How Competencies Enhance Performance Management

Domain Expert: Nicholas Camelio, Vice President, Human Resources, Salary.com

Bottom Line

Subjects

August 2008

Performance management programs enhanced with competencies provide the springboard to more
effective communication regarding performance, resulting in better alignment with business goals and
objectives and higher levels of goal attainment.
Performance management, trends and challenges, employee types, competencies

Competencies and Performance Management Setting the Groundwork

Too often managers and employees view the performance management process as an
obligatory, annual event rather than a valuable, ongoing cycle. Discussions about goal setting
and performance are often difficult and uncomfortable. This does not have to be the situation
in your organization.
In this issue of Salary.com Insight, we will review the major steps of the performance
management cycle, illustrating how each step builds on the other, creating a process that is
continuous and ongoing. Market trends and employee attitudes will be shared illustrating how
a well structured performance management program can help address employee concerns
and clarify misunderstandings about the performance management process.
We will illustrate typical employee types and offer suggestions for how to best handle these
specific personalities. Finally, we will show how implementing competencies as a part of your
performance management system can alleviate some of the stress associated with the
performance management process, making your program more effective.

What is Performance Management?

While the concept of employee performance management can vary by organization, it is
generally a structure to communicate, monitor, and assess the individual contribution of an
employee to an organizations overall goals and objectives. It typically takes place over a oneyear timeframe that aligns with the organizations annual budgeting and planning process.
Most performance management programs have several distinct phases, with the central and
most important step being ongoing coaching, development planning and feedback, which lies
at the core of any well executed plan as illustrated in the graphic below:
V. Calibration
Compensation
Planning

IV. Formal
Performance
Review

I. Goal Setting &

Career Development
Discussion

Ongoing Coaching,
Development Planning
and Feedback

II. Mid-Year Review

& Tracking Against
Goals

The purpose of a
performance
management initiative is
to drive employee
accountability and
promote alignment of
individual goals with
corporate objectives.

Our research shows that

performance
management programs
are largely
misunderstood by most
employees.

Competencies are a
collection of key
observable behaviors
that describe strong
performance in a job or
role.

Competencies raise the

bar for individual and
corporate performance
and promote a culture of
learning.

III. Self Assessment

Copyright 2008. Salary.com. Inc. All Rights Reserved

In the ideal scenario, mutually agreed upon goals are set at the beginning of the 12-month performance review period. Career
development issues and training requirements are clarified at this point to enhance overall job performance and provide career
development opportunities for the individual employee. At various points throughout the 12-month cycle, goals should be
reviewed and tracked against agreed-upon measurements by way of informal discussions and, if necessary, goals can be revised
or updated to reflect changes in objectives or job duties. A mid-year review is suggested at the minimum, but more frequent and
proactive communication throughout the year is preferred. At the end of the review cycle, employees should provide managers
with a self-assessment explaining how they feel they performed with regard to established goals. Managers should include this
input in the final formal performance review. After the final formal review is conducted, the cycle begins again.

Performance Management Today

Performance management can mean different things to different organizations. In most organizations, performance management
is limited to annual performance reviews. In some organizations, it incorporates an informal goal setting process. And in very few
organizations, it is seen as an approach to leverage human assets that include identifying, measuring and developing employee
performance.
In many organizations, the performance management process can be a painful one. Often, employees feel they are being held
accountable for results that are beyond their control. There can be an underlying concern about rater bias stemming from the
lack of clarity with regard to expectations and the belief that the system is rigged and rewards are merely tied to the managers
discretion. Goals and general purpose are not clear from the start and it is difficult to deliver tough messages. Some managers
choose to avoid these confrontations altogether.

Trends and Challenges

An increasing number of organizations are beginning to indentify the need for enhanced processes to build, support and sustain a
competitive workforce. Competitive pressures are driving organizations to address program structures and measurement tools in
order to increase and sustain competitive advantage.
Most employees in todays workforce are more proactive and involved in the goal planning attainment process than ever before.
They know what they want from an organization in order to reach their professional goals and will likely move on if they are
unsatisfied. Common questions that employees ask include:

Am I being paid fairly?

What are my goals and objectives?
How will I be reviewed?
What professional opportunities are available to me?

Salary.coms own research illustrates that employees, in general, do not have a good understanding about performance
management. In the 2007/08 Employee Satisfaction & Retention Survey employees indicated the top five reasons they are
leaving or want to leave their current job.

Top 5 Reasons to leave a job

Percent of employees

Inadequate compensation

27%

Lack of career development

19%

Insufficient recognition

17%

Boredom

11%

Inadequate professional development opportunity

11%

Copyright 2008. Salary.com. Inc. All Rights Reserved

A large number of employees responding to our survey, 32 percent, indicate a desire to find a new job within the next three
months. If designed properly, a performance management program can address each of the reasons for leaving a job specified
on the previous page, resulting in a more satisfied, engaged, flexible and productive workforce.
In the 2007/08 Performance Management Survey, Salary.com invited employees and business representatives from across the
U.S. to participate. Results indicate that performance management is still primarily a manual process that is not completely
understood by most employees. Some survey highlights include:

Seventy-five percent of organizations use a manual process involving hand-written forms or spreadsheets
Only 34 percent of employees feel their individual goals are tied to company goals
Half of the employees surveyed feel that their input was included in individual performance reviews, while 31 percent
feel their input is included only somewhat
Thirty-one percent of employees see the relationship between pay and performance as informal with pay decisions
believed to be at the managers discretion

