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Make Smarter Business Decisions Know What Employees Can Do

November 18, 2001
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Teri Ralbovsky knows that achieving success in today's dramatically fluctuatingmarketplace involves more than a great product and effective marketing. It requiresmore than a flawless balance sheet and the hottest information technology. Atthe end of the day, she says, this is what it's all about: "The skills andcompetencies that you develop as an organization define how you conduct business,how effectively you interact with customers and business partners, and, ultimately,whether you're able to succeed."

    As human resources director for Virtual Inc., an integrated management-marketingfirm based in Wakefield, Massachusetts, Ralbovsky is on a mission to push thecompany to the highest level of performance. As a result, she conducts regularand ongoing analysis of clients' needs, surveys the skills and competenciesof Virtual's 38 employees, and then identifies ways to fill in the gaps throughhiring and training. If, for example, the firm needs employees with strong teamworkor communication skills, she will pore over résumés for qualifiedcandidates, or provide specific training to address the requirement. "Today,human capital defines an organization," she says.

    More and more companies are subscribing to Ralbovsky's way of thinking. They'redeveloping systems to track skills, typically defined as job-based activitiessuch as using a word-processing program or operating a forklift, and competencies,which typically cover broader professional characteristics such as the abilityto work on teams or think creatively. Increasingly, organizations are usingthese models to make key business decisions centering on recruiting, training,and succession planning.

    "By creating a unique inventory of human capabilities, a company is betterprepared to compete in today's business environment," says Tom Kraack,director of the organizational development practice at Unifi Network, a divisionof PricewaterhouseCoopers consulting. In some cases, companies are turning tosophisticated software systems to manage the process. Others are finding thatspreadsheets and old-fashioned paper are sufficient.

    Skills inventories took on increased importance after September 11, says IleneGochman, practice director, organization management, at the consulting firmof Watson Wyatt Worldwide in Chicago. "You can see how quickly firms hadto get back to business," she says. "All of a sudden, you need someonewho can speak French, or someone who had been a bond trader earlier in his career."Without a system, Gochman says "you're relying on your memory or the informalnetworks people have." That's fine in an emergency, but to leave peoplein those positions because of who they knew, or the luck of the draw, wouldraise issues of fairness, she says.

    No matter what the motivation, skills inventories are more about process thantechnology, says Frank Belmonte, a human resources consultant for Hewitt Associatesin Lincolnshire, Illinois. "An organization must identify its key objectivesand business goals and shape its workforce accordingly." As skills andknowledge become increasingly specialized in today's business world, organizationsthat don't keep up are destined to fall behind, he notes.

Building a skills inventory
    To a certain extent, organizations have always triedto get a handle on the talent and skills they have and what they need. But intoday's highly competitive business environment, it's not just a good idea;it's an absolute necessity. A skills inventory, essentially a checklist or databaseof organizational capabilities, can help an enterprise determine whether ithas the ability to produce a next-generation microchip or to market a new foodproduct effectively. When human resources or line managers identify a skillgap -- the difference between where the company is and where it needs to be-- they can funnel workers into appropriate courses or hire applicants bestsuited to the job. HR can also tweak pay and compensation to attract the idealkinds of workers.

    Although every organization approaches the issue differently, a managementstrategy for skills and competencies usually revolves around a few essentialsteps. Typically, human resources begins by analyzing the specific skills andcompetencies needed to perform job duties effectively. This can include functionsneeded within a company, such as expertise in a particular software applicationor piece of equipment, or specific behavioral qualities required to interactwith customers and vendors.

Skillvs. Competency

Skill

* Proficient inPowerPoint
* Programmingin Java
* Setting up anIV drip
* Driving aforklift
* Usinga welding torch
* Usinga PDA
* Computerrepair
* Carpentry
* Installingwindow shades

Competency

* Creativethinking
* Conflictresolution
* Ability towork on a team
* Ability tobuild
   relationships
* Effectivenegotiation
* Verbalcommunication
* Valuingdiversity
* Flexibility
* Integrityand honesty

    Once an organization has documented its skills, it can build or buy a systemdesigned to track them. Many small companies continue to use paper or a spreadsheet,while medium and large companies often turn to specialized software programs,including HRMS modules from SAP, PeopleSoft, and Oracle, and human capital developmentapplication providers like Saba Software and SkillView Technologies. "Thegoal is to develop a system that can provide insights into organizational andemployee needs," says Stephen Schoonover, president of Schoonover Associates,a Falmouth, Massachusetts, consulting firm.

