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Article

15 min read

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

Global HR

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Author

Lorelei Trisca

Published

September 13, 2024

Last Update

September 13, 2024

Table of Contents

What is a skill and competency assessment?

Methods for assessing employee skills and competencies

Best practices for your next skill and competency assessment

Challenges of assessing competencies and how to overcome them

Benefits of skill and competency assessments: Employee and organizational perspectives

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

Key takeaways
  1. Accurately assessing employee skills ensures your team members are well-equipped for their roles and helps identify areas for improvement.
  2. Methods for assessing employee skills and competencies include performance reviews, skills tests, self-evaluations, and behavioral interviews.
  3. Competency frameworks outline the key skills required for each role, providing a benchmark against which companies can assess employees.
  4. Talent management software like Deel Engage integrates various assessment tools to provide a holistic view of employee capabilities.

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.

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Creating a new performance review cycle on Deel Engage

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.

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Retain top talent and foster a culture of high performance with our AI-powered people suite to manage development, performance, and training programs from one single place.

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.

Complimentary guide and template

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.

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Peer nominations on Deel Engage

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.

Example: Someone who captains their soccer team on the weekends already has experience in leadership. At the same time, an amateur photographer could be an asset to your creative team.

Encourage employees to reflect on their progress with our self-assessment templates and use these self-evaluation questions to focus on the most valuable areas.

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.

Example prompt: Tell me about a time when you had to think on your feet and devise an innovative solution to a problem.

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?

Example: A customer service simulation for call center solutions might involve different role-play scenarios to understand how they approach difficult conversations and enhance the customer experience.

Free template

Create actionable competency frameworks effortlessly
Download our competency framework template and select the most relevant competencies from over 140 core, functional, and technical competencies across five mastery levels.

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.

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Define competency levels on Deel Engage

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.

Free template

Identify, assess, and align competencies with organizational roles and levels
Download this competency mapping template and develop a robust and effective competency framework that supports talent development and aligns with organizational goals.

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.

Example: You use a self-assessment to ask employees about their skill sets. However, their modest personality means they hold back on providing meaningful details about their skills. However, a peer evaluation uncovers they’re a star negotiator, a skill they can use as their role evolves.

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.

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Competency-based learning journeys on Deel Engage

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.

Solution: Standardize the evaluation criteria and provide training for evaluators to ensure consistency.

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.

Solution: Include context in your evaluations by considering the specific circumstances in which competencies are demonstrated. Collect multiple perspectives across different contexts to form a more accurate picture of an employee’s competencies.

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.

Solution: Develop clear, role-specific competency frameworks with observable behaviors and expected outcomes. Engage experts or use industry standards to define these benchmarks, ensuring they are relevant and measurable.

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.

Solution: Align competency frameworks and performance expectations with strategic business objectives. Regularly review and adjust competencies to ensure they support the organization’s current and future needs, avoiding the trap of overemphasizing unnecessary skills.

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.

Solution: Adopt a long-term perspective in evaluating the effects of competency development. Use trend analysis and longitudinal studies to track changes over time, acknowledging that some benefits are gradual.

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.

Solution: Implement a 360-degree feedback system to capture a comprehensive view of an employee’s performance. Provide clear guidelines and training to all raters to ensure their feedback is objective and constructive.

Using valid data

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

Solution: Focus on qualitative data and narrative feedback to capture the nuances of competency mastery. Encourage detailed examples and stories in reviews to provide valuable insights into behaviors and their impacts.

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.

Example: Jane has been on your marketing team for six months. After assessing her skills, you discover she also has excellent web design capabilities. Knowing this, you ask Jane to optimize your company website landing pages and upload new blog posts rather than outsourcing to a web design agency. The company saves money, and Jane has the opportunity to develop her web skills.

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.

Example: Sarah is a manager who conducts an employee skills assessment for her team member Juan, a junior sales representative.

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.

Marliis Reinkort, CEO of Code Galaxy, also asserts that this untapped potential is valuable when negotiating mergers and acquisitions. She provided the following example to us:

“Let’s imagine Startup A, with its unique AI solution, attracts the interest of a larger Tech Company B for acquisition. Before the deal, Company B conducts a job skills assessment of Startup A’s team. This process uncovers an unexpected wealth of blockchain expertise that adds potential value to the merger.

This discovery changes the acquisition negotiation, potentially increasing Startup A’s market value. A successful assessment should focus on unique skills, overlooked talents, and potential leadership. In essence, running regular competency skills assessments can turn a team’s hidden talents into tangible financial gains during M&A.”

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.

We spoke to Tracey Beveridge, HR Director at Personnel Checks, who explained how assessments support your training programs:

“Understanding where employees are in terms of their skills and development requirements makes planning for and assigning training much more effective as you have the data to align to the training requirements on a per-employee basis.”

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.

Goal and success coach Juliet Dreamhunter, Founder of Juliety, advises using this information to inform succession planning and retention strategies to identify potential leaders and go the extra mile to retain your key players.

“An organization might offer tailored career development opportunities or additional incentives to retain these key personnel. Understanding who these irreplaceable employees are also helps plan for potential knowledge transfer, ensuring their unique skills and expertise remain within the organization even if they choose to move on.”

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.

With Deel Engage, we can clearly outline career paths and roles aligned with our values, streamline feedback processes, and encourage personal growth.

Christina Bacher,

Team Lead, People and Organization, reev

FAQs

The primary purpose of a skills and competency assessment is to identify employees’ current skill and competency levels. This enables organizations to align their workforce’s capabilities with strategic goals, facilitate targeted training programs, and improve overall performance. It also helps make informed decisions about promotions, role suitability, and succession planning.

Skills and competency assessments are integral to career development as they clearly show an employee’s abilities and growth areas. This information helps in creating personalized development plans, setting realistic career goals, and identifying opportunities for advancement. Regular assessments ensure that employees are continuously developing their skills, which is essential for career progression and long-term success.

Skills are specific, learned abilities related to tasks or knowledge that employees can develop over time. They encompass transferable, technical, and soft skills.

Competencies are more holistic and combine broader qualities, including skills, and also encompass behaviors, knowledge, and abilities required for effective performance in a particular role or context.

Performance reviews are a popular way to assess staff competency. You can use a performance appraisal to discuss work samples, evaluation questions, or peer feedback to better understand an employee’s competencies.

Psychometric tests are one of the most common forms of competency evaluation. These tests measure a person’s aptitude and personality to determine how well they would fit in a certain role or organization. They also provide insight into an individual’s skills, which you can use to develop effective training programs. In combination with other testing, such as cognitive, behavioral, and numerical (if required) testing, the results indicate how competent an individual employee is within their assigned role.

Skills and competency assessments improve team performance by ensuring each member possesses the necessary skills and competencies to contribute effectively. By identifying individual strengths and weaknesses, teams can be structured to maximize complementary skills, fostering collaboration and efficiency. Additionally, targeted training and development plans can address specific team deficiencies, leading to better overall performance.

Technology can enhance skills and competency assessments by using digital platforms and tools that streamline the assessment process. Online assessments, e-learning platforms, and AI-driven analytics provide real-time data and insights, making the process more efficient and accurate. Technology also enables remote assessments, ensuring that all employees, regardless of location, can participate in the evaluation process.

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About the author

Lorelei Trisca is a content marketing manager passionate about everything AI and the future of work. She is always on the hunt for the latest HR trends, fresh statistics, and academic and real-life best practices. She aims to spread the word about creating better employee experiences and helping others grow in their careers.

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