Competency-Based Performance Reviews: Framework & Examples
Traditional performance reviews often focus narrowly on what employees achieved without examining how they achieved it. An employee might hit their sales targets through aggressive tactics that damage client relationships, or a developer might ship code on time but create technical debt that slows down the entire team.
Competency-based performance reviews address this gap by evaluating both the outcomes and the behaviours, skills, and attributes that produce sustainable, high-quality results. When implemented well, they create a shared language for performance expectations, clarify what good looks like at every level, and give employees a concrete roadmap for development.
This guide walks you through building a competency framework, designing rating scales, and implementing competency-based reviews with practical examples you can adapt for your organization.
What Are Competency-Based Performance Reviews?
A competency-based performance review evaluates employees against a defined set of competencies: the knowledge, skills, abilities, and behaviours that the organization has identified as essential for success in a given role or at a given level.
Rather than asking "Did this person meet their goals?" the competency approach asks "Did this person demonstrate the behaviours and skills we need at their level, and to what degree?"
Components of a Competency
Each competency typically includes:
- Competency name: A clear, concise label (e.g., "Strategic Thinking")
- Definition: What the competency means in the context of your organization
- Behavioural indicators: Observable behaviours that demonstrate the competency at each proficiency level
- Proficiency levels: A progression scale from developing to expert
Benefits of Competency-Based Reviews
| Benefit | Description |
|---|---|
| Clarity | Employees know exactly what behaviours and skills are expected at their level |
| Development focus | Identifies specific capability gaps rather than vague improvement areas |
| Fairness | Standardized criteria reduce bias and subjectivity in evaluations |
| Career pathing | Competency progression aligns naturally with career advancement |
| Strategic alignment | Competencies can be tied directly to organizational values and strategy |
| Succession planning | Easy to identify who is ready for the next level based on demonstrated competencies |
Building a Competency Framework
Step 1: Define Core Competencies
Core competencies apply to every employee in the organization, regardless of role or level. They reflect your values and culture.
Example Core Competencies:
- Communication: Conveys ideas clearly, listens actively, and adapts communication style to the audience.
- Collaboration: Works effectively with others, shares knowledge, and contributes to team goals beyond individual responsibilities.
- Accountability: Takes ownership of commitments, meets deadlines, and accepts responsibility for outcomes.
- Adaptability: Responds constructively to change, learns from setbacks, and adjusts approach when circumstances shift.
- Integrity: Acts ethically and transparently, follows through on commitments, and treats others with respect.
Most organizations define 4-6 core competencies. More than that becomes difficult to assess meaningfully.
Step 2: Define Role-Specific Competencies
Role-specific competencies reflect the technical skills and functional expertise required for a particular job family.
Example for a Software Engineering Role:
- Technical proficiency
- Code quality and testing
- System design
- Technical mentorship
- Incident response
Example for a Sales Role:
- Pipeline management
- Consultative selling
- Product knowledge
- Negotiation
- Client relationship management
Example for a People Manager Role:
- Team development
- Performance management
- Delegation and empowerment
- Conflict resolution
- Strategic planning
Select 3-5 role-specific competencies per job family to keep the review process manageable.
Step 3: Define Proficiency Levels
Proficiency levels describe what each competency looks like at different stages of mastery. A common model uses four or five levels.
| Level | Label | Description |
|---|---|---|
| 1 | Developing | Learning the basics; needs guidance and supervision |
| 2 | Competent | Independently applies the competency in standard situations |
| 3 | Proficient | Consistently demonstrates the competency at a high level; handles complex situations |
| 4 | Advanced | Deep expertise; coaches and mentors others; drives improvements |
| 5 | Expert | Recognized authority; shapes organizational capability; innovates in this area |
Step 4: Write Behavioural Indicators
Behavioural indicators are the specific, observable actions that demonstrate a competency at each proficiency level. These are the backbone of a competency framework because they make abstract concepts concrete and assessable.
