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Research Report

COMPETENCY-BASED
PERFORMANCE MANAGEMENT
What, Why, and How
Many organizations are becoming more performance in present and future jobs Uncertain Environments. In uncertain and
interested in management and appraisal of Development (behavior change) rapidly changing environ-ments, where re-
competencethe how of performance. oriented sults are not under employee control, hard
They are seeking more qualitative assess- results objec-tives are often rendered irrel-
ORGANIZATIONAL ISSUES
ment, oriented to the future and focused on evant by external events. In such situations,
development.Acompetency approach brings Problems that indicate a need for com- evaluation must be based on whether em-
a different perspective to performance man- petency-based performance management ployees did everything they could, wheth-
agement. Performance is viewed in terms of include the following: er they demonstrated the right behaviors
the process em-ployees use to achieve their Job performance standards and appraisal rather than achiev-ing targeted results. The
job results. It combines planning, manage- criteria are seen as unequal or unfair be- less control employees have over results,
ment, and appraisal of both perfor-mance cause: the more performance should be based on
results and competency behaviors. It as- One group of employees must achieve expression of competencies.
sesses what employees accomplished and at a higher level than other employees in Qualitative/Process Service Jobs. In jobs
how they did it (with personal characteris- equivalent jobs to receive a good evalua- with no measurable outcomes, qualitative
tics they possess that predict superior per- tion or reward skills-competencies-are the best indicators
formance in present jobs, or in future jobs). Employees are graded on a bell curve, of employee performance. The more sub-
Performance and competence are bal- so that most workers are rated average or jective the job output, the more important it
anced in a competency-based perfor- below average, regardless of the absolute is to appraise competency behaviors.
mance management system. In a line job, level of their per-formance Jobs Intended for Development of Future
achievement of performance results may be Expected results are not under the work- Performance. The more a job or organiza-
weighted 90 percent and demonstration of ers control, (e.g., using a pro-ductivity in- tions objectives for employees stress devel-
competency behaviors only 10 per-cent. At dex such as tons of steel per secretary) opment of skills (e.g., management trainee
the other extreme, an appraisal form for a Employees have little input into the per- positions), the more appraisal should be
service position might weight competence formance goals set for them. based on demonstrations of improved com-
100 percent. Performance objectives for a Performance appraisal is seen by manag- petence.
staff job might give equal weight to results ers and employees as a bureau-cratic pa- Changing Organizational Strategy, Focus,
and demonstration of competency behav- perwork exercise that they do not take or Markets. In changing envi-ronments and
iors. seriously because it has little impact on em- organizations, employees potential to con-
In traditional systems, achievement of ployee performance or development. tribute to the firm in the future may be more
performance results is quantified, past ori- Employees see nothing in the system for important than their past performance. For
ented, and tied to unit goals, based on a them; performance appraisals do not ad- example, the ability to sell a firms new
short term, and used to make compensation dress their questions about skill develop- products in a global market may be more
decisions. Competency appraisal is more ment or career ad-vancement_ important than sales of older products in do-
qualitative, longer range, future oriented, The performance management system mestic markets. Most performance manage-
and used for employee devel-opment and has little impact on actual man-agement; ment systems are past oriented. The greater
career path planning. it doesnt lead managers to do their jobs a firms emphasis on future perform-ance,
better or to develop or provide feedback to the more its system should stress develop-
PERFORMANCE their employees. ment and appraisal of competencies.
(pay for results) 50%-90% The performance management system
What of performance does not reflect or reinforce the organiza- STEPS IN DEVELOPING A
Quantitative: Tied to unit goals tions strategy because it fails to focus em- COMPETENCY-BASED SYSTEM
Short time frame: One year, past ployee behavior on strategic priorities such 1.Identify competencies required for su-
performance as quality or service. perior performance in present or future jobs
Reward oriented Performance ratings are inflated. If 95
(competencies needed to implement a de-
percent of the workforce is rated 4 (very
COMPETENCIES sired strategic change).
good) on a scale of 1 to 5, employee rat-
(pay for skill) 10%-50% 2. Train managers and employees in per-
ings are not of any use for promotion deci-
How of performance sions or succession planning. formance management (e.g., coaching for
More qualitative A competency-based approach is par- performance improvement). Performance
Longer time frame: Future ticularly appropriate for: coaching involves:

2006, Workitect, Inc. www.workitect.com


a. Agreement between manager and em- Feel dissatisfied with their existing situa- The most important factor in imple-
ployee on his or her actual levels of com- tion or level of performance (actual) menting a competency-based perfor-mance
petence. An employees competency levels Are clear about a desired situation or management system is training managers
are most eas-ily assessed with 360 degree level of performance to provide this coaching and developmen-
ratings by colleagues all around the em- Are clear about action steps they can take tal assistance. (Studies of effective perfor-
to move from the actual to the desired situ- mance management sys-tems consistently
ployee (i.e., by his or her boss, and a sample
ation or level of performance find training to be an important input.) Em-
of peers, subordi-nates, and customers who
Competency-based performance man- ployee training also helps employees un-
know the employees work well). The aver- agement systems shift the emphasis of ap- derstand how the system works, what their
age of these ratings is compared with the praisal from organization results achieved role is, how to assess themselves, and how
employees self-assessment of his or her to employee behaviors and competencies to contract for competency development
competencies. demonstrated. Diag-nosis and problem activities with their managers.<
b. The employee identifying the desired solving to deal with poor performance takes
levels of competence he or she wants to de- this form: If results are not at the desired Adapted from: Competence At Work by
velop to meet his or her own performance level, give higher priority to these job tasks, Lyle Spencer and Signe Spencer; 1993,
or career advancement goals. demonstrate these behaviors more often, John Wiley & Sons.
c. Agreement on a contract between em- and develop these competencies (i.e., Workitect helps organizations design and
ployee and manager on model the task priorities, behaviors, and implement competency-based performance
The employees competency development competency levels of the best performers management systems, and provides
goals and the action steps he or she will in the job). training and resources for managers and
take to attain them The addition of competencies to perfor- employees.
The help and support the manager will mance management systems has im-portant
give the employee implications for management. Managers
This coaching approach uses the princi- explicitly commit themselves to provide
ples of self-directed change theory, which employees with formal training, coaching,
holds that adults change only when they and other competency development activi-
feel it is in their own best interests to do so ties during the performance period. www.workitect.com

2006, Workitect, Inc. www.workitect.com