Performance reviews are an essential part of managing employees effectively and setting them up for success. Performance reviews can also be tricky to conduct in a way that is meaningful, fair and motivating for employees. The Society for Human Resource Management (SHRM) offers guidance and best practices for conducting performance reviews through a competency-based lens.
Competency-based performance reviews focus on evaluating employees based on the core competencies and objectives required for their role, rather than just reflecting on results alone. This approach helps employees understand exactly what behaviors and skills are most important, provides a framework for setting developmental goals, and creates more consistency and objectivity in the review process.
The key steps in conducting a competency-based performance review according to SHRM guidance include:
Define Core Competencies
Take the time upfront to define the 3-5 core competencies that are most important for success in an employee’s specific role. Competencies should reflect technical skills as well as soft skills like communication, problem-solving, initiative, etc.
Communicate Expectations
Clearly communicate the core competencies and performance expectations employees will be evaluated on at the beginning of the review period. This sets the stage for employees to understand exactly what behaviors and results will be reviewed.
Gather Evidence and Examples
Throughout the review period, managers should document specific examples and metrics that show how well an employee is demonstrating each core competency. Hard numbers, accomplishments, challenges and opportunities should all be noted.
Conduct Mid-Year Check-Ins
Halfway through the review period, the manager and employee should meet to discuss progress, address any concerns, acknowledge successes and make any adjustments needed for the rest of the period. Feedback should flow both ways.
Hold The Review Meeting
The formal review meeting is where the manager and employee come together to discuss performance over the entire review period based on the predefined competencies and expectations. Feedback should be focused on behaviors, not personality or traits.
Discuss Ratings and Scores
If using a rating scale to assess performance level for each competency, take time to explain the ratings/scores given and what they signify. Allow employees to provide their own self-assessment as well to facilitate discussion.
Develop Goals and Actions
The review conversation should lead to clear, specific goals that will help the employee further develop for success. Commit to regular follow-up meetings to discuss progress toward achieving the agreed upon goals.
Obtain Employee Sign-Off
Have the employee sign off on the review documentation to acknowledge discussion of performance and goal setting for development. Ensure they feel heard and that the process was fair and constructive.
Follow-Through is Key
Following up after the formal review with ongoing coaching, feedback and progress check-ins keeps employees motivated to achieve their full potential and helps managers sustain a continuous performance management culture.
SHRM also recommends adhering to some important principles to ensure performance reviews remain constructive and benefit employee development and engagement. Firstly, focus the review conversation on observable behaviors and impacts, not personality attributes which the employee cannot change. Reviews should also offer a balanced perspective – both acknowledging strengths and successes as well as opportunities for growth. If constructive criticism is given, it must be specific, supported by examples and coupled with clear steps for how the employee can improve. Additionally, performance discussion should note both what was achieved as well as how it was achieved – highlighting exemplary behaviors aligned to core competencies.
A competency-based, goal-oriented performance review system centered around clear expectations, documented examples, two-way feedback and development planning helps managers conduct meaningful reviews that motivate high performance. But regular informal coaching conversations throughout the year and leadership follow-through after the formal review is key to sustaining a culture where performance management drives continuous learning and improvement versus being viewed as just an annual event. When done right, SHRM research shows competency-based reviews can increase employee engagement, productivity and retention.
Competency-based performance reviews following SHRM best practices provide a structured yet flexible framework to evaluate employees in an objective, developmental manner. From defining what success looks like in a role to setting clear goals post-review, the SHRM approach ensures performance reviews are a meaningful process that foster two-way communication, acknowledge strengths and opportunities, and ultimately work to enhance an employee’s contribution through focused development. Regular check-ins and coaching ensure the review conversation continues throughout the year versus being a single annual event. When competency-based reviews are implemented consistently with a growth mindset, they can absolutely help maximize employee performance and potential over time.