    At that point, it's up to HR and other departments to design processes thatcan nurture the desired skills. For example, the organization might compilea list of specific job-skill requirements that recruiters can use for hiring,or develop a list of questions to be used during the interviewing process tofind the right people. An organization might also construct a system that providesfeedback to managers and employees about the skills and competencies that individualpeople, departments, and the company as a whole have available.

    At Virtual Inc., Ralbovsky has worked hard to develop a matrix that allows herto hire and train for the organization's specific and constantly changing needs.Because the company's clients have diverse requirements -- some are consortiumsand organizations that require specific management services and others are high-techcompanies looking for marketing assistance -- a "cookie-cutter approachsimply won't work," she says. "We have to constantly assess how wecan satisfy a client." Ralbovsky initially developed the skills and competencieslist by consulting with senior staff, and she continues to tweak and refinethe process.

    Because the company is small, she is able to maintain the list on paper. Atstaff meetings and through written communication to employees, she emphasizesimportant traits such as effective communication skills and the ability to workon a team, build strong interpersonal relationships, solve problems, and resolveconflicts. She also has designed a performance-review process to help supervisorsand managers evaluate employees on their level of proficiency for various skillsand competencies.

Leveraging the power of skills and competencies
    Once an enterprise has developed a system for measuringskills and competencies, it can put the data into action and realize an arrayof benefits. For example, many companies now offer corporate universities ore-learning programs with dozens, if not hundreds, of different classes. Employeescan venture online and instantly know which courses, skills, and competenciesare required to receive a promotion or to change job tracks within the organization.It's then possible to sign up for the appropriate course online and know one'sstanding at any given moment.

    At the same time, the company can track job skills and overall learning andknow which employees, teams, and departments are up to speed and which needadditional training or instruction. The organization can also determine whethertraining, succession planning, and other initiatives are on target and thentweak hiring and compensation to fit current needs. "Today, organizationsmust adjust their business strategies on a near real-time basis," saysLisa Tesvich, director of PricewaterhouseCoopers' Unifi Network. "Withoutthe right information, it's impossible to stay in touch with internal needsand those of clients or customers."

    At Ford Financial, which has about 20,000 employees scattered across the globe,core leadership training is an essential piece of the skills-and-competenciespuzzle. The division of Ford Motor Company has constructed a sophisticated skill-and competency-based learning program, which is available through the companyintranet. Employees can view information about various jobs within the firmand determine which skills and competencies they must master to achieve theirgoals. At that point, it's possible to focus learning appropriately, says BarbaraStebbins, manager of corporate learning and development at Ford Financial inDearborn, Michigan.

    The company had its first glimpse at the power of a competency-based approachin the early 1990s, when Accenture (formerly Anderson Consulting) interviewedmore than 2,000 employees and helped Ford Financial catalog its various skills.Over the next five years, Ford Financial developed more than 80 courses, butdidn't bother to link them to the skills database. "Suddenly, we realizedthat we were sitting on top of a gold mine," Stebbins says. "By mappingand organizing all the information, we could build a sophisticated system thatcould improve organizational performance."

    It was no easy task. Given the hundreds of identified skills and varying needsin 36 different countries, connecting skills to actual work requirements demandedcomplex thinking and analysis. Ford Financial called in Larkspur, California-basedMindjet, which systematically mapped every skill set used by the company's employeesaround the world. Three months later, Mindjet had mapped the company into threecore businesses consisting of 15 knowledge domains, 80 functional areas, andnearly 800 separate skills.

    As a result, Ford Financial can ensure that employees gain the skills requiredto improve their job performance and careers, while also improving overall companyperformance. The system runs from software developed in-house; an increasingnumber of employees are using it, and they give it high marks. Ford Financial'snext objective is to evolve from a skills-based approach to a competency-basedsystem. "We have built a road map for the future," Stebbins says.

Putting it all together
    Hewitt's Belmonte notes that while human resources shouldbe at the center of the equation, an effective skill- or competency-based programrequires input from across an organization, including finance, operations andmarketing. "Then it's up to HR to build the templates to make the processwork, and partner with IT to implement the systems."

    Because each organization's needs are different, it's usually unwise to letsoftware applications define the process, Belmonte adds. Using a database orsoftware program to track skills inventories and make information readily available,however, can pay dividends -- particularly in larger organizations. "It'spossible to update information and have the system evolve with the organization."

    When all the pieces come together, competency management can create an enterprisethat is nimble and smart, and one that achieves a distinct competitive advantage."Once an organization knows its strengths, weaknesses, and needs, it canmake sound decisions and optimize its investment in human capital," saysCabot Jaffee, president and CEO of AlignMark, a Maitland, Florida, consultingand productivity management provider. "Managing skills and competenciesis at the foundation of any successful business."

For more information:

Workforce, November 2001, pp. 42-46 -- Subscribe Now!

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