What’s competency-based performance management?

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Competency-based performance management assesses job performance based on a list of required skills and knowledge, known as competencies, to identify strengths and areas for improvement. It can be used to improve performance or place employees in suitable positions. The competency frameworks used should be flexible and rewards are given for meeting or exceeding competency requirements.

Competency-based performance management uses a list of required skills and knowledge, known as competencies, to assess an employee’s job performance. This management practice focuses on the skills and characteristics of working employees to determine their strengths at work and identify areas that need improvement. Managers use competency-based performance management to improve employee efficiency and morale and reduce employee training costs by identifying and developing the specific skills needed to perform a task or business job.

This method can be used to improve performance in a position or to place members of an organization in positions suited to their skills. While the main focus of this type of management is to increase the performance level of employees, competency-based performance management data can also be used by human resources (HR) to evaluate and place employees in jobs based on their ability to meet job requirements. Competencies are characteristics that people possess or develop that help them to operate successfully in a position. In some cases, competency-based performance management may require an employee to be removed from a position where he or she is consistently unable to meet performance targets.

All physical, mental, and skill set characteristics can be included as competencies needed to perform a job. Skills can vary widely between job titles. The competencies defined largely depend on the requirements of a specific job. Competency-based performance management essentially creates an outline of the perfect qualification of employees and creates a measurement system, called a competency framework, against which to evaluate employee performance. Generally, when an employee does not meet the requirements needed to meet the needs of a job, he or she is trained or educated in weak areas to help him/her perform better in the job.

The competency frameworks used in competency-based performance management should be flexible based on the current skill needs of a position. Requiring skills or traits that are not necessary in the specific position can require an employee to acquire skills and knowledge that are not needed, often at a cost to the business that requires the skills. For example, requiring a graphic designer to learn accounting procedures or an accountant to learn graphics programs may be considered an unnecessary competency requirement to manage these positions.

Generally, competency-based performance management measures employee performance based on their improvements since the last competency assessment. In this type of system, the employee is measured against his own past performance and does not necessarily compete with other employees on their skill levels of competence. Competency-based performance management also involves rewarding employees who meet or exceed competency requirements. Generally, rewards are used in cases where an improvement in one or more competencies is displayed, but rewards can also be awarded to employees who demonstrate consistent proficiency in some or all of the competencies required for a job.

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