How to create competency framework that fuels your business

In World War II, the U.S. Army Air Corps did something different that helped them win.  

The Axis firepower, on the opposite side, had swelled and become more lethal. Only innovation could help defeat it.  

So, the Americans selected and trained fighter pilots based on what they “did” rather than what they “should do”. They looked for flying competency.  

Researchers asked good pilots a simple question: How do you act and behave while flying exceptionally? – And a list of qualities was handed over to recruiters.   

Such a competency-based approach supported: 

• the American strategy of creating a modern, offensive force  
• to achieve the goal of winning the war 

Centuries ago, the Romans used this approach too: they recorded qualities of excellent commanders in action. These profiles, that fit well with the kingdom’s policy of conquest and expansion, were then used to select soldiers. 

The Romans, powered by competency-based human resource management, conquered kingdoms across continents to establish a dominant empire.  

‘The soldier has a right to competent command’: the Romans held fast to this maxim.  

How can you use competency today to achieve business goals? 

Following the American victory, John Flanagan who was part of the air force’s task force, took the competency approach to General Motors, writes Dave Ulrich in ‘HR from the Outside in”. 

A competency-based approach to managing people and organizations can yield the desired outcome, but only when linked with your company’s vision, strategy and goals. Without this synergy, the resulting misalignment may increase costs, reduce efficiency among people and prevent teamwork.  

What is competency?

A competency is an underlying characteristic of an individual that is causally related to criterion-referenced effective and/or superior performance in a job or situation.

– Lyle M. Spencer, Jr. and Signe M. Spencer in ‘Competence at Work’

Spencer & Spencer explain various aspects of the definition:

• Underlying characteristic means competency is a fairly deep and enduring part of a person’s personality and can predict behavior in a wide variety of situations and job tasks.  
• Causally related means that a competency causes or predicts behavior and performance. 
• Criterion-referenced means that the competency actually predicts who does something well or poorly, as measured on a specific criterion or standard. Examples of criteria are the dollar volume of sales for salespeople or the number of clients who stay “dry” for alcohol-abuse counselors. 

Types of competencies

Motives

The things a person consistently thinks about or wants that cause action. McClelland defines motive as a recurrent concern for a goal state, or condition, appearing in fantasy, which drives, directs and selects behaviors of the individual.  

Example – achievement-motivated people set challenging goals for themselves  

Traits 

Physical characteristics and consistent responses to situations or information.  

Example – listening to others before responding in a discussion 

Self-Concept

A person’s attitudes, values, or self-image 

Example – self-confidence  

Knowledge

Information a person has in a specific content area. The authors claim that many knowledge tests measure rote memory, while they must focus on the ability to find information.  

Example – A sales manager having knowledge of industry regulations

Many knowledge tests measure rote memory…Memory of specific facts is less important than knowing which facts exist that are relevant to a specific problem, and where to find them when needed.

Lyle M. Spencer, Jr. and Signe M. Spencer in ‘Competence at Work’

Skill

The ability to perform a certain physical or mental task. The authors say that mental or cognitive skill competencies include “analytic thinking” (processing knowledge and data, determining cause and effect, organizing data and plans) and “conceptual thinking” (recognizing patterns in complex data). 

Example: A market analyst’s ability to identify market trends and suggest a roadmap

Spencer & Spencer suggest that while knowledge and skill competencies tend to be visible, self-concept, trait and motive competencies are more “deeper” and “central to personality”. 

In addition, surface knowledge and skill competencies are easier to develop than motive and trait competencies, which are more difficult to assess and develop. 

Organizations should select for core motive and trait competencies and teach the knowledge and skills required to do specific jobs as that is more cost-effective.”

–  Lyle M. Spencer, Jr. and Signe M. Spencer in ‘Competence at Work’

Whereas, Parry has suggested a more universal definition of competency: a cluster of knowledge, skills and personal attributes that affects a major part of one’s job that: 

• Correlates with performance on the job 
• Can be measured against well-accepted standards 
• Can be improved via training and development 

Threshold vs differentiating competencies

Moreover, Spencer & Spencer categorize competencies into threshold and differentiating:  

• Threshold Competencies
  These are the bare minimum competencies that everyone in a role needs to be minimally effective at. This doesn’t separate a performer from a non-performer. Example: Researching skills of a content writer  

• Differentiating competencies
  These are what sets performers apart from average workers. Example: Setting goals higher than what is required for a role  

Technical vs behavioral competencies

Daniel Goleman, who developed the emotional competency framework, has found that behavioral competencies enabled superior performance on a job. 

