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Competency Management – Build Competencies to Improve Performance

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The concepts of competency building and performance management are imposing new thought-processes in IT organizations.  Traditionally Organizational Behaviour and Human Resource Management has been guided by the concept of jobs being the “basic building blocks” of organizations –a concept that is founded firmly in the bureaucracy of the “industrial” era.

This era was focused on a hierarchical chain of command, organization by functional specialisation, uniform rules, standard procedures, a career of advancing up the ladder, impersonal relations between management and staff and between organizational “silos”, and co-ordination and decision-making from above.

With the advent of the “information” era, organizations are finding that the reasons that this “framework” worked in the past, are no longer relevant.  The hierarchical chain of command is being challenged as it does not handle the flexibility and complexity needed in organizations today.  And it does not present the most effective way to establish organization intelligence.  Rules and standard procedures are too rigid and respond too slowly to change.

With organizational “flattening”, there are fewer managerial positions available so there are fewer opportunities for advancement for the more educated workforce of today.  Work today is more “information intensive”, and this needs the development of more in-depth relationships across the organization.  The more educated workforce of today is ready for, and wanting, “self-management”, not direction.

The rapidly changing environment of business today creates necessary structural change and resulting “job” changes.  People today need to be more flexible and need to be able to rapidly develop new competencies to take on new and different responsibilities.

So … Where Does that Leave Us Today?

Edward E Lawler, established in 1992 that competitive advantage often depends on the organization’s ability to develop particular “organizational competencies”, not in its size or financial and technological resources.[1]

The alternative to the “job-based” organization is a competency-focused approach to organizing.  The key issue for this organization focus is understanding the competencies and skills needed to drive the organization’s strategy.  And then, determining the number of people needed with each kind of skill.

This starts with the development of skill sets that are appropriate and unique to the organization.

The move to a competency-based approach to management has it’s most fundamental impact on the area of work design.  The basic building-block in a competency-based environment is not the job – it is the individual, the employee.  In environments where work is highly interdependent or rapidly changing, such as IT, the basic work unit is the “team”, rather than a job.  Both of these scenarios require the development of Competency Profiles that indicate the skills and abilities than an individual or “team” needs in order to be effective in a particular area of work.

The selection process for recruiting and selecting individuals also moves from a focus on “fit for the job” to “fit for organizational membership”.  This means identifying people who are capable of learning the skills needed by the organization, adapting to change, and are able follow the different career paths available in the organization.

Career development is also different in competency-based organizations.  Instead of moving up the corporate ladder, career development will be around the concept of “multiple skills acquisition” paths.

Perhaps one of the most contentious and less clear issues is the area of “Competency-based Pay”.  But we are already doing this in the IT industry.  If we weren’t, how is it that a Java programmer earns more than a VB programmer?  How is it that a SAP business analyst earns more than a non-SAP business analyst?  We are already paying more for specific competencies.  But at this stage it is not altogether based on “value to the organization”, but rather on “supply and demand”.

Making this issue even more complex is the concept that an individual may have competencies not needed by the organization.  Conceptually, the organization only pays for the skills that it has identified that it needs – the skills that “add value”.

Skills-based pay does not replace Performance-based pay.  In fact it facilitates the latter by defining the skills needed to perform the area of work.  How well the person uses the skills and abilities determines their performance.

Training and development are critical in a competency-based organization.  The organization needs to have a well-developed system for providing training in the identified competency areas.  And it need to ensure that individuals are given the time to develop and maintain the necessary skills.

But .. What are the Challenges?

The challenges lie mostly in the area of management theory and style.  The big change is the change from managing people, to managing processes through people.

These challenges include:

  • how to best manage individuals so that they develop and maintain the “correct” skills sets,
  • ensuring that the learning experience of individuals relates to the critical organizational performance issues,
  • how to create an environment that facilitates rapid change as old projects are completed and new ones start,
  • how to create structures that maintain functional excellence while, at the same time, integrate into teams and structures that operate laterally,
  • focusing on what individuals and teams need to be able to do in order to make the work processes operate effectively,
  • how accountabilities for individuals and teams are defined, and how individuals and teams are motivated,
  • changing the basic assumption that individuals have jobs to individuals have value,
  • changing the concept of career development,
  • how to determine rates of pay,
  • how to determine the “multiple skills acquisition” career paths.

Is it all Worth While?

There is only one compelling reason for moving to a Competency-based organization – because it can lead to improved organizational performance.  Past and current writings and research have shown that the best competitive advantage in global markets is the performance capability of the organization.

But for IT organizations, there are additional advantages:

  • It can reduce turnover and increase retention – the number one motivator of IT people is competency development,
  • It offers career development in an environment with limited availability of managerial positions,
  • It relates remuneration to the value that individuals and teams add to the organization.
  • The competency development of individuals is proactively managed and more specific and focused.


[1] “The Ultimate Advantage”, Edward E Lawler (1992)

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