Special Topic 1: Competency Management – Human Resource Management: Text and Cases

Special Topic 1

COMPETENCY MANAGEMENT

Objectives

  • To understand what the meaning of competency is.

  • To understand the construct of a competency framework.

  • To understand how to use competency frameworks in various HR processes.

  • To understand how assessment centres are designed.

A1.1 INTRODUCTION TO COMPETENCY MANAGEMENT

Nowadays, the competition is not between products—it is between people. What is at the core of this is the competence of the organizations. Competence is, however, different from competency. While competence is the ability to do a particular task, competency concerns the underlying characteristics which allow a person to perform well in a variety of situations.

The word ‘competency’ has two relevant meanings:

  1. The ability of an individual to perform effectively in a job-relevant area: this reflects the degree to which the person does what is required of the job.
  2. That which is required of an individual for effective performance: this involves defining what it takes to be successful at the job.

The entire concept of the competency management is based on the second definition.

A competency is an attribute, knowledge, skill, ability, values or other characteristics that contribute to successful job performance (Figure A1.1). This would mean that the articulation of competencies would translate into the identification of the critical success factors in achieving the organization's mission, vision and strategy, which if not achieved would result in the decrease in the performance of the organization.

Difference Between Competence and Competency

An ability based on a work task for a job output is referred to as competence and the ability based on behaviour tends to be referred to as a competency.

Figure A1.1 Defining competencies in terms of behaviours, action and results

A1.2 COMPETENCY MODEL

A competency model is a grouping of individual competencies, which describes all or most of the requirements for job, function or organizational success.

A1.2.1 Types of Competencies

Competencies could be categorized into two groups:

  1. Technical competencies
  2. Non-technical competencies

Technical Competencies

Technical competencies, also known as functional competencies, are related to a specific area of expertise such as industry, process, technological package or functional area. They represent specific knowledge or skill (e.g., knowledge of supply chain, designing a performance management system, exploration of oil, safety concerns in a chemical plant). These competencies are generally built through some form of training (i.e., formal education, professional course or certification) or through real time ‘on the job’ experience (Table A1.1).

Non-technical Competencies

Non-technical competencies are also known as behavioural competencies; these consider the ‘soft skills’ of people and are essentials for effective managerial behaviour. Therefore, these would typically be one of the competencies cited in Table A1.2 or something similar. These competencies are not particular to a certain industry, process, technological package or functional area.

Competencies can be further categorized into clusters called meta competency and sub-competency to make it more focussed and also detailed. In Table A1.2 that discusses behavioural competency, ‘leading others’ and ‘communicating and influencing’ may be called meta competency. Each meta competency is usually a broad combination of sub-competencies which could be measured separately. Providing motivational support, fostering teamwork, empowering others, managing change, developing others, managing performance and fostering diversity are sub-competencies.

 

Table A1.1 Technical competencies

Industry

Process

Technology

■  Aerospace and defence

■  Retail

■  Agri business

■  BPO

■  Banking and financial services

■  Manufacturing

■  Life sciences

■  Energy

■  Entertainment

■  FMCG

■  Advertising

■  Telecommunications

■  Logistics

■  Transportation

■  Inventory

■  Research

■  Innovation

■  Sales and marketing

■  Supply chain

■  Payroll

■  Fund management

■  IT strategy

■  ERP
implementation

■  ERP program

■  Business continuity processes

Function

Lead business processes

■  Legal

■  Accounting

■  Public relations

■  Knowledge management

■  Internal audit

■  Treasury operations

■  Research and development

■  Business development

■  Vision

■  Mission

■  Values

■  Strategy

■  Critical success factors

■  Core competence

■  Competitive analysis

■  Objectives

■  Goals

■  Social responsibility

■  Key performance measures

 

Table A1.2 Behavioural (non-technical) competencies

People

Business

Self-management

Leading others

 

■  Providing motivational support

■  Fostering teamwork

■  Empowering others

■  Managing change

■  Developing others

■  Managing performance

Preventing and solving problems

 

