Competency-based PMS are particularly appropriate for:
1. Uncertain Environments: In uncertain and rapidly changing environments, where results are not under employee control, hard results objectives are often rendered irrelevant by external events.
In such situations, the evaluation must be based on whether employees did everything they could, whether they demonstrated the right behaviors rather than achieving targeted results.
The less control employees have over results; the more performance should be based on the expression of competencies.
2. Qualitative/Process Service Jobs: In jobs with no measurable outcomes, qualitative skills – competencies – are the best indicators of employee performance.
For an air cabin crew, competency behaviors, such as smiling and being unfailingly cheerful to tired, disgruntled passengers, or staying cool in emergencies, are the job output.
The more subjective the job output, the more important it is to appraise competency behaviors.
3. Self-Managing Teams: In teamwork groups, individual results outputs may be less important than contributing to the group process.
Teamwork and cooperation competencies, the ability to work well with different groups of people, are increasing!) important in the diverse workforces of the global organization.
Even in technical/professional individual contributor jobs, ’‘organizational citizenship behaviors” predict superior performance.
4. Jobs Intended for Development of Future Performance: The more a job or organization’s objectives for employees stress developmental skills (e.g., management trainee positions), the more appraisal should be based on demonstrations of improved competence.
5. Changing Organisational Strategy, Focus, or Markets: In changing environments and organizations, employees’ potential to contribute to the firm in the future may be more important than their past performance.
For example, the ability to sell a firm’s new products in the European Common Market may be more important than sales of older products in domestic markets.
Most performance management systems are past-oriented. The greater a firm’s emphasis on future performance, the more its PMS should stress the development and appraisal of competencies.