How to Create Competency-Based Performance Reviews

Welcome to The Learning Xchange!

We’re so excited to bring to you our brand-new weekly podcast, hosted by Matthew Brown, VP of Learning and Brand Success at Schoox.

The Learning Xchange is a podcast that focuses on the ever-changing landscape of online learning and talent management. It is a place where L&D and HR practitioners and leaders can enjoy an “Xchange” of ideas, explore innovations in learning, and gain insights from others who share the same passion for improving and influencing the future of learning and development.

In this first episode we focus on performance reviews, and specifically competency-based performance reviews.

Hit play on the player below to listen to the podcast episode.

Or, read on to find out more.

Performance reviews are a necessary part of any business

Typically, most businesses kick off their annual review process around September/October and facilitate the whole cycle through to December.

When done right, a performance review acts as a formal assessment of an employee’s demonstration of knowledge, skills, and capabilities. Managers identify the employee’s strengths and weaknesses and clarify expectations of the employee in their given role.

Despite their necessity, performance reviews can strike fear and panic in the hearts of both employees, managers, and HR departments around the country.

Why? Well, an employee might dread what their manager will say about them. It’s perfectly normal to want to shy away from getting feedback. It’s also nerve-wracking if your performance review directly relates to your annual bonus, pay raise, or promotion decisions. Plus, it’s often a highly administrative, time-consuming process. 

Likewise, managers do not want to spend too much time completing performance reviews for the same reasons.

Finally, HR professionals have a lot more work to do during the performance management process because they play such a key role. Creating a great performance management experience takes a lot of effort.

At Schoox we believe that no one—whether an employee, manager, or HR professional—should dread or fear performance reviews.

A performance review should help to improve employees’ skills and their overall development. This benefits the employee, their manager and team, and the company as a whole.

It’s time to take the confusion and fear out of performance reviews so that managers can create an effective experience and achieve what they set out to accomplish in the first place—improved performance!

How performance reviews usually operate

Performance reviews have not changed much since the early 1990s. We have been using the same processes, for the most part, for over three decades and they tend to look a little something like this:

1. Everyone on the team receives an electronic or paper form to fill out
2. They fill out the form and include their thoughts on the past year (the good, the bad, and the ugly!)
3. They take a deep breath and submit the form to their manager
4. The manager reviews their notes and adds their thoughts and ideas
5. They enter the calibration process (ran by HR) where the results are analyzed further, and rating distribution is considered
6. The final step is compensation distribution, where matters such as bonuses and any possible raises are discussed and delivered

Not all performance reviews will work in the same way. There are variations in the process but, the steps listed above are what most of them will entail.

What do annual performance review forms contain?

When the annual performance review form lands on your desk or in your email inbox, it will typically contain two main sections.

One section focuses on company results such as KPIs, sales, turnover, and engagement. The second section focuses on individual performance. The individual performance section may include core values or certain competencies related to your specific role within the company.

The problem with traditional annual performance reviews is the ‘annual’ part. Remembering what you had for breakfast can be a struggle, never mind recalling what happened over the last 12 months!

The heart of a performance review should focus on driving the right behaviors and the right outcomes. Sure, getting results is important. But your performance review shouldn’t be solely focused on results. Instead, it should focus on whether the path you take to achieve the results is sustainable and ideal for delivering those results. That’s where competency plays a big part in your performance review process.

Why businesses need to leverage a competency-based framework

Many businesses miss out on the opportunity of combining different competencies and sharing them throughout learning and HR.

HR professionals understand that having a competency-based framework that acts as a connecting thread running through the employee experience can help individuals obtain greater performance outcomes. A competency-based framework can also help strengthen the business, yet, very few businesses leverage it and instead take a more haphazard approach.

A massive mistake that many companies make is failing to provide adequate training designed to improve the competencies that were deemed necessary in the recruitment phase. When a business searches for a new hire, they will usually include desired competencies that the ideal hire will possess. If someone applies for the role and they show that they do have the required competencies, the business will hire that person, welcome them to the team, and that’s it. Usually, there is no follow-up training to help the new team member develop those vital skills any further.