Example: Communication Competency
Level 1 - Developing
- Communicates basic information clearly in writing and verbally
- Asks questions to clarify understanding
- Responds to messages and requests in a timely manner
Level 2 - Competent
- Structures written communications logically with clear purpose
- Actively listens and paraphrases to confirm understanding
- Adapts tone and detail level for different audiences
- Presents information confidently in small group settings
Level 3 - Proficient
- Communicates complex or sensitive topics with clarity and tact
- Facilitates productive discussions in meetings
- Creates clear documentation that others can follow independently
- Anticipates questions and addresses them proactively
Level 4 - Advanced
- Communicates strategic vision in a way that inspires action
- Navigates difficult conversations with empathy and directness
- Coaches others on improving their communication skills
- Represents the team or organization in cross-functional or external settings
Level 5 - Expert
- Shapes organizational communication standards and practices
- Builds bridges between departments or stakeholders with conflicting interests
- Communicates at the executive or board level with confidence and influence
- Serves as a trusted advisor on communication strategy
Competency Examples by Employee Level
Individual Contributor Competencies
For individual contributors, competencies focus on personal effectiveness, technical skill, and collaboration.
| Competency | Expected Level | Behavioural Indicators |
|---|---|---|
| Technical Expertise | Competent to Proficient | Delivers quality work independently; seeks feedback to improve; stays current with industry practices |
| Problem Solving | Competent | Breaks down problems logically; considers multiple solutions; escalates appropriately when stuck |
| Time Management | Competent | Prioritizes tasks effectively; meets deadlines consistently; communicates proactively about delays |
| Teamwork | Competent | Shares knowledge with colleagues; supports team decisions; offers help when capacity allows |
| Initiative | Developing to Competent | Identifies improvement opportunities; volunteers for projects; suggests solutions alongside problems |
Manager Competencies
For managers, competencies shift toward people leadership, strategic thinking, and organizational impact.
| Competency | Expected Level | Behavioural Indicators |
|---|---|---|
| People Development | Proficient | Creates development plans for each direct report; provides regular coaching; identifies and nurtures high potential |
| Performance Management | Proficient | Sets clear expectations; delivers timely feedback; addresses underperformance constructively |
| Strategic Thinking | Competent to Proficient | Connects team goals to business strategy; anticipates challenges; makes trade-off decisions aligned with priorities |
| Delegation | Proficient | Assigns work based on strengths and development needs; provides context rather than micromanaging; holds people accountable for outcomes |
| Change Leadership | Competent | Communicates the "why" behind changes; supports team through transitions; models adaptability |
Senior Leader Competencies
For senior leaders, competencies emphasize organizational impact, vision, and culture stewardship.
| Competency | Expected Level | Behavioural Indicators |
|---|---|---|
| Vision and Strategy | Advanced to Expert | Sets a compelling direction; translates strategy into actionable plans; adjusts course based on market and organizational signals |
| Organizational Development | Advanced | Builds scalable systems and processes; develops leadership pipeline; shapes culture intentionally |
| Business Acumen | Advanced | Understands financial drivers; makes resource allocation decisions with organizational impact in mind; balances short-term and long-term priorities |
| Executive Presence | Proficient to Advanced | Communicates with authority and authenticity; builds trust with board, investors, and external stakeholders; represents the organization publicly |
| Innovation | Proficient to Advanced | Champions experimentation; creates psychological safety for risk-taking; allocates resources to new ideas |
Rating Scales for Competency Reviews
Five-Point Behavioural Scale
This is the most common approach, linking ratings directly to the proficiency levels.
| Rating | Label | Definition |
|---|---|---|
| 1 | Below Expectations | Rarely demonstrates the competency; significant development needed |
| 2 | Developing | Demonstrates the competency inconsistently; actively building capability |
| 3 | Meets Expectations | Consistently demonstrates the competency at the level expected for the role |
| 4 | Exceeds Expectations | Frequently demonstrates the competency above the level expected; a role model for peers |
| 5 | Exceptional | Consistently performs at a level well above expectations; influences others and drives organizational improvement |
Tips for Effective Rating
- Anchor ratings to observable behaviours: Use the behavioural indicators as evidence, not gut feeling.
- Avoid central tendency: Managers should differentiate between strong and average performers rather than clustering everyone at "Meets Expectations."
- Use examples: Require at least one specific example to justify any rating above or below "Meets Expectations."
