What is Competency Management? Best Practices To Drive Performance (In 2024)
Mastering competency management is essential if you’re looking to prepare your organization for the future. Especially when automation and AI are rapidly transforming work as we know it. Some forecast that 85% of jobs available in 2030 haven’t even been invented. And there’s the global talent shortage to consider. Over 85 million jobs are estimated to go unfilled by 2030, which could cost up to $8.5 trillion in untapped annual profits.
So, how can you and your organization navigate these challenges ahead? Let’s explore some key ways to do that by developing an effective competency management process.
Contents
What is competency management?
Why is competency management important to HR (and the organization)?
What are the strategic benefits of competency management?
A step-by-step guide to developing a competency management process
How do you ensure competency management is well-implemented?
Use case: IBM’s competency management system
What is competency management?
Competency management is a multi-step process. It’s about identifying, developing, assessing, and optimizing employees’ skills, abilities, and behaviors. Particularly those they need to excel in their specific roles.
An effective competency model goes beyond traditional job descriptions. It involves creating a framework of core competencies that outlines the skills and behaviors required for each role. When done right, it enables you to align them with your organization’s values, goals, and strategies to drive high performance.
Let’s take a closer look at why competency management is more critical than ever before.
Why is competency management important to HR (and the organization)?
AI could replace millions of jobs. Three hundred million, to be exact. And in just a few years, nearly 50% of workers will experience changes to their core skills.
So, organizations need to do all they can to prepare for this skills revolution – today. And this is where effective competency management can have a significant impact. It’s also where you come in. As HR professionals, your role is critical – particularly in advising your organization about the pressing need for upskilling and reskilling.
Why the urgency?
Preparing your employees for the future will equip them with the necessary skills to adapt to new roles. Not to mention the ability to effectively handle change and leverage new technologies. That’s why your HR team (and the organization) needs to prioritize competency management to have the capabilities ready to succeed well into the future.
Let’s dive in to some other significant advantages of competency management.
What are the strategic benefits of competency management?
If you need some more compelling arguments to build your business case for competency management, here are five major benefits:
1. Increased employee performance and productivity
What’s the secret to keeping employees on track and productive? Having clear expectations about their role and responsibilities. Competency management provides employees with a roadmap for success by identifying, developing, and assessing their key competencies. And when everyone’s skills align with your company’s goals, everyone benefits.
2. Effective talent acquisition and retention
Hiring (and keeping) talented employees is much easier with a competency-based approach. Because it helps you identify the right candidates for the job based on the required competencies – rather than only their qualifications and experience. And you’ll be more likely to retain top talent when you provide them with opportunities to grow based on their skills.
3. Targeted employee development and training
Developing individualized learning and development training can be challenging. But having a competency model can significantly improve the process. It allows you to focus on specific competencies to develop training that address specific needs. Concentrating on areas where your employees need it the most will enable your organization to drive high performance.
4. Greater alignment with organizational goals
There’s no point in investing in training and development if it doesn’t align with your organization’s objectives. But many training efforts fail to do just that. Competency management helps you determine and benefit from the specific skills your organization needs to drive business goals (and outcomes).
5. Better succession planning
Many organizations don’t think about succession planning until it’s too late. One of the biggest challenges is replacing specialized talent when someone leaves. However, having a competency model enables you to identify which current employees have the potential to transition into future roles. This proactive approach not only reduces time and costs of external hiring but also drives engagement and retention among your existing talent.
After successfully presenting your business case, what’s next? You’re ready to create your competency management process.
A step-by-step guide to developing a competency management process
Here is a step-by-step approach based on best HR practices:
Step 1: Identifying and defining competencies
It makes sense to begin with the most critical task: competency identification.
Essential and job-specific competencies
Start by identifying essential competencies: the skills, abilities, and behaviors that all employees should have – regardless of their job function. Some examples of essential competencies include communication skills, problem-solving, and teamwork.
Next are the job-specific competencies required for each role in your organization. These could include technical skills, proficiency in certain software programs, or behavioral skills such as leadership capabilities.
