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

Do you have accurate, up-to-date insights about your employees' skills and competencies? 

Who is the strongest communicator in your team? Who is the go-to Python master? Who has the potential to become a leadership superstar?

Assessing employee skills and competencies, then recording them will offer an accurate picture and enable you to tailor training plans based on existing skill sets. 

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 skill and competency assessment is a process organizations use to evaluate and measure their employees' skills, knowledge, abilities, and overall competencies. 

The purpose of this assessment is to:

• Identify individual strengths and suggestions for improvement.
• Align employees' skills with your organization's needs.
• Develop targeted training and skill development programs.

📏 How to assess employee skills and competencies: 6 Methods

There are numerous ways to assess skills and competencies, so choosing the right approach for your organization is vital.

Here are 6 methods you could consider.

1. Learn from performance evaluations

We believe in the power of performance reviews to celebrate employee successes and hold 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. 

➡️ Download our template to follow a competency-based performance appraisal and adapt the framework to your employees' needs.

2. 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.

➡️ Download our biannual peer review template to unearth insights about those you work closest with. Use these peer review questions to inspire a constructive discussion. 

3. Ask employees to conduct self-assessments

Who better to evaluate an employee's skills and competencies than the individual? 

Self-assessment tests 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 template and use these self-evaluation questions to focus on the most valuable areas. 

4. 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: 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. 

5. Participate in 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 

6. Organize 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.

💡 6 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 skills or 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.

➡️ Learn how to design a skills matrix, which can be as simple as building a two-dimensional skills matrix in Excel. 

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. 

Create a regular assessment timetable

Skills and competency assessments shouldn't be a one-time deal. 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. 

➡️ Check out a diverse range of employee development plan examples. 

🏆 7 Benefits of skill and competency assessments: Employee & 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. 

But there are tangible benefits for 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 capabilities in web design. 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. But identifying this gap 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. Armed with a better understanding of Juan's abilities, she can identify opportunities for his future career growth. Sarah puts together a professional development plan, including mentoring programs or upskilling initiatives. Juan embraces Sarah's involvement in his career, can see the opportunity to progress at the company, and delivers a more robust individual performance on the sales team due to his heightened engagement. 

➡️ Our comprehensive guide provides even more ideas on how to improve employee performance in your organization.

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

LinkedIn's 2023 Workplace Learning Report reveals that 89% of 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. 

➡️ Check out our guide to learn how to measure training effectiveness. 

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. From here, Goal & 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 Zavvy

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

• 🔁 360 feedback software: Collect valuable multi-source feedback to determine existing skills and competencies. 
• 🌟 Skills matrix software: Identify and display individual and organizational skill gaps. 
• 📚 Learning experience platform: Build customized learning experiences from an extensive library of world-class courses.
• 🌱 Employee development software: Create a cycle of continuous development based on the competencies you identified during your assessments.
• 🤖 Zavvy AI: Abolish silos by combining every element of HR in a single coherent system. Zavvy AI is a powerful tool that automatically generates growth areas based on employee roles, proficiency levels, and respective competency models. The holistic platform links past employee feedback cycles to actionable training recommendations as part of an integrated system. 

Ready to supercharge employee growth in your organization? 

📅 Book a free Zavvy demo today. 

❓ FAQs

What is the difference between skills and competencies? 

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. 

Which is a popular method to assess staff competency? 

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. 

What is the most common form of competency evaluation? 

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. 

What are the different employee assessment tools used to assess competency?

The most common competency assessment tools include performance reviews, skills tests, simulation exercises, and interviews. You can use each method to evaluate an employee's knowledge, abilities, and behaviors that apply to their job role. The best practice is to use a combination of methods to provide a comprehensive overview of their abilities.