This study also reveals that goal-related talks outside of the formal annual review do not happen frequently enough as illustrated
in the chart below:

Frequency of Goal-Related Talks Outside of Formal Reviews

50%
41%

41%

40%

41%

37%

Percent of Employees

35%
29%

30%

26%
24%
21%

20%

19%

20%
15%

14%
12%

14%
11%

10%

0%
HR Professional

Individual
Contributor

Line Manager

Senior Executive

Employee Category

Frequently (every month)

Infrequently (1-2 times per year)

Never

Somewhat Frequently (1-2 times per quarter)

Common Employee Types

For the purposes of our discussion, we have identified five common employee types. Each behavior results from a different
combination of motivators and presents their own set of challenges to employers from a performance management perspective.
The chart on the following page summarizes some typical employee personality types and recommended tips on how to
approach these employees during performance discussions in order to engage them in a productive discussion about goals and
performance.

Copyright 2008. Salary.com. Inc. All Rights Reserved

Employee Type

Key Motivators

Tips for conducting performance discussions

The Perfectionist

Achievement
Autonomy

Encourage them to focus on 2 3 top priorities

Give them permission to let some things go
Focus more on exceeding competency expectations rather than tactical goals
Give difficult feedback when necessary

Establish strong goals up-front

Be the first to set the tone during discussions about performance
Be open to their side, but cut it short if a pattern emerges
Agree to disagree bearing in mind that the managers assessment is what ultimately
counts

The Debater

The Passive
Aggressive

Achievement
Power/control

Achievement
Power/control

Observe body language when discussing performance

Use silence as a way to draw the employee out
Use action-inquiry or other feedback techniques to make sure the message is being

received correctly
Stay calm, focused, and on-task

The Finger Pointer

Job Security
Relationships
Power/control

Call out the behavior early

Direct discussion back to the employee and their performance
Use action-inquiry or other feedback techniques to cal out the avoiding behavior
Set ground rules about what can and should be discussed during the performance
review

The Emotional One

Job Security
Balance
Relationships

Frame negative or developmental feedback to help prepare the employee

Avoid softening the feedback because you feel bad
Dont offer excuses or explanations to help the employee out
Focus on getting their input on action plans for improvement and ways to develop new
skills/new competency areas

What are Competencies?

Competencies are a collection of observable behaviors that excellent performers exhibit more consistently than average
performers. They represent a combination of the knowledge, skills and abilities required to perform a job. Competencies are at
the core of effective talent management initiatives providing the key behaviors that describe strong performance in a job or role
and driving the success criteria for recruiting, performance management career development and succession planning, as well as
the underpinnings for competitive compensation planning.
Competency based performance planning systems help to raise the bar for overall performance, align individual behavior with
business strategy and promotes a culture of learning. The process necessary to build a competency model is comprehensive
and requires buy-in from human resources and business unit leaders.
Broadly speaking, however, when developing a competency model you should first define a set of core corporate competencies
upon which all employees are measured, and then build out job competencies for individual jobs. Employee goals should then be
developed with both competencies and business goals in mind. Monitor performance against competencies to identify gaps,
create development plans, track progress and reward results.
For a more details on how to build a competency model in your organization, read our May 2008 Insight Building Competency
Models which can be found at http://knowledge.salary.com.

Copyright 2008. Salary.com. Inc. All Rights Reserved

The Impact of Competencies

A Performance Management program that is enhanced with competencies can have a positive impact on the company itself,
managers, individual employees, as well as human resources and training.
Through the implementation of a competency model, the company can better align the workforce with corporate strategy, goals
and objectives. Knowing what skills, knowledge and abilities are needed to perform each function, it is easier to detect possible
shortfalls of skills in critical business areas. Cross training is encouraged allowing employees to move more easily across various
functions of the organization. All of this leads to a more flexible and adaptive workforce that is clearly focused on achieving
corporate goals and meeting specified objectives.
A competency model also establishes a common language which allows for more objective discussion between managers and
employees regarding development, performance, succession planning, and talent management. Managers can clearly and
consistently communicate job expectations to staff. And job profiles that are created using competency model guidelines assist in
recruiting the right people for the right job.
Established competencies can assist employees in determining what skills are needed to be successful in their current position
as well as jobs they would like to have in the future. Development plans that are created for employees with competencies in
mind include information which identifies knowledge gaps. In addition, strengths are highlighted which may qualify individuals for
higher profile project work, affording them valuable work experience and skills development opportunities. Self-directed
employees can take advantage of learning references available and work towards moving more quickly through the organization.
Finally, an established competency model makes it easier for human resources to align learning and development with employee,
team and organizational needs. Training professionals can more easily facilitate directed learning for employees as they look to
improve skills and enhance the quality of their work.

Copyright 2008. Salary.com. Inc. All Rights Reserved

Takeaway

Clearly specify roles and responsibilities for all employees. This provides focus for the employee and allows them to
buy into goals and objectives. Understanding their role in the organization is the important first step towards ensuring
goal attainment and a high level of performance.

Define performance criteria for individuals that are meaningful and relevant and are aligned with business goals
and objectives.

Define guidelines for measuring and assessing success and determine a fair and consistent process for gathering
assessment data. If an employee understands how goals are being measured, they can understand and appreciate the
assessment process itself.

Implement competencies as an effort to further enhance the performance management initiative.

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