To make this process more efficient (and impactful), take a systematic approach:
Action plan
- Be clear about your organization’s core values, goals, and strategies
- Ensure essential and job-specific competencies are aligned with these key objectives
- Plan to drill down to an individual and team level
Stakeholder involvement
There’s a lot involved in this first step, so you’ll need to work closely with key stakeholders. Gather input from employees, managers, and senior leaders to ensure the identified competencies are accurate and relevant to each job role.
Action plan
- Conduct a stakeholder analysis to identify who exactly to involve
- Gather their input through surveys, focus groups, and/or informal interviews
- Keep them informed along the way for continuous improvement and feedback
Establish methods for defining and organizing competencies
There is no one-size-fits-all approach to defining and organizing competencies. But here are some methods to consider:
Action plan
- Complete a detailed job analysis to identify the tasks and responsibilities for each position.
- Conduct informal interviews with employees and their managers to describe real on-the-job scenarios demonstrating specific competencies.
- Perform competency mapping to create a visual map of required competencies for each position and how they align to the organization’s business objectives.
Step 2: Develop a comprehensive competency model
The next crucial step is designing a robust competency model that will serve as a roadmap to competency development. What does this involve? Conducting a thorough analysis of competencies, job roles, responsibilities, and desired business outcomes.
Purpose and benefits
The intention behind creating a competency model is to have specific guidelines that outline the skills, knowledge, and behaviors for each role in one place. It will provide concrete understanding of all employee abilities and skills, enabling you to more accurately identify learning and development needs. And it allows employees to take ownership of the skills and behaviors required of them.
HR tip
You’ll also want to establish a clear purpose for your competency model. Are you looking to cover all roles and functions? Or just focus on a few high-priority skills? Knowing your end goal helps you structure the model, determine its scope, and choose the right people to involve.
Components of a competency model
Central to designing the blueprint of your competency model is a list of core competencies, technical competencies, and behavioral competencies that are crucial for all jobs in your organization.
Other fundamental elements include:
- A competency dictionary to provide clear definitions and behavioral indicators for each competency description
- Proficiency levels (e.g., a scale of 1-5) to measure the competencies
- Behavioral examples that illustrate each competency in action
Once you’ve finalized your competency model, you can apply it to recruitment processes, talent management, training, and performance assessment.
Step 3: Assessing competencies
What guiding principles will you use to assess competencies? An important question to consider is to ensure assessments are relevant and valid.
Conduct effective competence assessments: Evaluate the skills and abilities of employees to determine if they possess the necessary competencies required for their job roles. You can do this in a variety of ways, including:
- Self-assessments, manager assessments, and/or peer-assessments
- Informal interviews
- Behavioral observations
Importance of gathering feedback
The second part of this step is to gather feedback on the assessments from employees, managers, and senior leaders. This process can help you identify any areas needing improvement or clarification.
Ensure fairness, validity, and reliability
How do you ensure everyone’s skills and abilities are assessed accurately, without bias? Here are some key questions to ask:
- Are questions and assessment methods consistent and standardized?
- Do your assessments measure the exact skills and knowledge being assessed?
- Are the results consistent over time across different assessors?
- Do any of the assessments unfairly favor particular groups of employees?
- Do you use various assessment methods (e.g., written tests, performance-based tasks, and observations)?
Step 4: Analyzing competency gaps
When you’re done with competency assessments, the next step is to determine any gaps in competencies. Before you start this process, decide on the scope. Are there specific roles, departments, or teams that you want to assess first?
Identify gaps between required and existing competencies
Conduct a competency gap analysis. Are there any significant gaps between the required competencies for each role and the existing competencies of your employees? The answer to this question will help determine which competencies need to be developed and which employees require training.
Analyze the results
Evaluate the results to determine any critical gaps, particularly those that impact your organization’s future goals and strategies. Make sure you have a holistic overview from a team to an individual level.
HR tip
Consider getting feedback from your external stakeholders to provide input on past performance and/or desired future competencies.
