Competency Models – What Are They Anyhow and What’s the Big Deal?

June 2012
Issue 27

by Melissa Noonan

Let’s start with the “big deal.” Very simply, if developed and implemented effectively, a well-defined competency framework can help organizations: 1) find and keep the best people, 2) enable better employee performance, and 3) improve business results.

Since these are objectives that virtually every business subscribes to, the integration of competency models into the fabric of the organization in seen by many as a high-priority strategic goal. But, as with most things, success is in the implementation, and that’s where competency initiatives have been challenged. This article is to provide some insight into competency models and to suggest ways that you can leverage all the good things about them, while avoiding potential pitfalls.

 

Competency Models Defined

A competency model is a framework for organizing a collection of observable skills, behaviors, and attitudes that impact the quality of work that people do. It describes what people need to know and be able to do in order to execute on their responsibilities effectively.

Even though the definition is pretty simple, the role of competency models in organizational design has become extremely significant. In fact, as the war for talent continues to rage, many organizations have come to view competencies as foundational to effective talent management and have classified competency models as a strategic imperative. The reason for this is that the best organizations are using competencies to:

  • recruit and select of employees to ensure organizational fit,
  • set performance expectations and measure contributions objectively,
  • focus employees on what is critical to enhancing their contribution and increasing their satisfaction, and
  • provide a roadmap for employee development and career planning.

In addition, by assessing “competency gaps” in relation to individuals and groups, competency models become valuable inputs to creating highly targeted training initiatives.

 

Competency Models – The Good …

When done right, competency models enable an organization to align employees’ performance with the overall business strategy. If the strategy is the “what” for the organization, the competency model describes “how” employees should execute in order to deliver on the strategy. And the impact is cumulative across the organization – the most effective competency models are designed and implemented with the intent not only to raise individual performance results, but also to increase the levels of proficiency throughout the enterprise.

Competency modeling helps HR functions leverage their strategic roles by vertically aligning the different HR practice areas to the organization’s strategic objectives. In addition, competency modeling helps to interconnect the various HR practices which, in turn, reinforces the integration of talent management activities.

When different HR processes are designed and implemented using a common competency framework, it results in a holistic, self-reinforcing system. For example, when an organization selects, develops, rewards, and promotes employees on the same set of competencies, it contributes to building a strong organizational climate by establishing high performance work systems. (Bowen & Ostroff, 2004)

In terms of approach, there are various ways to drive organizational improvement, depending on organizational needs:

  • A core competency model supports the development of those critical core competencies that are required by an organization to achieve its defined strategy.
  • A technical/functional competency model supports the development of technical, role-specific competencies that enable an organization to execute more effectively.
  • A leadership competency model supports the development of key leadership capabilities in order to build leadership impact (and bench strength) within the organization.

These different approaches can also be combined in various ways but, regardless of the approach selected, the following success factors should be built into the framework design process. The model should be:

  • limited to a set of critical competencies that align to strategic intent
  • simple, pragmatic, and easy to use
  • integrated with and used as the foundation for people processes
  • systematically implemented and communicated
  • developed, endorsed, and used by organizational leaders

 

Competency Models – Avoiding the Bad and the Ugly …

If all of this sounds desirable and straightforward, the reality is that competencies can be hard to define and understand and, for HR professionals, the task of developing and implementing a competency model can seem daunting. In addition, all too often the work on competency model development is done just by HR and is detached from the business. This can easily lead to models that become over-engineered and difficult to apply. It can also lead to prolonged implementation cycles that end up stalled.

Grounding the competency framework in the context of the business is essential, and there are a number of best practices that can help to avoid the “bad” and the “ugly” of competency modeling.

  • Brand competency modeling as a strategic initiative. Avoid positioning competency model projects as HR activities. Instead, market them as strategic imperatives that are necessary for helping the organization achieve its business outcomes.
  • Align competencies to the organization’s values and strategy. Enlist senior executives to help you identify critical competencies necessary to perpetuate the culture and execute the strategy of the organization.
  • Identify critical (or differentiating) competencies. Avoid exhaustive lists of competencies and keep models manageable. Select 10 or fewer core competencies to create organizational focus and another 5-15 competencies to address the skills that make a real difference for different jobs. (Lombardo & Eichinger, 2002)
  • Start with off-the-shelf models and research, but don’t over-rely on them. Leverage existing models and research as starting points to accelerate model development, but recognize the need to customize models to best align with your organization’s specific strategy and minimize the risk of diluting the model’s impact.
  • Engage key business stakeholders in development. Conduct focus groups and review sessions with key business stakeholders to improve the accuracy and quality of the model, while building consensus in the process.
  • Integrate competency models with people processes. Ensure competency visibility by explicitly integrating competencies into existing people processes to improve adoption and business impact. To avoid implementing more than the organization can absorb, focus on the areas of biggest impact as a way to gain traction and build initial adoption.
  • Determine how you will measure success. Be clear and explicit about the business impact you want to achieve, and identify appropriate metrics for measuring it.
  • Communicate from the top. Use senior leadership to set expectations with employees regarding how competencies will be used both short-term and long-term and encourage them to model the behaviors that they want the rest of the organization to adopt.

 

Competency Models – High on the HR Action Agenda

Competency models are now a critical component of the entry price for any organization that wants to flourish in this uncertain economy. But competency modeling can no longer be viewed as an HR “task” and must be viewed instead as an organizational game changer. The responsibility to make this case rests with HR.

  • HR professionals must be comfortable engaging executives in relevant business dialogue about talent and the importance of competency modeling in building a foundation for strategic people-related practices that support finding, keeping, and growing the talent.
  • HR can no longer stand at a distance from the business. It must be at its center advocating the comprehensive talent agenda and demonstrating how competency models enable strategic and integrated HR talent management.

Afraid that executives will think that this is a lot of conceptual mumbo jumbo? Well, think again. Research shows that strategic and integrated talent management practices are directly linked to increased shareholder value. (Pfeffer,1998; Huselid, 1995)

By positioning competency models as a business solution, executives may just realize that competency models aren’t as ugly as they once thought they were. And, after the competency framework is properly implemented and the operational benefits begin to accrue, those business executives may come to believe that they thought of it themselves.

 

References:

Bowen, D. E., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The role of the “strength” of the HRM system. Academy of Management Review, 29(2), 203-221.

Huselid, M. A. (1995). The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38 (3), 635 – 672.

Lombardo, M. M., & Eichinger, R. W. (2002). The leadership machine. Minneapolis, MN: Lominger Limited, Inc.

Orr, Evelyn, J., Sneltjes, Craig, and Dai, Guangrong (2010). Korn/Ferry Institute: The Art and Science of Competency Modeling.

Pfeffer, J. (1998). The human equation. Boston,MA: Harvard Business School Press.

 

Next month: Technology Project Gone Live! Now what?

Most companies spend months, even years, and millions of dollars to implement organization-wide software systems. These systems often support accounting, human resources, sales, service management, resource planning, content management, and many other mainstream functions. But, once an enterprise system has gone live and everyone on the project team gets back to their “real” jobs, few organizations actually look at how the system is working for them and how they can enhance value by leveraging these new tools going forward. Next month, our veteran Technical Solutions Analyst Louis Adams explains why you need to stay proactive and explores what you should be looking at in order to get the most from your very expensive software investments.

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