■  Diagnostic information gathering

■  Analytical thinking

■  Forward thinking

■  Conceptual thinking

■  Strategic thinking

■  Technical expertise

Self-confidence

 

■  Stress management

■  Personal credibility

■  Flexibility

Communicating and influencing

 

■  Attention to communication

■  Oral communication

■  Written communication

■  Persuasive communication

■  Interpersonal effectiveness

■  Influencing others

■  Building collaborative relationships

■  Customer orientation

Achieving results

 

■  Initiative

■  Entrepreneurial orientation

■  Fostering innovation

■  Results orientation

■  Thoroughness

■  Decisiveness

■  Business acumen

■  Global perspective

 

A1.3 COMPETENCY FRAMEWORK

A competency framework is one which enables organizations to steer their HR strategy with the competencies forming the basis for many HR processes. The essential components of the framework have to be:

  1. Competency dictionary
  2. Competency band matrix
  3. Job/role competency profile
  4. Competency assessment tools

A1.3.1 Competency Dictionary

The entire universal set of competencies identified for an organization would be known as Competency Dictionary (Figure A1.2). However, this is not merely a collection of the competency names, but a detailed repository of competencies with their definition and description along with behavioural indicators articulated for different proficiency levels of the competency. For example, consider the competency ‘influencing others’. First, merely naming a competency does not ensure the calibration of understanding between all. Hence, a competency needs to be defined and described, so that all are on the same page as far as understanding the meaning of the competency is concerned. This competency is one which can be expected from the ground-level staff as well as the head of the organization. Second, do both the levels need this competency in the same measure? Obviously not—while the ground-level staff would be expected to deliver within a small circle of influence the head of the function has to have it to an entirely different level so as to build successful working alliances to steer business. These different levels in which a competency is articulated are known as ‘proficiency levels’. The behaviour which indicates the presence of the competency at that level is known as the behavioural descriptor. Figure A1.3 is an illustration which can help you understand this better. ‘Influencing others’ is the name of the competency. ‘Gain support from others through influence, negotiation and by forming alliances with other interested parties’ is how it is defined, so that is the competency definition. This competency has four proficiency levels (Level 1 to Level 4). Each proficiency level has a behavioural descriptor. For example, the behavioural descriptor for Level 4 is ‘Builds influential alliances to steer business’.

 

Figure A1.2 Competency dictionary

A1.3.2 Competency Band Matrix

Once the competency dictionary is ready, the next step is to prescribe who needs which competency and at which levels. The output of this exercise is what is known as the mapping band matrix.

Refer to Table A1.3 to understand the example explained now. In this example the organization has identified and articulated 12 behavioural competencies. There are three levels of proficiency that have been articulated (1 to 3, where 1 is the lowest and 3 being the highest). The organization has decided to track and develop five key competencies for each band (level or grade or whatever nomenclature) in the organization. There are four bands in the organization namely:

  • IC (individual contributor)
  • M (manager)
  • SM (senior manager)
  • BUL (business unit leader)

Figure A1.3 Competency name, definition, proficiency levels and behavioural descriptors

 

Table A1.3 Competency band matrix

 

Table A1.3 is known as the competency band matrix for the organization. Table A1.4 defines the competency ‘Drive for excellence’. This competency is shown to have three proficiency levels. Each proficiency level is described with detailed behavioural descriptors.

 

Table A1.4 Drive for excellence

Drive for Excellence
Strives to surpass standards of excellence in achieving goals. Steadfastly pushes oneself and others to deliver results and establish benchmarks. Surpasses own standards of excellence. Supports others in their quest for excellence

Proficiency level 1

Proficiency level 2

Proficiency level 3

■  Sets high standards of quality for own work. Flawlessly executes responsibilities and consistently delivers on sets goals and targets

■  Is energized when given a ‘stretch’ goal, responds promptly and is able to deliver the stretched goal within the defined time frame

■  Is able to set check points for measuring progress towards goals for self and subordinates

■  Consistently overachieves on defined targets. Focuses on self delivering quality output on all occasions and ensures that team achieves ‘executional excellence’ in all activities