• Technical competencies: These are required to perform a job and deliver products and/or services within a specialized area, explains Mahesh Kuruba, a consultant, in ‘Role Competency Matrix’.  Example: knowledge of HTML for a developer
• Behavioral competencies: These include: Interpersonal competency of working with others to achieve the desired objective, Communication, Problem solving, Accountability  

Core competency of an organization

Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies…Core competence is communication, involvement, and a deep commitment to working across organizational boundaries.

–  C.K. Prahalad and Gary Hamel in Harvard Business Review

Competency at the organization level is defined in the form of core competency. Organizational competencies are a “synergistic blending” of the core competencies that each of their employees brings to their work every day, explains Kuruba.   

A Harvard Business Review article suggests three tests to identify core competencies in a company: 

• It provides potential access to a wide variety of markets 
• It should make a significant contribution to the perceived customer benefits of the end product
• It should be difficult for competitors to imitate

Features of competency

All personal attributes are not necessarily competencies. They must lead to “effective performance and contribute for success on a job,” suggests Capgemini India Chairman Srinivas R. Kandula in ‘Competency-based Human Resource Management’.

Step-by-step guide to link competencies with business goals

Two of the top five challenges facing organizations are aligning people strategies to business objectives and driving cultural change, according to a survey by Human Resource Executive.   

To ensure tighter alignment, Development Dimensions International (DDI) advises using well-defined competencies that are “aligned with business priorities and relevant to each person’s role level”.  

The competencies could be used “as a metric against which every individual can be selected, developed, and evaluated” fairly and consistently. Further, they can aid in translating company values into employee behaviors, DDI suggests.  

Yet, only 19% of organizations that utilize competencies say that competencies and business goals are aligned, according to a study by Brandon Hall Group, a research firm. 

To drive the alignment better, DDI advises integrated talent management which enables HR processes to be aligned to business objectives as well as to each other. Bersin and Associates have found this approach to increase revenue, lower turnover among high performers and increase the ability to “develop great leaders”.  

The approach, when used for competence management,  starts with identifying the business strategy and then tying competencies to it. 

According to Seema Sanghi in ‘The Handbook of Competency Mapping’, a competency model can be an effective way of communicating to the workforce the values of the senior management and what people should focus on in their own behavior. 

Organizations must strive for competency management. “It is the process—or set of processes—for acquiring, developing, nurturing, and managing competencies to foster superior employee and workforce performance…it is obvious that competency management is crucial to business success,” writes Kuruba.  

STEP 1: Identify your business goals and strategy 

Existing competencies may quickly become irrelevant or obsolete over time, believes Kuruba. Therefore, it is “imperative that managements view competency development as a strategic imperative that will drive its business goals”. 

A business model should consist of four elements, suggests Harvard Business School’s Clay Christensen. These are:  

• a customer value proposition  
• a profit formula 
• key resources 
• key processes 

In any business strategy, people are more critical than the plan. Strategies can only be effectively implemented if organizations have a competent force of employees.

–  Seema Sanghi in ‘The Handbook of Competency Mapping’

As an HR professional, you must consider “human resources from the outside in,” as suggested by Dave Ulrich.  

This involves focusing on the “business of the business”, which means understanding the context and setting in which the business operates, the expectations of key stakeholders and the strategies that give a company a unique competitive advantage, Ulrich writes in ‘HR from the Outside in”. 

Setting and understanding goals 

As an HR, you must be involved in and inform the goal setting process. Goals may follow the SMART framework: Specific, Measurable, Attainable, Realistic, and Time-bound. 

