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Competency Management Delivers Spectacular Corporate Gains

Competency-based management (CBM) is a core strategy for understanding what’s really going on within the enterprise. It’s relatively easy to view a snapshot of where employees—and the organization—are in the ongoing quest for success.

March 1, 1999
Related Topics: Human Resources Management Systems (HRMS/HRIS), Strategic Planning
It’s no secret that in today’s organizations, managers get paid to worry. They fret over production schedules and churn their stomachs over budgets. They pore over productivity, and pull their hair out thinking about improving the product. Too often, the last thing they consider is how to track worker performance in any kind of organized and coherent way.

It doesn’t make things any simpler that most managers also devote an inordinate amount of time dealing with the best and worst performers in the organization—while they ignore the vast majority of employees in the middle of the pack. After all, these people do their jobs, they don’t attract attention and they don’t cause any headaches. Why should an overworked and time-pressured manager tend to problems that don’t exist?

On the TV game-show circuit, that type of thinking would elicit a loud buzz (as in you’ve just answered the question wrong). But in the game of corporate HR management, it usually elicits little more than a yawn. And that’s a shame if you consider that in an era of increased competitive pressure, most organizations overlook a method that can deliver spectacular organizational gains: competency-based management (CBM).

CBM is a core strategy for understanding what’s really going on within the enterprise. Combining process with software, it’s possible to analyze the productivity of a worker or group of workers, find out who the best contributors are and what employees are underpaid or overpaid relative to their performance. By condensing core competencies from the web of roles, goals, skills and knowledge that determine an employee’s effectiveness, it’s relatively easy to view a snapshot of where employees—and the organization—are in the ongoing quest for success.

At first glance, CBM resembles traditional people management techniques for hiring, evaluating, developing and rewarding employees. But CBM goes further. Among other things, it offers a defined strategic direction for the entire organization, clear descriptions of the individual competencies that distinguish high performance, and simplified management and HR development programs aimed at reinforcing the identified competencies. Simply put, the emphasis is on competencies rather than specific job skills.

CBM helps fill gaps in skills.
In an era in which knowledge has become the center of the corporate universe, CBM spins a tight orbit around organizational success. It is a way to direct workers toward specific skills and competencies that benefit both them and the organization. It also ushers in a new era of employee self-direction and responsibility. "Without competency management, it’s difficult to achieve organizational objectives because you don’t have a good idea of what skill gaps exist and where your workforce is [in terms of skills incompetencies]," says Michael Sternesky, who has considerable experience managing skills competencies, and is vice president of Houston-based Americas New Ventures for Shell Services International.

But getting on track with competency-based management isn’t easy. There are cultural issues to overcome and technical issues to cope with. Before human resources forks over a six-digit sum of cash for an HRMS or other software that supports competency-based management, it’s a good idea to understand the organization and what’s really going on.

First, it’s important to conduct an organizational skills and capabilities analysis. This serves as the foundation for a CBM program and helps an enterprise align the goals of the individual and the company. Typically, the analysis involves interviews and a study of employees within the company who successfully achieve strategic goals. It results in a list of critical competencies. These help define the strategic direction of the program, the systems and tools that a company uses, and how an entire program takes shape.

It’s also important to understand what makes a CBM program tick. It’s essential to create descriptions for various competencies and skills, create assessment and feedback tools, create development plan guides, map development ideas to competencies, create training, develop a competency-based pay structure and tailor programs—particularly recruitment—to fit the model. Only after an organization thoroughly understands itself and its internal processes can it turn to software that ratchets up the capabilities of CBM.

As Mike Campion, a professor of management at Purdue University, explains: "Most companies are better at measuring jobs than measuring people. Unless the underlying processes are in place, all the sophisticated software in the world is useless." The problem, he says, is that many companies turn to shrink-wrapped packages without understanding the underlying processes. For example, pre-defined ratings—say on a scale of 1 to 5—mean nothing without criteria to standardize what each number means across various departments and divisions, and with different managers using the system.

Evaluate your software needs.
Don’t get the wrong idea. Software can make it far easier to manage competencies and spot trends. Vendors like SAP, Oracle, Lotus and Infinium are adding capabilities that allow a company to manage the process in an organized, coherent way. Other third-party vendors sell packages specifically tailored to CBM. In almost every instance, the packages provide Web-based tools that allow HR professionals and managers to develop knowledge and skills through recruiting, hiring and training processes. Using such a system, it’s possible to conduct cost-benefit analysis, understand real value and determine an organization’s weaknesses.

The net effect? CBM tools make it easier to drill through mountains of data and information. Not only can a manager track the progress of a group of employees, it’s possible to view each individual on a comparative bar chart, and then view each person’s courses and accomplishments. At that point, the manager can slot a potential candidate into specialized training or a job opening, as needed. And if a particular skill doesn’t exist within the company, the system can automatically generate a job requisition. The same software can help managers determine how various departments, teams or employees rank in terms of pay and performance. An astute HR department can then tweak pay, benefits and recruiting to match the exact needs of the organization.

Employees, too, can benefit from such a system. Because they can check their current skills against organizational criteria for specific positions, they can become more active in managing their own careers. If a worker sees that a set of courses or a certain assignment can lead to a better job, it’s a pretty good bet that he or she is going to do what it takes to land the promotion and the extra money that comes with it. In the end, everyone wins.

Yet, even with solid analysis and the right software, success doesn’t just happen. Like any new process or system, it takes time to get all the pieces in place and create buy-in—particularly among managers. More important than the software package is convincing managers that CBM is the future of HR. It reduces favoritism and discrimination, creates standards for the entire organization and is part of the shift toward employees taking responsibility for their careers.

In the end, CBM is about rethinking processes and using computers to better manage details. Though software provides a powerful tool for administering a CBM program, it doesn’t intrinsically solve organizational problems and eliminate roadblocks. Computers, however efficient, can’t replace human thinking, communication and work processes. Once an organization—and its HR department—thoroughly understands its human capital, it’s able to unleash its potential in ways that never before seemed possible.

Workforce, March 1999, Vol. 78, No. 3, p. 104-105.

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