Competency-based assessments: Benefits and types that you must know

How do you know which type of assessment to go for? Liliana Chitnis takes us thrrough a few of the most popular. 

Reading time: 3 minutes.

One thing that will always give you a competitive edge in the business world is not the technology but the skills and competencies of your employees. To boost employee efficiency and performance, you must invest in honing their skills and competencies. One way to achieve this is by taking a competency-based approach to training and assessment.

What is competency-based assessment?

Competency assessment mainly looks at the potential or existing skills and competencies of the employees to specified performance standards. This is done to determine their aptitude and suitability for certain roles. A competency-based assessment ensures that employees’ skills and competency profiles align with the business’s strategic plans.

Benefits of competency-based assessment approach 

Increased efficiency

In a competency-based approach, the training and assessment are related to what needs to be done on the job. This means the gap between the training environment and working on the job is reduced significantly.

To boost employee efficiency and performance, you must invest in honing their skills and competencies.

Due to this, employees would take lesser time to become competent on the job. This eventually leads to improved efficiency where training and assessment are concerned.   

Higher cost efficiency

All the training activities and assessments are goal-oriented as they focus on areas where employee performance needs to improve. This way employers don’t waste resources on training the employees in areas they are already good at.

Simultaneously, the employees are also motivated to learn something that improves their performance. The training, development, and assessment are done on the job, thus making competency-based assessment cost-effective. Since the approach only focuses on improving employees’ performance you can reduce cost overruns that are a result of poor performance.

Increased productivity

If the employees are competent, know what their employers expect from them, and are recognized for their skills, they will be more motivated. They will experience higher job satisfaction, and the feedback and communication with the superiors will get better. All of this will eventually lead to increased productivity.


Higher customer satisfaction

When you use a competency-based approach to assess and train the employees, they will perform well. They can serve their customers better, which increases the customer satisfaction levels.

Increased profitability

Don’t insist on the employees learning and remembering a lot of information; rather make it easily accessible to them. They can use resources like tutorials and guides whenever they require information. Armed with available information and their knowledge and skills, they can solve any problem with reduced errors. This will have a positive effect on the overall profitability.

Types of competency-based assessment

Performance and psychometric tests

These are tests that are designed to determine specific competencies and characteristics of employees such as motivation and personality. You primarily conduct a performance evaluation here and determine what skills an employee needs to learn to better himself.

Competency-based interviews

These interviews are based on examining past behaviour and experiences of a candidate. The interviews help in evaluating if the candidate has the right competencies for the job.

360-degree feedback

This includes obtaining feedback in a competency-based approach. The feedback and opinions come from people working at different levels of the company.


This is a method where the employees use their insights to introspectively establish which skills and behaviour they need to work on and improve. 

Skill gap analysis

This is a procedure where you will evaluate different qualities of an employee’s competencies. It will help you determine which skills the employee needs to improve and to what extent to boost his performance.

Competency-based approach is a continuous process of building skills and knowledge of the employees. When you can conduct a performance review based on data, you can take the necessary steps in improving the skillset of the team as a whole.


About the author

Liliana Chitnis is a content marketing executive at NamanHR.


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