Eventually, the annual performance review season comes around, and that’s when a discussion around competencies arises. If you’re lucky, there might even be a conversation around how you can close any performance gaps evident from your review. However, you might be an employee who is left to figure it all out for themselves.

Businesses that lack a competency-based framework will often leave it up to their employees to create a meaningful development plan that tackles the issues presented in the performance review.

Three reasons why businesses are not making the change

The first reason businesses are reluctant to change annual performance reviews is because they see compensation as the finish line. Without using the yearly performance review to help guide the decision process around compensation distribution, businesses are at a loss for an alternative answer.

The second reason is that change takes time and creating a new annual performance review process is a lot of work.

Finally, many businesses do not have enough determination to make a change. A lot of them will say, “if it’s not broken, why fix it?”

Why businesses need to change their annual performance reviews

Workplace dynamics have changed. Younger generations grew up in a different world, and they have different expectations than generations that came before them. Older generations are accustomed to the way things have always been. However, younger generations are not afraid to question the status quo. Their desires, needs, and expectations have evolved, and unfortunately, many businesses have not evolved with them.

Younger generations are not driven by compensation to the same degree as generations before. Instead, what drives younger generations is the desire to be a better human and ultimately make the world a better place. Technology powers their lives from morning until night. If they have a question, they Google it. If they want to learn something new, they watch YouTube videos.

So, what does all of this mean for businesses?

If you want to keep employees happy and engaged, you need to make sure that they feel like they have a purpose.

How to keep younger generations happy at work

Put the employee in the center of the discussion. Take time to walk in their shoes and try to see things from their perspective. What are their needs, wants, strengths, weaknesses, and fears?

For years, businesses focused on the business needs of the employees. Companies set expectations and consider how well an employee performs based on these expectations. But, is it time to ask what employees need from the business?

Do you know what your employees need? Do you know what motivates them? Do you know what skills they possess outside of their specific job function?

Take an inventory of what is available within your team. Let employees’ voices be heard and don’t silence them. You should know where employees are the strongest and most confident. It would help if you understood how to create experiences that bring out the best in your employees.

One of the easiest ways to figure all of these things out is to carry out a periodic survey. A survey is a simple way to gather important information about your employees, and it is very time-efficient.

Continuous learning—the constant expansion of skills through learning and increasing knowledge—is crucial if you want employees to stay loyal, engaged, and happy in their roles. Employees usually get some training during their first few weeks on the job. Then, learning experiences start to fade and reduce until there’s very little to no training. This situation gets worse when most of the employees take the same training. The one-size-fits-all approach to training is where many businesses go wrong because not everybody learns the same way.

How to identify training gaps and build a foundation of competencies

You don’t have to spend a lot of time or resources designing tons of new training. Instead, break the process into smaller pieces and tackle the problem one piece at a time. First, consider your existing training offering. Is it extensive or limited? Can employees go through the training at their own pace, or are they pushed to take the training when you tell them?

It’s fair to offer both options. However, if you have limited training for employees, your highest performers are at risk of running out of content, and therefore, they fail to reach their full potential.

Take a full inventory of what the business needs from employees. Ask what the business needs to be good at to be successful. Once you have this information, connect it to the required competencies, skills, behaviors, and attitudes to make it happen. With this, you create the first layer of the foundation.

Next, identify what employees need and want from the business. Combining both of these objectives will help you identify areas where the company lacks content to bridge specific gaps.

Remember, training doesn’t have to be formal. Training can be in the form of a video, a blog post, a 30-minute e-learning course, an interactive seminar, and so on. Your main goal here is to build a foundation that allows you to support your employees’ potential while also focusing on what you need from them today.

Make sure that your learning offerings are rooted in a foundation of competencies. Younger generations are not motivated by compensations as much as they are motivated by a business’s commitment to developing employees.

In conclusion

Annual performance reviews are critical. However, it’s equally vital that you create an environment where your employees are fully supported and continue to learn new things, improve their skills, and become better people.

When done right, performance reviews help employees understand their strengths and weaknesses—ideally this should be done through a competency-based framework. Many will want to do better and strengthen those weaknesses through training activities, and it’s important that they have the option and training available to do so.

Do you want to learn more about competency-based performance management?

Watch our on-demand webinar: Handling Performance Reviews During Business Unusual.