■  Is comfortable defining ‘stretch’ goals and pushes himself to deliver the same

■  Improvises on set standards at work whether in quality, productivity, systems or processes. Uses benchmarking activities to identify more effective ways of doing work

■  Consistently exceeds performance targets in multiple and diverse environments and applications

■  Pushes self and others towards delivering results. Thrives in setting and achieving ‘stretch’ goals for self

■  Establishes benchmarks whether in quality, productivity, systems or processes. Develops and applies techniques for reinforcing executional excellence

■  Supports others in their quest for excellence. Measures and rewards individual and group excellence

A1.3.3 Job Competency Profile

As a consequence of the competency band matrix, each ‘job/role’ in the organization will have certain competencies (technical and non-technical) with their proficiency levels identified for them. This is known as the Job/Role Competency Profile. The advantages of having a Job/Role Competency Profile is that it sets a benchmark for many other HR processes in the organization such as selection, performance management, training & development and career management.

 

Example of a Job Competency Profile Template

Job title

 

Department

 

Reporting to

 

Job Purpose

 

Key Result Areas

Percentage of Time Spent

KRA 1

 

KRA 2

 

KRA 3

 

KRA 4

 

KRA 5

 

Competencies (Specific to the Job)

Name of Competency

Proficiency Level Required

Technical Competency

 

  • Competency 1

< Desired Level>

  • Competency 2

< Desired Level>

  • Competency 3

< Desired Level>

  • Competency 4

< Desired Level>

  • Competency 5

< Desired Level>

Behavioural Competency

 

  • Competency 1

< Desired Level>

  • Competency 2

< Desired Level>

  • Competency 3

< Desired Level>

  • Competency 4

< Desired Level>

  • Competency 5

< Desired Level>

A1.3.4 Competency Assessment Tools

The basis of the usage of competency models in the industry is the fact that they can be measured by an observable behaviour. There are three methods for assessing competence: cognitive tests, simulations and direct observation. An adequate assessment method is the one which stands the test of practicability, reliability, validity and sensitivity. Competency assessment can be done as a part of selection, performance management or development. The method of assessment would change depending on the purpose of the assessment. Some tools used for competency assessment are in-basket exercises, group and team discussions, case study exercises, presentations, paper pencil tests, aptitude tests, psychometric tests, role-plays and interviews. You will note that most of these assessments are the same that are used in assessment centres, described in Chapter 5 (‘Selection’).

  1. In-basket exercises: These are usually used to assess administrative and decision-making competencies. In these, the candidate is given information on a fictitious company and then asked to respond to multiple issues. These might relate to correspondence on uncomfortable and difficult subjects etc.
  2. Group discussions: In these, the participants are given background information about an organization or an issue and then asked to meet in a group to discuss and come to a conclusion or resolution of an issue. These are used to assess administrative and decision-making dimensions.
  3. Case study or analysis exercises: In these, participants are given quantitative and qualitative data about a fictitious organization or situation. They are required to study this and then make recommendations for improvement of performance, productivity or morale. These are used to check the analytical skills of the candidate.
  4. Paper pencil tests: These include a wide range of tests such as:
    1. Cognitive ability test: These tests measure an individual's ability in the areas of numerical reasoning, verbal reasoning, non-verbal reasoning, spatial intelligence, drawing appropriate conclusions and understanding information.
    2. Knowledge tests: These tests are meant to measure specific job-relevant knowledge.
    3. Behavioural knowledge test: These tests measure the ability of an individual to handle diverse situations.
    4. Motivation assessment test: These tests identify what motivates people to perform; their likes and dislikes in the job.
    5. Personality tests: There are a variety of personality tests each measuring different facets of a person's personality. Depending on the required competencies of the job the appropriate test is chosen.

Interviews: These are used to explore different facets of the candidate. Interviews are usually used to ratify or confirm what has been found through other tests and exercises. Competency-based interviews are those where every question asked is to evaluate the competence of the interviewee. The competencies to be checked are collected from the Job/Role Competency Profile. The answer is then matched against pre-decided criteria. The downside with this form of interview is that it can only check the competency of the candidate based on their past experience which may not be the best indicator of their performance in the future job.