- Calibrate across managers: Hold calibration sessions where managers discuss and align their ratings to ensure consistency.
Implementing Competency-Based Reviews
Phase 1: Design (4-6 Weeks)
- Assemble a working group of HR, managers, and high-performing employees to define competencies
- Draft core competencies (4-6) aligned with organizational values and strategy
- Draft role-specific competencies (3-5 per job family) with input from subject matter experts
- Write behavioural indicators for each competency at each proficiency level
- Define expected proficiency levels for each role and career stage
- Select or design a rating scale that fits your culture
Phase 2: Pilot (4-8 Weeks)
- Select 2-3 teams for a pilot program
- Train pilot managers on the competency framework and how to assess behaviours
- Conduct pilot reviews using the new framework
- Gather feedback from both managers and employees on clarity, fairness, and usefulness
- Refine the framework based on pilot learnings
Phase 3: Full Rollout (Ongoing)
- Train all managers with workshops that include practice assessments and calibration exercises
- Communicate to all employees what competencies will be assessed and why
- Integrate with existing processes including goal setting, development planning, and compensation decisions
- Provide resources such as self-assessment guides, example reviews, and FAQ documents
- Launch the first full cycle with HR support available for questions
Phase 4: Continuous Improvement
- Review and update competencies annually to reflect changing business needs
- Analyze review data to identify common development gaps across the organization
- Refine behavioural indicators based on manager and employee feedback
- Conduct calibration sessions each review cycle to maintain rating consistency
Competency Review Template
Section 1: Core Competencies
Communication (Expected Level: Competent)
- Self-assessment rating: ___
- Manager rating: ___
- Evidence and examples: _______________
- Development actions: _______________
Collaboration (Expected Level: Competent)
- Self-assessment rating: ___
- Manager rating: ___
- Evidence and examples: _______________
- Development actions: _______________
Accountability (Expected Level: Competent)
- Self-assessment rating: ___
- Manager rating: ___
- Evidence and examples: _______________
- Development actions: _______________
Section 2: Role-Specific Competencies
[Competency Name] (Expected Level: ___)
- Self-assessment rating: ___
- Manager rating: ___
- Evidence and examples: _______________
- Development actions: _______________
Section 3: Overall Assessment
- Strengths: Top 2-3 competencies where the employee excels
- Development areas: 1-2 competencies to focus on in the next review period
- Career development actions: Specific steps aligned with competency growth
- Overall performance summary: Narrative combining goal achievement with competency assessment
Benefits and Challenges
Benefits
- Objectivity: Competencies with clear behavioural indicators reduce the subjectivity that plagues traditional reviews.
- Development orientation: Employees receive specific, actionable feedback about skills and behaviours they can improve.
- Alignment: When competencies reflect organizational values, every review reinforces what matters most.
- Promotion clarity: Employees can see exactly which competencies they need to demonstrate before advancing.
- Retention: Employees who understand what they need to develop and have a plan to get there are more likely to stay.
Challenges and How to Address Them
| Challenge | Solution |
|---|---|
| Framework is too complex | Limit to 4-6 core + 3-5 role-specific competencies |
| Behavioural indicators are vague | Use specific, observable actions rather than abstract qualities |
| Managers struggle with assessment | Invest in calibration training and provide example reviews |
| Employees see it as bureaucratic | Connect competencies clearly to career advancement and development |
| Framework becomes outdated | Review and update annually with input from employees and business leaders |
| Rating inflation | Require evidence for above-average ratings and conduct calibration sessions |
Conclusion
Competency-based performance reviews represent a significant step forward from traditional approaches that focus solely on outcomes. By defining the behaviours and skills that drive success at every level, you create a shared language for performance that is clearer, fairer, and more development-oriented than subjective assessments.
The investment in building a competency framework pays dividends across the employee lifecycle: from hiring (assessing competency fit), to development (targeted growth plans), to promotion (clear advancement criteria), to succession planning (identifying readiness for the next level).
Start by defining your core competencies, pilot them with a few teams, gather feedback, and iterate. The framework does not need to be perfect on day one. What matters is that it gives employees a concrete understanding of what success looks like and a clear path to get there.