How to Assess Employee Skills and Competencies: Methods, Best Practices, and Expert Insights

Regular and thorough assessment of employee skills and competencies is vital for maintaining a competent and motivated workforce, ultimately contributing to organizational success.

Discover how to assess skills and competencies and how this process will unlock your team’s potential, make more informed decisions, and support business agility.

What is a skill and competency assessment?

A skills and competency assessment is a systematic approach organizations use to evaluate an employee’s abilities, skills, and knowledge in relation to their job roles and responsibilities. This process helps identify workers’:

1. Strengths
2. Areas for development
3. Overall capability to perform tasks effectively

Methods for assessing employee skills and competencies

There are numerous ways to assess skills and competencies, so choosing the right approach for your organization is vital. Here are six methods you could consider.

1. Learn from performance evaluations

Performance reviews are great tools for celebrating employee successes and holding candid conversations about the employee’s development and career goals.

Whether you run 360-degree assessments, 180-degree feedback cycles, traditional top-down reviews, or something in between, these assessments are an opportunity to track job performance and document any key skills or competencies employees have acquired or developed since their last review.

2. Implement competency-based appraisals

A competency-based performance appraisal evaluates an employee’s performance based on their demonstration of specific skills, knowledge, behaviors, and attributes deemed essential for their role within an organization. These may include technical skills, behavioral attributes, leadership abilities, communication skills, problem-solving capabilities, and other job-related proficiencies.

Many organizations develop custom competency databases or frameworks that outline the critical competencies required for success in various organizational roles. These frameworks typically include a list of competencies and behavioral indicators or descriptors for each competency at different proficiency levels.

3. Hold peer reviews

Peer reviews provide unparalleled insights into the skills and competencies that employees exhibit in their line of work.

These reviews enable leaders to evaluate team dynamics and any specific skills or competencies they could further develop.

Encouraging employees to provide constructive, regular feedback about their colleagues can uncover areas where the team might need additional training and highlight skills employees have that they’re not currently recognized for.

4. Ask employees to conduct self-assessments

Self-assessments are a great way to view what an employee brings to the table.

They might include “mad skills,” which cover volunteer work, hobbies, and sporting or creative interests. At first glance, these skills may not seem related to the employee’s role. Still, they can add value to your organization in unexpected ways.

5. Conduct behavioral interviews

In a behavioral interview, the interviewer will ask employees to provide specific examples of how they have handled certain situations in the past.

The interviewer then analyzes the employees’ responses to assess how well their past behavior aligns with the required competencies. They will also check for consistencies between the employee’s stated skills and whether they demonstrate these skills in their responses.

Behavioral interviews work well across all company areas, including manager assessments, where leaders describe how they handle certain managerial situations impacting their direct reports.

6. Organize skills tests

Skills tests are a great way to assess job roles and measure the competency of existing employees or even potential new hires. Depending on the role, these tests could involve:

• Numerical tests
• Psychometric tests
• Personality tests
• Coding tests
• Language tests

7. Conduct simulation exercises

When you’re looking to get a clear indication of someone’s skills and competencies, there’s no substitute for watching them in action. Simulation exercises enable you to understand whether individual employees have the following:

• Leadership skills: Do they provide clear direction and respond to team disagreements?
• Problem-solving skills: Can they find a creative solution to a problem?
• Teamwork skills: Do they possess effective interpersonal skills that enable them to work well in a group?
• Decision-making skills: Do they consider all available options and make an appropriate choice?
• Customer communication skills: Do they build rapport with customers and solve their pain points?

Best practices for your next skill and competency assessment

Follow the below tips to obtain fair and accurate employee competency evaluations that allow both your employees and the organization to progress.

Align assessments with job requirements

Ensure you understand or define the job requirements before starting your assessments. This step determines which skills are most important to the role, allowing you to identify the best types of competency assessments to use.

Build a competency model

Building a competency matrix and mapping competencies for each department or role enables leaders to understand the strengths and weaknesses of their employees.

It allows managers to identify skill gaps, strategically plan workforce development, and tailor training programs to improve team performance. This approach ensures the right people are in the right roles, maximizing their potential and contributing to the organization’s success.

Use multiple methods to understand a range of skills and competencies

A blend of assessment methods gives a more accurate evaluation of employees. It can also uncover skills or competencies that perhaps were not initially identified as requirements for the role but could be beneficial in the long term.

Use assessments to guide development plans

Collecting assessment results is only a starting point. Your next step is creating tailored competency development plans based on each employee’s needs and role.

Competency-based learning programs ensure each team member receives training relevant to their career path, plugging the gaps in their knowledge accordingly.

Create a regular assessment timetable

Skills and competency assessments shouldn’t be a one-time process. As your employees progress in their careers, they’ll pick up new skills, embrace different projects, and learn from peers and leaders.

Regular assessments offer the opportunity to review and recognize employees’ progress so the results you have on file are still valid across assessment periods.

Share the results with your employees

Always be transparent with your employees and share their assessment scores with them. These discussions:

• Open up conversations about employee development plans
• Provide an opportunity to reward their performance
• Improve employee engagement by focusing on critical growth opportunities

Challenges of assessing competencies and how to overcome them

Assessing competencies can be challenging, as they involve behaviors and traits that are not as easily quantifiable as metrics like OKRs.

Competency-based evaluations can quickly evolve into cumbersome processes, especially if you run them based on pages and pages of competency definitions. Reviewers must get acquainted with those before conducting the assessments.

Here are seven challenges of assessing competencies you should be aware of.