A1.4 COMPETENCY-BASED HR PROCESSES

A human resource management system should be an integrated whole of all its subsystems. Figure A1.4 shows how the competency-based subsystems in combination with an objective-driven performance subsystem can constitute of an integrated human resource management system. This means that all HR subsystems can be a worthwhile whole in themselves if there are a combination of competency-based system and objective-driven performance management system.

 

Figure A1.4 Competency based HR system

A1.4.1 Selection Process

The steps taken to develop a competency-based selection process are:

  1. Develop job/role competency profile: This defines the specific competency levels that predict threshold and superior performance in the jobs studied and becomes the template used to select or place employees.
  2. Select or develop assessment methods: Selection methods are chosen from the interview, test, assessment centre, biodata and rating methods (discussed greater detail in the section ‘Competency Assessment Tools’) based on cost-effectiveness, administrative ease and candidate acceptability. Valid methods (e.g., assessment centres) may be too costly and difficult to administer: others, such as tests, may be rejected by candidates or may not be in line with the organizational culture. Our experience is that the Behavioural Event Interview (BEI) is the most cost-effective selection tool.
  3. Train assessors in the assessment methods: Organizational staff who will conduct the assessments need to be trained to do a BEI or run an assessment centre. Most people who have considerable work experience can learn this in a few days to conduct a BEI with sufficient reliability to make effective selection decisions.
  4. Assess the competencies of the candidate for the job: The method could be selected depending on the job and other constraints that the organization might have. One may not always get to structure a selection or a promotion system in the ideal manner. This is because there are several resource issues and chief among these issues are the time available to make the decision, the size of the applicant pool and the amount of money that can be spent on each candidate. For internal recruitments, a combination of past performance and competency assessment forms the basis of selection.
  5. Make job-person match decisions for selection, placement or promotion.

A1.4.2 Performance Management Process

Traditionally, all companies measure results to assess performance. While there is nothing wrong with this approach, it could be very limiting for the growth of the capability and the overall competence of the organization. Putting it simply, what this means is that if someone is producing results in the current job, it does not mean that they will continue to produce results in the next position when promoted. We have heard about the scores of ace salesmen who failed as sales managers. Competency-based performance management processes can be used to answer this challenge. A competency-based performance management process shifts the focus from mere results to building competency.

Well-designed performance management systems typically include three components:

  • Objectives: Identifying and evaluating employees’ goals and objectives—this is a measurement of results.
  • Competencies: Evaluating employees on the competencies that have been identified for superior job performance—this is a measurement of the behavioural characteristics that impact results.
  • Development: Creating individual developmental plans (IDPs) to enhance employee strengths and to close performance gaps as determined by the competency evaluation.

If an employee fails to meet certain objectives, the competency assessment will typically reveal the reasons why. However, evaluating the employees on the critical competencies for a position does much more than that. Employees can meet their performance targets, yet be rude to customers, disrupt the team and fail to keep commitments. Providing employees with performance feedback on competencies gives them the information that they need to be successful. Given below is an example of how competency assessment can be made a part of the performance appraisal process.

Role/Job

Required Competencies for the Role

Competency 1

  • Name of the competency
  • Definition of the competency
  • Behavioural descriptor of the proficiency level required as per the job/role competency profile

Greatly exceeds expectations

Exceeds expectations

Meets expectations

Occasionally meets expectations

Unsatisfactory

Competency 2

  • Name of the competency

  • Definition of the competency

  • Behavioural descriptor of the proficiency level required as per the job/role competency profile

Greatly exceeds expectations

Exceeds expectations

Meets expectations

Occasionally meets expectations

Unsatisfactory

Competency 3

  • Name of the competency
  • Definition of the competency
  • Behavioural descriptor of the proficiency level required as per the job/role competency profile

Greatly exceeds expectations

Exceeds expectations

Meets expectations

Occasionally meets expectations

Unsatisfactory

Competency 4

  • Name of the competency
  • Definition of the competency
  • Behavioural descriptor of the proficiency level required as per the job/role competency profile

Greatly exceeds expectations

Exceeds expectations

Meets expectations

Occasionally meets expectations

Unsatisfactory

A1.4.3 Learning and Developmental Process

Learning and development inputs can be obtained only after some form of assessment.

