Physical medicine and rehabilitation residency programs will face new challenges as they implement the Milestones and establish a Clinical Competency Committee, new requirements in the Accreditation Council of Graduate Medical Education’s Next Accreditation System. The milestones require programs to measure the capabilities of individual residents, and programs will be expected to show how residents progress to successively higher levels of behavior during the course of the residency. Program directors will be assisted by a committee of faculty whose role is to assess each individual resident’s attainment of milestones and assist in the early identification of residents not making the expected progress. Programs will need to evaluate their assessment programs and will need to create a coherent mix of instruments to evaluate all of the milestones. Because the milestones are based on observable behaviors, a key component of this system will be direct observation by faculty of residents during patient care. However, many faculty are not trained in this skill. Faculty development in observational skills, workplace-based assessment skills, and providing formative feedback will be a very important aspect if the milestones are to be successfully used to help residents make developmental progress in their clinical competence.