As we head into a successful 2024 performance review season, HR professionals are likely reflecting on various evaluation methods such as competency evaluation, performance evaluation, and 360-degree feedback.

Today, we will explore the differences between performance and competency evaluations and take a look at key considerations for fair and effective employee evaluations.

There are many methods for employee evaluation, but most companies primarily use two: performance evaluation and competency evaluation.

Performance Evaluation, assesses the achievement of individual or team goals and accomplishments, also known as results-based evaluation. For example, a sales department may have a target for annual sales, and performance evaluations will measure how much of this target has been met. Performance evaluations typically rely on concrete metrics, such as goal achievement over a set period or project outcomes. These evaluations often use tools like KPIs and MBOs to establish objective goals and assessments and are commonly used to determine promotions or rewards.

Competency Evaluation, on the other hand, does not assess expertise or experience directly related to job tasks. Instead, it evaluates an individual’s abilities, skills, attitude, values, and mindset based on the company’s core values or ideal employee profile. While performance evaluations are typically led by the HRM (Human Resource Management) team, competency evaluations involve significant input from the HRD (Human Resource Development) team. The HRD team plays a key role by providing training and development programs tailored to job levels, roles, and organizational needs, such as leadership training, skills development, and evaluation training.

Unlike performance evaluations, which are based on MBO (Management by Objectives) and KPI (Key Performance Indicators), competency evaluations often involve subjective opinions from evaluators, which can lead to disagreements or dissatisfaction among employees after the evaluation process. However, employees cannot be judged solely on their performance, making it essential for HR managers to implement structured and systematic competency evaluations.

The concept of competency was first introduced by American psychologist David McClelland. Competency refers to psychological and behavioral traits that can predict or explain an individual’s performance. It encompasses not just knowledge or skills but a comprehensive ability, including the attitudes, behavior, and aptitudes necessary to perform tasks effectively. Competency evaluations assess not only an individual’s job performance but also how their skills and attributes contribute to the organization’s competitiveness and success.

It is also essential to note that each organization’s competency framework may vary depending on the company’s vision, culture, and the specific skills required for different roles.

• Communication
• Achievement/Results Orientation
• Customer Focus
• Teamwork
• Leadership
• Planning and Organization
• Business Acumen
• Flexibility/Adaptability
• Development of Others
• Problem Solving
• Analytical Thinking
• Relationship Building

Source : Woods & Payne, The Psychology of Recruitment and Selection (2002); Lee Sun-Gu, Competency Evaluation and Competency Interviews (2015)

Employee evaluations significantly impact compensation, and promotions, so it's critical to continuously research and implement fair evaluation systems, methods, and criteria.

Here are three important steps to ensure fair evaluations:

Employee evaluations are typically conducted by superiors, which can sometimes lead to concerns about fairness. To address these concerns, HR teams should clearly define evaluation criteria and ensure objectivity and fairness by diversifying the evaluators, for example, by implementing 360-degree feedback systems.

Training evaluators is crucial for ensuring fair and consistent application of evaluation criteria. Training helps prevent bias and enables evaluators to apply uniform standards.

HR managers should continually update and refine evaluation systems to reflect changes in the organization or roles.

Gathering feedback on evaluation results and processes is essential for improving future evaluation methods. It is important to document specific areas for improvement, such as evaluation criteria, procedures, and evaluator training methods.

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