According to research by Edwin A. Locke and Gary P. Latham in American Psychologist:  

• Highest or most difficult goals produced the highest levels of effort and performance 
• Specific, difficult goals consistently led to higher performance than urging people to do their best 
• Tight deadlines lead to a more rapid work pace than loose deadlines 
• Making a public commitment to the goal enhances commitment, presumably because it makes one’s actions a matter of integrity in one’s own eyes and in those of others 

What’s more? It is not enough to mention the objectives in value terms alone, cautions Kuruba.

“Business objectives must also clearly mention the business/industry segment and/or the geographies in which the organization is seeking to make an impact. They must state what must be achieved (in terms of revenue, market presence, etc.) and by when,” he writes.

Setting and understanding strategy 

While a goal is what you hope the outcome will be, a strategy tells what you are going to do to achieve it, according to Freek Vermeulen of London Business School. 

He says that a “real strategy” involves a clear set of choices that define what the firm is going to do and what it’s not going to do. 

Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization. Businesses have strategies, a formal planning cycle, a mechanism is devised to devote the resources to it in the competitive environment. 

–  Jauch and Glueck

Further, organizations that planned for long-term sustainability were twice as likely to be good competency implementers than those who didn’t, suggests a McKinsey study. 

So, it’s essential to draw up a long-term strategy to achieve goals and vision. And the HR must be involved in their preparation and implementation.   

STEP 2: Identify roles and develop profiles for them

This involves identifying the organizational functions that are critical to achieving business objectives.  

According to Kuruba, this helps decide the scope of the role competency matrix implementation: “whether to implement it organization-wide or in only business units that are regarded as critical-to-growth”.  

The identification of such roles can depend on “a commitment by business unit heads for supporting the program, the unit’s ability and willingness to risk a certain degree of disruption, the head of business unit’s understanding of the program and its methods, and employees’ willingness to participate.” 

STEP 3:  Identify competencies  required

This involves the process of identifying the critical (or key) competencies and mapping them to roles, says Kuruba.   

Further, Sanghi suggests that the basis of generating competency models are processes.  

So, two questions need to be asked:  

• What does the employee have to be able to do?  
•  What does the employee have to know in order to do it?  

In addition, she claims that determining competencies is easier if the flow charts of the job processes are laid. “If the competencies are not related to specific process steps then the model is not valid,” she writes. 

Competencies that are taken for granted

Context-Level

• Identify competencies which are assumed to be present in every employee
  Example: Honesty
• Identify competencies required by law
  Example: knowledge of regulations
• Find out industry-specific competencies. A good source for this can be certification programs.

Organization-level

• Study the vision and mission statements of the organizations to understand its philosophy.  
• Understand the work-group-level competencies. For instance, some departments within the organization may have their own vision and mission statements.  
• Gauge the competencies carried as part of background information. “This provides whatever general business, industry or company information is required to meet job standards,” writes Sanghi.  

Position documentation

• Industry research – academic journals, publications and periodicals 
• Vendor information – This includes vendor publications. “Such reference material can prove helpful for developing competencies for production jobs,” says Sanghi.  
• Customer feedback 
• Regulations 
• Certification requirements – professional certification programs have standards and assessment processes which can be referred to for identifying competencies.  
• Quality programs – Such as ISO 9000/14000 or any other quality certification.  

Process documentation

• Procedure manuals and flowcharts  
• Time logs 
• Job task analysis  

The entails observation of how people work. Sanghi advises that while analyzing the system, the analyst should not become a part of it.

Various techniques of job analysis are:

• Observation 
• Interviews 
• Diaries  
• Questionnaires 
• Critical Incident Techniques:  This technique, developed by Flanagan (1954), requires observers frequently engaged in the role, such as supervisors, clients, peers or subordinates, says Sanghi. She explains:  “Observers are asked to describe incidents of effective and ineffective behavior of a person over a period of time.”
• Repertory Grid Techniques: This highlights those behaviors which are associated with effective performance. “The advantage of the repertory grid technique is that it can elicit the skills needed to do the job from knowledgeable observers with no constraints placed on the answers given, unlike in questionnaires,” explains Sanghi.  
• Customer Contact Maps:  The map includes every instance when a customer is contacted by the organization. To identify competencies, suggests Sanghi, it needs to be asked: “What do employees need to know or do to be able to satisfy the customers for this particular contact?”

