1 to 3 competencies per goal/objective). At the end of the performance cycle, the employee's performance is evaluated in relation to the performance goals/objectives as well as the key competencies associated with each goal. Using this approach, the competencies included in the employee's performance plan may or may not completely coincide with the standard competency profile for the employee's role/job. The advantage of using this method is that the competencies being assessed are entirely consistent with the employee's performance goals for the performance review cycle. The disadvantage is that not all competencies within the competency profile for the employee's role/job will necessarily be assessed within the cycle.

By integrating the competencies for the employee's job into the PM process

In this case, the performance plan includes the performance goals/objectives for the review period as well as the complete set of competencies from the competency profile for the employee's role/job. The performance goals/objectives address "what" must be accomplished during the review period, and the competencies measure "how" the employee conducted him/herself to accomplish their work. The advantage of this method is that all competencies defined in the competency profile for the employee's role/job are evaluated. The disadvantage is that due the specific nature of the performance goals/objectives, key competencies for the effective performance during the review cycle, but not included in the competency profile, will not be assessed.

In both cases, feedback provided on the employee's competencies typically feeds into the development of a learning or action plan to address gaps in performance and development within or beyond the employee's current role/job.

Multi-source/360-degree/upward feedback

In multi-source, 360-degree and upward feedback, the behavioural indicators for the competencies needed within the target role/job are used as the standard for assessing the performance of the employee. In Multi-source / 360 feedback, different stakeholder groups provide ratings, including the employee, their supervisor, as well as others with whom the employee interacts (e.g., peers, team members, clients both within and outside the organization, reporting employees; etc.). In upward feedback, all employees reporting directly and/or indirectly to the supervisor provide feedback on the supervisor's performance.

The results are compiled and a report is provided to the employee. The report includes the results for all competencies, highlighting both the competencies that are strong as well as those rated lowest by the different stakeholder groups. In almost all cases, individual ratings from others (except for the employee's supervisor) are combined in such a way (e.g., averaged ratings) as to protect the anonymity of the individuals providing the feedback. The report is set up to show similarities and differences in ratings across the different stakeholder groups. The results of the process are normally used to develop learning and action plans for improvement (see section on Learning and Development). They can also feed into broader assessment programs (e.g., management assessment centres; development programs) to support employee career development and / or succession management within the organization.

Upward and multi-source/360 degree feedback programs must be managed well in order to protect those providing, as well as those receiving, feedback. The Society for Industrial and Organizational Psychology has published guidelines for the effective development and implementation of multi-source feedback.

Implementation stages

The following implementation stages are suggested for mid to large organizations implementing competencies within Performance Management on a corporate-wide basis

Stage 1

Determine policy for integrating competencies within the Performance Management process
Design a Performance Management process consistent with the policy (as required)
Design communications and training program to support implementation
Pilot the process
Revise and finalize 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., first year) and make revisions, as required.

References

Books

Dubois, D., & Rothwell, W. (2004). Competency-Based Human Resource Management. Davies-Black Publishing
Dubois, D., & Rothwell, W. (2000). The Competency Toolkit (Volumes 1 & 2). HRD Press
Lucia, A., & Lepsinger, R. (1999). The Art and Science of Competency Models: Pinpointing Critical Success Factors in Organizations. Pfeiffer
Shandler, D. (2000). Competency and the Learning Organization. Crisp Learning.
Spencer, L M. in Cherniss, C. and D. Goleman, eds. (2001) "The economic value of emotional intelligence competencies and EIC-based HR programs", in The Emotionally Intelligent Workplace: How to Select for, Measure, and Improve Emotional Intelligence in Individuals, Groups and Organizations. San Francisco, CA: Jossey-Bass/Wiley
Spencer, L., & Spencer, S. (1993). Competence at Work: Models for Superior Performance. Wiley
Ulrich, D. and Brockbank, W. (2005) The HR Value Proposition. Boston: Harvard Business School Press
Wood. R., & Payne, T. (1998). Competency-Based Recruitment and Selection. Wiley

Articles

Bartram, D. (2005) The Great Eight competencies: A criterion-centric approach to validation. Journal of Applied Psychology, 90, 1185–1203
Catano, V., Darr, M., & Campbell, C. (2007). Performance appraisal of behaviour-based competencies: A reliable and valid procedure. Personnel Psychology, 60, 201–230
Cheng, M. I., &. Dainty, R. I. J. (2005). Toward a multidimensional competency-based managerial performance framework: A hybrid approach. Journal of Managerial Psychology, 20, 380–396
Draganidis, F., & Mentzas, G. (2006). Competency-based management: A review of systems and approaches. Information Management & Computer Security, 14, 51–64
Homer, M. (2001). Skills and competency management. Industrial and Commercial training, 33/2, 59–62
Horton, S. (2000). Introduction- the competency-based movement: Its origins and impact on the public sector. The International Journal of Public Sector Management, 13, 306–318
Kochanski, J. T., & Ruse, D. H. (1996). Designing a competency-based human resources organization. Human Resource Management, 35, 19-34
McEvoy, G., Hayton, J., Wrnick, A., Mumford, T., Hanks, S., & Blahna, M. (2005). A competency-based model for developing human resource professionals. Journal of Management Education, 29, 383–402
Rausch, E., Sherman, H., & Washbush, J. B. (2002). Defining and assessing competencies for competency-based, outcome-focused management development. The Journal of Management Development, 21, 184–200
Sanchez, J. I., &. Levine, E. L. (2009). What is (or should be) the difference between competency modeling and traditional job analysis? Human Resource Management Review, 19, 53–63
Schmidt, F.L., & Hunter, J.E. (1998). The validity and utility of selection methods in personnel psychology: Practice and theoretical implications of research findings. Psychological Bulletin, 124, 262–274
Shippmann, J. S., Ash, R. A., Battista, M., Carr, L., Eyde, L. D., Hesketh, B., Kehoe, J., Pearlman, K., & Sanchez, J. I. (2000). The practice of competency modeling, Personnel Psychology, 53, 703–740.
Spencer, L. M. (2004). Competency Model Statistical Validation and Business Case Development, HR Technologies White Paper http://www.hrcompass.com/validation.html

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