Pros & Cons of Competency-Based Performance Reviews

Richard Nelson Bolles's book, What Color Is Your Parachute?, has sold over 10 million copies in 28 countries — and for good reason.

In the book, Richard gives current and would-be employees the advice to, "Always define WHAT you want to do with your life and WHAT you have to offer to the world, in terms of your favorite talents/gifts/skills-not in terms of a job-title."

In other words, take time to really get to know your best competencies — then, find a job that lets you apply them. Today, that's a message that resonates on both sides of the employee/employer equation.

But it's one thing to say you're looking for someone who's "adaptable", "ambitious" and has excellent "attention to detail". It's another thing to measure whether an individual is bringing those traits to work every day — and a whole other thing still to prove those traits actually result in improved performance at work.

So how can you track competencies at a practical level?

A brief history of competency assessments

The idea of optimizing an individual's inherent strengths may seem pretty hot these days, but the practice of assessing competencies has been around a while.

“Competence” was first creating a buzz in HR back in 1953. But the idea of competency assessments really made its mark in 1973, when Harvard psychology professor David McClelland wrote a paper called, Testing for Competence Rather than Intelligence.

In his groundbreaking paper, David posited that while traditional aptitude tests were good predictors of academic performance, they weren't all that great at predicting on-the-job performance. Instead of a rigid intelligence test, David suggested that an individual's underlying personal characteristics (or, "competencies") were the best predictors of performance.

And it's an honorable idea. But as with most good ideas, proof of worth is in the execution — not the idea itself.

The problem with competency ratings in performance reviews

Competency assessments have morphed into a bulky HR process.

HR departments force managers to navigate endless competency libraries and judge employees based on a rigid set of competencies that are more reflective of a "unicorn" employee than the actual needs of the business.

Here's a quick sum-up of the drawbacks of an over-reliance on competencies in performance reviews:

• Reviews become overly focused on what "should" work, instead of what does
• They don't leave enough room for the variety of skill needed in nuanced situations or roles
• They treat competencies as quantitative measures of performance

A better way to track competencies in performance reviews

Get your managers on board

The practice of measuring an employee's knowledge, skills and attitude (KSAs) has been around for quite some time. But do your managers know that?

More importantly, do they care?

The truth is, most managers are too busy working with the actual personalities on their team to to think about whether their employees should improve their "critical thinking" abilities. And is that really a bad thing?

A manager's ability to lead a group of different people with different competencies is what matters most, not their ability to dissect that group based on a 9-box model of what's supposed to work. That's why companies like Google have kept their managers out of the hiring process altogether, and other companies like Deloitte have scrapped traditional competency-ratings in favor of open-ended metrics like, "Given what I know of this person's performance, I would always want him or her on my team."

If your managers are smart people (and we're betting they are), they'll know that using a qualitative measure to assess a business goal is a waste of time. Get them on board by coaching them on how your competencies go beyond the fluff to measure how an employee meets a quantitative goal.

(And while you're at it, make sure they're aware of the impact of rater effects and how their feedback could be prone to bias.)

Work backward

Competencies are best-used to identify the how behind a specific business goal or vision.

• How does a customer support department boost an NPS score by 5 points?
• How does a sales rep hit their revenue target?
• How do we work better and faster moving forward?

We all know there are a certain mix of characteristics, that lead to a certain set of behaviors, that leads to an individual's success in their role. But there are many nuanced "black box" areas on the way to hitting a performance goal that those of us at the higher level just can't see.

Rather than taking a top-down approach that assumes that someone with a rating of 4 out of 5 on "organizational skills" is ripe for a promotion — why not start by assessing the competencies of the people already winning in their roles?

Once you know the KSAs that already work, then you can help your managers hire, coach and rate based on proven competencies.

Keep the competencies, ditch the "framework"

Coaching employees to further develop their best traits on the path to achieving your company's vision is at the core of performance management.

Competencies help us put a finger on what's really working in our business and are crucial to helping us coach our employees to reach their highest potential.

But they can quickly backfire when they're used as a performance management "cure-all", blanketing the unique individuals that make up your business into a homogenous group.

If you really want to offer more value at work by helping your people spend more time in their "zones of genius", it's time to go back to basics and look at competencies at what works on-the-job as opposed what "should" work based on a job description.