Existing Documentation 

• Job descriptions 
• Union contracts 
• Departmental planning documents 
• Performance plans 
• Appraisal forms  

Thus, a competency list is generated. At the preliminary level, competencies are arranged against different levels of competencies: 

• Organization-specific: specified by the top management and expected to be exhibited by all irrespective of the role 
• Business-unit specific 
• Project-specific 
• Role-specific  

Next, the competencies are compared with the ones available in the organization’s competency database. “This helps in identifying the gaps between what is available in the organization and what is needed at both project and organizational levels,” Kuruba points out.  

Thus, a competency list is prepared suggesting competencies that need to be developed after taking into account the competency gap. The competencies missing in the inventory must be developed through training or hirings.  

STEP 4: Mapping competencies to roles

• The people or unit manager can dip into the competency list to pick those required for the role. They must also specify the competency levels required from ‘level 1’ having basic training in a competency to ‘level 4’ being a master in it. 
• Few competencies will be common to all the roles, while some roles will have multiple competencies.  
• To prioritize competencies, categorize them as ‘critical’, ‘necessary’ and ‘good-to-have’. 

STEP 5: Assign weights to competencies

Next, you must assign weights to competencies. This will indicate their relative significance for a role and project.  

For this first, assign a rating to each competency on a scale of 1(good to have but not essential) to 9 (very important). 

Then, calculate the weight using the equation below:

Example: Below are competencies required for the role of a salesperson 

STEP 6: Communicate framework

• Explain the objective, procedure and the intended outcome of the building a competency framework to all the employees in unambiguous terms  
• Collect competency data across the organization in a standardized format  
• Competency data may be collected once a quarter or half-yearly

STEP 7: Assess competency levels

In a bid to assess the existing competency levels of employees against the desired levels, you must encourage both self-assessment by the employee and assessment by the manager.  

Further, there must be mechanisms for “review, escalation and resolution” in case of disagreements between the employee and the manager regarding competency levels, according to Kuruba.  

STEP 8: Determine competency index and gap

Competency Index (CI) is the measure of the degree to which employees’ competencies are aligned to that of their roles. Whereas, the CI of an organization is the measure of the degree to which its core competency is aligned to its business objectives, according to Kuruba. 

For an employee, a CI of 0 indicates that they don’t have the competency required for a role, while a CI of 1 means they are fully competent for it.   

For an organization, a CI of 0 indicates it lacks the competency required for the business it is doing. But a CI of 1 means that it is “ideally placed to grow its business around its core competency”.   

Competency index is a measure of the strength of the intellectual capital of an employee/workforce and, over time, can show the trends (increase or decrease) in competencies, or whether they are stagnating. 

–  Mahesh Kuruba in ‘Role Competency Matrix’ 

For employees:  

You can calculate the competency index using the following steps.  

• Calculate the CI for each competency required for a role using the equation:  

• Add the CI for the competencies to get the CI of an individual for a role 

Example: Ravi is a candidate who has applied for the position of salesperson. Below is his suitability for the role based on competency.

Competency	Required competency level	Level of employee	Competency weight	CI for specific competencies
Product knowledge	Level 4- Master	3	0.32	0.24
Negotiating skills	Level 3- expert	1	0.25	0.06
Prospecting	Level 2 – experienced	2	0.17	0.08
Data analysis	Level 1 – trained	1	0.25	0.06
CI of Ravi for the role of salesperson				0.44

Benefit of calculating competency index: 

• Helps in identifying skills and abilities that need to be improved
• It helps in cost management of training initiatives through targeted interventions
• Aids employees in aligning their behaviours with the organization vision and goals. 
• Helps in finding the right fit for a role

To take on tasks for which one lacks competence is irresponsible behavior. It is also cruel. It raises expectations that will then be disappointed.

–  Peter Drucker, management consultant

Competency Gap

Competency Gap (CG) is the measure of the gap between the required competencies for a role and the competencies that a business unit/individual possesses, according to Kuruba.

It can range from –1 to 1. 