As a part of the performance management process as shown above, it can identify competency gaps or developmental areas can be identified. Based on that input, every individual may have a prescribed developmental plan (a sample template is shown below).

 

 

Let us understand this with the help of an example:

EMC designed an accelerated leadership development programme in partnership with IIM Bangalore. The programme was called EDGE—an acronym for educate, develop, grow, empower. The EDGE learning curriculum is spread over 15 months and is based on three pillars:

  1. Self-awareness (managing self)
  2. Synergy (managing relationships)
  3. Success (managing work)

Competency Model

EDGE is a programme designed to develop leadership competencies. This is how they define their leadership competencies.

The leadership competencies are divided into six capabilities (meta competency) and within each capability there are three competencies.

  1. Knows the business
    1. Business acumen
    2. Operational command
    3. Financial management
  2. Execution and results competencies
    1. Sense of urgency
    2. Passion
    3. Integrity and change leadership
  3. Thought leadership
    1. Innovation
    2. Technical mastery
    3. Intellectual ability
  4. Customer focus
    1. Anticipating needs
    2. Solving problems
    3. Building loyalty
  5. Personal leadership
    1. Self-awareness
    2. Learning from experience
    3. Developing self and others
  6. Presence and influence
    1. Building coalition
    2. Organizational influence
    3. Leveraging global resources

Competency Assessment

These competencies are then assessed. The method of assessment that EMC follows is an online tool that conducts a 360-degree feedback process. Each assessor has to answer the questions based on the EMC competency model cited above. This feedback is collected from the participant's direct reports, peers and superiors.

Learning and Developmental Plan

The competency assessment through the 360-degree feedback method is used to identify the gaps in competencies. Based on these gaps, a developmental plan is prepared. The developmental plan includes on-the-job development assignment (OJDA) anchored with peer learning groups. After a period of time, the learner has a mid-term learning review (MTLR) followed by an end-term learning review (ETLR) at the end of 15 months. Between 18 and 21 months, the competency assessment is repeated and this time the assessment identifies the competencies which have been successfully enhanced and the competencies which would need more improvement emphasis. This sets in motion a preparation of another developmental plan and thus learning becomes a continuous process.

A1.5 CAREER PLANNING AND SUCCESSION PLANNING PROCESS

A competency-based human resource system can help career planning too. In a competency-based system, various elements integrate to facilitate career planning. Each ‘Job/Role’ in the organization will have certain competencies (technical and non-technical) with their proficiency levels identified for them. This is known as the Job/Role Competency Profile. All employees know the competency descriptions for the given jobs. Employees also have a way of knowing their competency profile if the organization has a system of competency assessment in place. This assessment can be facilitated through development centres, online 360-degree feedback systems etc. Employees can match their proficiency in competencies with the competencies and proficiency requirements of various jobs. Based on the match, the employees can apply for various jobs and based on the gaps they could identify the developmental opportunities for themselves and have a conversation about it with their line manager or HR. Such a system helps employees manage their career proactively.

The same process can be used by HR for succession planning. A combination of the employees’ performance analysis and competency assessment would help HR in identifying potential successors for the key positions in the organization. The gap can be used to design a developmental plan and a learning path for the identified employees.

A1.6 ASSESSMENT AND DEVELOPMENT CENTRES

The history of assessment and development centres (ADCs) can be traced back to the Second World War when it was used by the UK War Office Selection Boards to judge candidates. In 1956, Douglas Bray introduced the first industrial application of the assessment centre at AT&T. It was the first private company that commenced using it for management selection. Soon Standard Oil, IBM and others followed suit.

