In the present business environment of cut throat competition and globalization, competency based practices have gained much of an attention from the contemporary organizations. They aim at achieving an optimum performance in the long term by developing the skills and competencies of the employees on a continuous basis. Competency based management systems are primarily employee centric performance management systems and focuses upon how an organization achieves a desired performance. By aligning competencies within the performance management framework, the supervisors provide a feedback to the employees on the performance goals achieved and how the work was performed.

Competency focused performance management systems can serve as a useful tool for helping the employees in understanding the performance expectations and improving the competencies. Competency based management are strategic in nature and influences almost every area of human capital management which starts with the hiring of an employee and ends with the retirement. It aims at standardizing and integrating all HR activities by relying upon competencies which support fulfillment of organizational goals.

For example, Maruti Udyog Limited which was a joint venture with Suzuki of Japan realized the need of aligning HR strategies with the corporate strategies by linking competency mapping with the major systems of HR. Deregulation in India in 1998 drastically declined the market share of Maruti which was earlier the undisputed leader in the automobiles industry. Reforms like competency mapping, job rotations, improvements in the appraisal system, initiatives in implementation of a transparent system of feedback and communication, clear definition of job profiles and their accountabilities and many others, improved the competitiveness of Maruti.

Performance management systems are based on personal competencies which distinguish high performers from the average performers and the personal competencies are derived from the values and core competencies of an organization (Reagan, 1994). According to Collins and Porras (1996), organizations which use core competencies based systems are regarded as high performers or visionaries. Competencies are primarily job specifications concerned with the knowledge, skills and abilities of an individual which defines the personal as well as the organizational success (Englemann & Roesch, 1996). The same researchers listed personal competencies as achievement orientation, team work, analytical thinking, relationship building, customer service orientation, etc. Individual competencies drive excellence in an organization as they are utilized as a yardstick for evaluating and monitoring both individual and organizational performance and their effectiveness (Antonacopoulou & FitzGerald, 1996).

Competencies can be integrated with the performance management process by any of the two ways:

1. By identifying and defining the key competencies required for realizing the performance goals/objectives: The key competencies are jointly defined by the manager and the employee during the stage of setting performance plans, goals and objectives. These competencies are ultimately assessed during the performance review period in connection with the performance goals/objectives realized by the employees.

2. By identifying the competencies which are required for performing an employee’s job/role into the performance management process: In the case, the competencies are identified from the competency profile from the employee’s role or job point of view and also include the performance goals/objectives for being reviewed. The performance goals/objectives deal with the aspect of what must be achieved over the entire period of review and the competencies address the question of how an employee achieved the pre determined performance goal by demonstrating an expected pattern of behavior.

Competencies are aligned in each phase of the performance management cycle. CPS Human Resource Services has designed a model on Strategic Performance Management which is given below:

CPS Human Resource Services treats the process of performance management as a gap closing strategy, which focuses upon the vision, mission and values of the organization, the goals and objectives of the agency, individual goals and objectives and also the core competencies.

Organizations like Wipro and Infosys, the major IT giants of India give a lot of importance to competency based performance management system. In Wipro, the performance management process begins with the identification and assessment of critical competencies for top management, senior management and middle management on the basis of critical incidents, focus groups and rigorous interviews. 360 degree feedback is used for providing a feedback on the existing competencies of the employees and based on the results of the feedback a training programme is organized for improving the deficit areas of performance. Finally, personal development plans are formulated for each employee for monitoring and tracking the improvement in competencies or skill sets. For building competencies, Wipro focuses on strategic thinking, vision, building star performers and global focus. Infosys equally gives a lot of importance to 360 degree feedback for evaluating the critical leadership competencies of their employees.

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