To calculate the CG, take the following steps: 

• Calculate the CG for each competency required for a role using the equation

• Add the CG for the competencies to get the CG of an individual for a role

Competency	Required competency level	Level of employee	Competency weight	Competency gap
Product knowledge	4	3	0.32	-0.08
Negotiating skills	3	1	0.25	-0.13
Prospecting	2	2	0.17	0
Data analysis	1	1	0.25	0
Competency gap of Ravi for the role of salesperson				-0.21

Benefits of calculating competency gap: 

• Helps in employees identify competencies that must be developed to perform a role better
• Minimizes subjective assessments about the employee’s alignment with company strategy
• “It is used as the basis for competency development, recruitment, assignment and reallocation of people to various roles,” believes Kuruba.

How to implement competency framework

Recruitment

Recruitment Research by Development Dimensions International shows that firms that use competencies are more likely to rate their staffing processes as effective.

According to Spencer & Spencer, competency-based selection methods are based on the following hypothesis: 

The better the fit between the requirements of a job and competencies of the jobholder, the higher job performance and job satisfaction will be

They claim that successful job-person matching depends on: 

• Accurate assessment of individual competencies
• Competency models of jobs
• A method of assessing the ‘goodness of fit’ between a person and a job

Further, Sanghi explains how a competency framework can be leveraged during different stages of the recruitment:

• To determine whether the candidate is qualified to perform the job
• Competency assessments may be used during the selection
• An orientation program can allow general competencies to be absorbed by the candidate
• The induction training can help develop competencies in case of gaps

Performance Management 

Several organizations today are interested in management and appraisal of competence —the “how” of performance. They are seeking more qualitative assessment, oriented to the future and focused on development.

–  Lyle M. Spencer, Jr. and Signe M. Spencer in ‘Competence at Work’

Spencer & Spencer write that a performance management approach that “combines planning, management and appraisal” of both performance results and competency behaviors is called a “mixed model” of performance management (PM)  or “total PM” approach. 

Thus, organizations reward both performance and competence, what was achieved and how it was achieved. 

Succession planning

Competency-based succession planning identifies competencies required for critical jobs, assesses candidate competencies, and evaluates possible job-person matches, suggest Spencer & Spencer. 

In addition, Sanghi believes competencies add value to the succession planning system by: 

• Helping identify qualities necessary for the role
• Providing a method to assess candidates’ readiness 
• Aiding training and development in case of competency gaps 

Training and development

Using a competency model for training and development helps to take a long-term perspective. “It ensures that the system focuses on the right things rather than the latest things,” believe Gordon Davis and Margrethe Olson.

Moreover, Sanghi believes a competency framework can: 

• Help people gauge their current capabilities and identify behaviors they need to exhibit to succeed at a role
• Help focus on training and development initiatives and align them with business goals
• Bring congruence across the organization on what performance means for a role. It provides a framework to trainers to design their programs. 

Integrated Human Resource Management Information Systems

An integrated human resource management information system (IHRMIS) is a database shared by all human resource functions that provides a “common language” and integrates all human resource (HR) services, according to Spencer & Spencer. 

They claim that a database may be used by all human resources functions: recruitment, selection, placement, compensation, performance management, succession planning, and training and development. 

“All functions use the common language of competencies,” they write. 

Such a system includes: 

• Organizational chart 
• Job description and analysis
• People assessment 
• Job-person matching 
• Development advice
• Training needs assessment 
• Development and Career path manager 
• Administration 

Building suitable culture

DDI believes that competencies help make an organization’s values tangible.

For instance, if an organization places premium on creativity within its culture, then performance and intended outcomes can be achieved if those behaviors that are considered creative are spelt out. 

“Managers need to reinforce the behaviors in line with the desired culture and hire individuals into the organization that possess skills and motivations that fit the culture,” suggests DDI in ‘Competency Management at its most Competent’. 

How mature is your model?

An organization’s ability to invest in competencies enough to develop different types of competencies in concert with each other, aligned with business objectives and enabled by technology, determines the maturity of their competency management practice, according to the Brandon Hall Group, which has developed this model. 

Research shows that the level of maturity determines the level of benefit — in terms of impact on key business indicators as well as on other talent management practices

You can gauge the maturity of your competency management by identifying the level you are at: