Competence encompasses knowledge, skills, abilities, and traits, which are acquired through pre-service education, in-service training, and work experience in the healthcare industry. Competence is a major determinant of provider performance and is represented by conformance with various clinical, non-clinical, and interpersonal standards. Measuring competence is essential in determining the ability of health workers to provide quality services. Although a precursor to doing a job correctly, measuring performance periodically is also crucial to determine whether providers are using their competence in their work. A provider could possess the appropriate knowledge and skill, but might not demonstrate this due to individual factors (e.g. abilities, traits, goals, values, inertia, etc.) or external factors (e.g. unavailability of drugs, equipment, organizational support, etc.). This paper provides a framework for understanding the key factors that affect provider competence. Different methods for measuring competence are discussed, in addition to criteria for selecting measurement indicators. Furthermore, evidence from various research studies on measuring the effectiveness of different assessment techniques is also presented.