Subjectivity

Assessing competencies occurs through subjective observations and interpretations, which can lead to biased evaluations. For example, a manager might perceive an employee’s assertiveness as confidence. In contrast, another manager might see it as aggression, resulting in inconsistent assessments.

Context dependency

Your people may demonstrate competencies differently depending on the context or situation. For example, an employee may be an effective team player in one project but struggle to collaborate in another due to the specific dynamics or challenges of that project.

Lack of clear benchmarks

Establishing consistent benchmarks for assessing competencies is challenging, especially when they vary by context and role. For example, while measuring an employee’s ability to meet sales targets may be easy, quantifying their ability to manage conflicts within the team is harder.

Misalignment with business objectives

Setting competency expectations that don’t align with company goals can lead to inefficiencies and misdirected efforts. For example, you don’t want your workers to allocate time learning unnecessary competencies, taking time away from learning relevant ones.

Time lag

The impact of improved competencies on performance might not be immediately visible, complicating real-time assessment. For example, an employee’s efforts to improve communication within the team may take months to show tangible results, such as increased productivity or reduced errors.

Multi-rater variance

When multiple sources assess competencies, including peers, subordinates, and supervisors, it can lead to varying perspectives on an individual’s performance, creating potential inconsistencies in the evaluation.

For example, an employee’s colleagues might appreciate their ability to innovate. But, at the same time, their supervisor might feel they are not adhering to established procedures.

Using valid data

The qualitative nature of competencies makes it hard to quantify the nuances of competency mastery.

By addressing these challenges with thoughtful solutions, you can enhance the effectiveness and relevance of their competency assessments, leading to more accurate evaluations and meaningful development opportunities for your workers.

Benefits of skill and competency assessments: Employee and organizational perspectives

Conducting skills and competency assessments might seem like another arduous task on a long HR to-do list, especially if you need to roll out assessments across a large organization.

However, there are tangible benefits to committing to the process, both from an employee and organizational standpoint.

1. Gain in-depth insights about your employees

Assessing your employees’ skill levels and competencies lets you gain actionable insights about their abilities. This information helps supervisors better utilize their teams to optimize performance.

2. Identify organizational skills or knowledge gaps

A skills gap is the difference between the skills your organization needs and the skills your employees can offer. However, identifying skill gaps is only possible if the organization is clear on what skills employees need to be successful in their positions.

Employee competency assessments allow organizations to determine what areas staff members excel in and where they need more support or training opportunities. This knowledge can help HR managers create tailored job descriptions, develop targeted learning and development programs, and ensure roles are filled with the right people.

Check out our skills gap analysis guide for best practices and a template to help you spot and bridge organizational gaps.

3. Improve employee performance

An effective skills and competency assessment process is a solid starting point for employee growth plans. Once you know your team members’ skills, you can provide clear direction on what they need to do to develop or progress in your organization.

With a better understanding of Juan’s abilities, she can identify opportunities for his future career growth. Sarah proposes a professional development plan, including mentoring programs or upskilling initiatives.

Juan embraces Sarah’s involvement in his career, sees the opportunity to progress at the company, and, as a result of his heightened engagement, delivers a more robust individual performance on the sales team.

4. Discover the untapped potential in your employee ranks

Skills and competency assessments can reveal gems of talent in your organizational lineup. For instance, you may find that an employee has higher-level capabilities than their current role requires, or they can take on additional responsibilities to support the team. This knowledge allows supervisors to unlock their teams’ potential and better utilize human capital.

5. Evaluate training effectiveness

L&D professionals agree that proactively building employee skills will help navigate the evolving future of work. And regular training is crucial to equipping your teams with the skills to thrive.

Companies can also follow training sessions with further assessments to understand how far the learning program has improved the employee’s knowledge.

6. Address skill shortages promptly

Regularly assessing and documenting employee skills ensures you can adapt to skill shortages.

• Scenario 1: If a key role in the organization is unexpectedly vacant, you can quickly access your data and compile a list of possible candidates from within your own employees—this makes any internal mobility process much shorter and more efficient
• Scenario 2: If specific skills are lacking across departments or teams, you can detect this early before it impacts organizational performance—when you know what skills are missing, you can create a plan to grow those areas with adequate training or by recruiting new talent
• Scenario 3: The world of work is continuously evolving, so your employees must possess the necessary skills and competencies to keep up—for example, a year ago, prompt engineering and AI-assisted copywriting were not required or even known by most organizations, but now, these competencies are valuable for organizations that want to stay ahead of the curve

7. Identify and retain key personnel

Irreplaceable employees might be senior leaders or professionals with profound product knowledge or technical skills that other team members don’t have.

Cataloging this information during a skills and competency assessment process ensures you know exactly who your critical employees are and how they contribute to your organization.

Assess and build your people’s skills and competencies with Deel Engage

Deel Engage offers multiple solutions to support your people’s growth and development, beginning with identifying and recording core competencies and then creating tailored L&D programs that enable each employee to reach their full potential.

• Competency frameworks: Define the required competencies and expected levels of mastery for all roles in your organization and visualize the road to success, giving your team a clear view of their career trajectory within the company
• 360 feedback: Collect valuable multi-source feedback to evaluate existing skills and competencies
• Skills matrix: Identify and display individual and organizational skill gaps
• Training management: Build customized learning experiences from an extensive library of world-class courses.
• Employee development: Create a cycle of continuous development and address skill gaps based on the competencies you identified during your assessments
• AI assistant: Automatically generate growth areas based on employee roles, performance levels and feedback, and respective competency models—the assistant will use past employee feedback cycles to suggest training recommendations
• Deel HR, our truly global HRIS solution, is always included for free

Book a demo to see how our solutions will help you build a highly competent workforce.