Now, HR professionals are widely using ADC for driving objectivity and transparency and for avoiding subjectivity and bias in their decisions. These decisions could be about selection, promotion, training and a variety of other reasons. When the exercise is done for the purpose of selection of the right candidates, it is known as an assessment centre. When it is done as part of a development initiative, it is called a development centre. A development centre uses the same approach as an assessment centre—the difference is only in the objective and the results. While an assessment centre uses the objective to evaluate a capability against a standard for the process of selection, a development centre uses it to identify training needs and the potential to be nurtured. While an assessment centre identifies the ‘competency gaps’, a development centre works out individual development plans (IDPs).

A1.6.1 Difference Between Assessment and Development Centres

An assessment centre is a multi-dimensional approach which is designed to provide reliable information about the range of competencies which are necessary for the employee, in order to enhance their skills and achieve the set objectives. ADCs are multiple assessment procedures. In this, a group of candidates/employees take part in a variety of different exercises, while they are monitored by a team of observers who are assessors. Each candidate is measured against a number of predetermined competencies (Table A1.5).

ADCs not only aid in finding the right kind of candidate for specific roles, but also help in the areas where they may be lacking. Due to their strategic advantage ADCs are being used in promotions, as it is a completely objective method.

A1.6.2 Features of an ADC

  • A sizeable number of candidates are brought together and then an assessment is carried out.
  • Multiple assessors are required to objectively assess each candidate.
  • Senior managerial employees are trained in observation. One could also rope in industrial psychologists, as a part of the team of assessors too.
  • The final rank given by various assessors are pooled together and the final grading is determined.
  • After the assessment scores are arrived at, then the overall scores are determined, by combining these with due weightage to the past performance and the previous experiences.

Table A1.5 Difference between assessment and development centres

Assessment Centre Development Centre
  • It has a pass/fail criterion of judgement.
  • It provides an opportunity for future development and it also has a pass/fail criteria.
  • Aimed at filling job vacancies.
  • Aimed at development of employees.
  • Less emphasis on self-assessment.
  • Greater emphasis is laid on self-assessment.
  • More candidates and few assessor.
  • Mentoring is encouraged and hence more assessors.
  • It is optional to share feedback.
  • It is a must that feedback is shared, in fact it is a prerequisite.
  • Fulfils short-term organizational needs.
  • Fulfils long-term organizational needs.

A1.6.3 How an ADC Works

An ADC uses multiple evaluation techniques, including various types of job-related simulations, and sometimes interviews and psychological tests. Some of the common job simulations used in assessment centres are as follows:

  • In-basket exercises
  • Group discussion
  • Fact-finding exercises
  • Decision-making problems
  • Simulation games
  • Business games
  • Oral and written presentation exercises
  • Case study
  • Role play
  • Psychological inventories

The assessment centre method is a proven and valid technique that is extremely effective for making the selection and promotion decisions and for diagnosing employee development needs. Applied traditionally, it is most appropriate for the organizations that process groups of employees. The reason why they are so successful and reliable to use for selection and promotions is that they assess their candidates on their performance in future jobs.

For example, Gati Ltd. has introduced an assessment development centre process at all levels of the organization since 2003. All promotion decisions are decided using this approach. When it was introduced, many of the senior employees started criticizing it; soon, they realized that how crucial this technique was for their development. The employees who were eligible were encouraged to experience the process. Even those who did not perform well were also encouraged to undergo the development centre process, where they could develop the required competencies and opt for a structured training. In a short span, the ADC was accepted as an important HR initiative for developing future leaders. Many organizations in India are moving towards a selection of subsystems (especially learning and career management) based on competencies. Organizing subsystems using a common set of dimensions/competencies produces substantial benefits because the subsystems reinforce one another in the total system. Because each element in the subsystem can be built around a common set of dimensions/competencies and rating scales, the entire subsystem becomes more efficient and effective. This reduces training time and expense and makes implementation and follow-through efforts more effective. In spite of all its merits, driving competency-based system needs rigour in implementation and discipline in maintenance, which is why only those organizations who are truly people-oriented are adopting these.

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