Determine priority areas for competency development
Identify the priority areas for competency development. You’ll need to prioritize which competencies need to be developed based on the following:
- Focus on the skills critical for driving business growth
- Where employees are the most lacking in their skills and knowledge
- Identify the most needed skills for future-proofing your organization (e.g., technical skills)
Step 5: Supporting competency development and management
Here is where the process comes alive, and all your organization’s hard work is put into action: the ongoing development and management of competencies.
Strategies for developing competencies
Make the most of your HR expertise and collaborate with L&D teams to build the learning strategy for the required competencies. Find the optimal mix that will appeal to different learning preferences, such as:
- Micro and/or nano learning
- Hyper personalized learning
- Internal and/or external training
- Coaching or mentoring
- Job shadowing or job rotations
Create individual development plans based on competency gaps
Individual Development Plans (IDPs) are powerful tools to help employees identify their strengths and areas for improvement. And they set tangible goals to further enhance skills development.
Track and monitor competency development progress
How will you know if your strategies for competency development are working? Make sure you track and monitor progress. You can do this through a variety of software programs or tracking tools.
Measuring competencies
Determine what employee performance metrics you will use to assess and measure competencies accurately. This process will help you identify skills gaps, track progress, and make informed decisions for employee development.
Step 6: Integrating competencies into HR processes
Integrating competencies into key HR processes is the secret to a successful competency management process.
Why integrate competencies into HR processes? You can ensure competencies are integral to the recruitment process, performance management, and learning and development training.
Communicate and promote the use of competencies within the organization
Developing a competency management process is only half the journey. The other half is communicating and promoting it throughout your organization.
And here is where your key stakeholders come in. Encourage and enable employees, managers, and senior leaders to share their competency development journey on internal channels and social media networks (e.g., LinkedIn, Twitter, Instagram, etc.)
How do you ensure competency management is well-implemented?
Once you’ve started implementing your competency management process, here are some key considerations to ensure it’s a success:
- Build a business case for competency management: It’s important to gather data such as employee performance metrics and feedback from internal and external stakeholders. Use this data to build a strong case for ongoing maintenance (and renewal) of your competency management process.
- Gain leadership support and employee buy-in: Support from senior leaders is crucial for any competency management process. Encourage leaders to share their experiences to demonstrate to employees that all levels of the organization are invested in developing their skills and abilities. This can inspire employees to prioritize their own competency development.
- Establish governance and accountability structures: Having a governance structure in place ensures your competency management process is transparent (and effective). This includes identifying who is responsible for developing and maintaining the framework, how employees will be assessed, and how competency data will be used in decision-making processes.
Use case: IBM’s competency management system
IBM has identified a comprehensive list of competencies required for various job roles within the organization. These competencies cover technical skills, leadership abilities, and business acumen. They have defined competency frameworks that outline the specific skills and behaviors expected at different job levels.
- Competency assessment: IBM conducts regular competency assessments to evaluate the skills and proficiency levels of their employees. They use a combination of self-assessment, manager assessments, and peer feedback to gather data on individual competencies. This assessment process helps identify skill gaps and development areas.
- Personalized learning and development: Based on the competency assessment results, IBM provides personalized learning and development plans for each employee. They offer a variety of training programs, online courses, and resources to help employees acquire and enhance the required competencies. These learning initiatives are aligned with the company’s strategic goals and individual career aspirations.
- Talent management and succession planning: IBM’s competency management system plays a crucial role in talent management and succession planning. By identifying and tracking employee competencies, the company can identify high-potential employees and groom them for future leadership roles. They can also identify critical skill gaps in specific areas and develop strategies to address them.
- Performance evaluation and recognition: Competencies are integrated into IBM’s performance evaluation process. Employees are assessed not only on their achievements but also on how well they demonstrate the required competencies for their roles. This approach ensures that competency development is linked to performance evaluation and recognition.
By implementing a competency management system, IBM can effectively manage and develop the skills and capabilities of their workforce, align them with business objectives, and drive overall organizational success.
Final takeaway
Building a comprehensive competency management process can take some time (and resources). But it’s worth the investment. It will help you choose the right talent, train them effectively, and continually enhance their skills. These efforts are crucial for future-proofing your organization – and preparing for the opportunities (and challenges) ahead.
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