An Overview of Competency-Based HR Management Practices

Overview

This chapter lays the foundation for the book by answering the following key questions:

• What are competencies?
• What is the difference between fully successful and exemplary performers, and why does it matter?
• What are competency models?
• How are competencies identified?
• What is human resource (HR) management?
• What is competency-based HR management?
• What business needs are met through the use of competency-based HR management practices?
• How are competencies aligned with business plans, objectives, and needs?

Competencies

Think for a few minutes about the best supervisor you ever had. Take a moment to identify three or four of this person's most significant characteristics, which, used appropriately and consistently, led you to select him or her as your best supervisor. Perhaps this person behaved in some of the following ways:

• Always trusted you to do your work well.
• Gave you immediate feedback on your work.
• Was incredibly and brutally honest—but in a very positive way.
• Showed concern for others when their personal problems affected their work.

From this exercise, you have just learned the meaning of the word competency. Your best supervisor probably had anywhere from 12 to 15 traits or characteristics that affected his or her behavior and, therefore, work performance.

Competencies, then, are characteristics that individuals have and use in appropriate, consistent ways in order to achieve desired performance. These characteristics include knowledge, skills, aspects of self-image, social motives, traits, thought patterns, mind-sets, and ways of thinking, feeling, and acting.

Competencies form the foundation of competency-based HR management practices. Interpretations of the meaning of competencies are quite varied. A brief look at the history of the competency movement will perhaps provide you with a better understanding of the term as it has been defined and is used in HR management.

Background

Several key developments laid the early groundwork for the competency movement and contributed significantly to the field. First, in 1954, John C. Flanagan devised an approach he called the critical incident technique, which was used to examine what people do (Flanagan, 1954). He defined the technique as "a set of procedures for collecting direct observations of human behavior in such a way as to facilitate their potential usefulness in solving practical problems and developing broad psychological principles. The critical incident technique outlines procedures for collecting observed incidents having special significance and meeting systematically defined criteria." An incident is an observable human activity that is complete enough on its own to allow inferences and predictions to be made about the individual performing the act. For an incident to be critical, it "must occur in a situation where the purpose or intent of the act seems fairly clear to the observer and where its consequences are sufficiently definite to leave little doubt concerning its effects" (p. 327).

Flanagan noted that the foundation for the critical incident technique originated in the studies of Sir Francis Galton in the late 1800s and in later developments such as time sampling studies pertaining to recreational activities, controlled observation tests, and anecdotal records. It is specifically rooted, however, in studies conducted in the United States Army Air Forces' Aviation Psychology Program. The Aviation Psychology Program was founded in the summer of 1941 to create selection and classification procedures for aircrews.[1]

The concept of human competence reached the forefront of human resource development with the concurrent work of the psychologists Robert White and David C. McClelland. White (1959) identified a human trait that he called competence. McClelland (1973) originated an approach for predicting competence that was notably different from widely accepted intelligence tests of the time. He suggested that although intelligence influences performance, personal characteristics, such as an individual's motivation and self-image, differentiate successful from unsuccessful performance and can be noted in a number of life roles that include job roles. McClelland and his associates conducted the first tests associated with this new approach with U.S. State Department Foreign Service information officers (McClelland & Dailey, 1973, in Spencer, McClelland, & Spencer, 1994).[2]

McClelland (1973, 1976), who is often credited with coining the term competency, defined it as a characteristic that underlies successful performance. Over the years, many writers, including key thinkers and leaders in the field, have defined and refined the word competency and related terms.[3]

Zemke (1982) set out to ascertain the precise attributes of a competency and conducted a number of interviews with experts in the field. He determined from the interviews that there is no complete and total agreement on what is and is not a competency:

Competency, competencies, competency models, and competency-based training are Humpty Dumpty words meaning only what the definer wants them to mean.—The problem comes not from malice, stupidity or marketing avarice, but instead from some basic procedural and philosophical differences among those racing to define and develop the concept and to set the model for the way the rest of us will use competencies in our day-to-day training efforts. (p. 28)

McLagan (1989) suggested that a competency is "an area of knowledge or skill that is critical for producing key outputs." She also noted that people may express these capabilities in a "broad, even infinite, array of on-the-job behaviors" (p. 77).

George Klemp (1980) defined a job competency as "an underlying characteristic of a person which results in effective and/or superior performance in a job" (in Boyatzis, 1982, p. 21). He also noted that "competencies are characteristics that are causally related to effective or superior performance in a job" (p. 23). Expanding on that definition, Spencer and Spencer (1993) described a competency as "an underlying characteristic of an individual that is causally related to criterion-referenced effective and/or superior performance in a job or situation" (p. 9). They explained that competency characteristics include these five types: motives, traits, self-concept, knowledge, and skill.

Dubois (1993) adapted Boyatzis's 1982 interpretation of the term and defined a competency as an underlying characteristic that "leads to successful performance in a life role" (p. 5). This definition varies according to the context of its application and the differences in procedure and philosophy. Flannery, Hofrichter, and Platten (1996) noted that competencies "add value and help predict success" (p. 93). Dubois and Rothwell (2000) described competencies as tools used by workers in a variety of ways to complete units of work, or job tasks.

Knowledge and skills are the more obvious competencies employees use to achieve the expected outputs or results. Some of the more abstract worker competencies, however, are those that have been associated with successful completion of select types of work; such competencies include patience, perseverance, flexibility, and self-confidence. Note that competencies have less to do with assigned tasks (work activities) and more to do with personal qualities. This critical dimension is largely missing or not well represented in traditional definitions of jobs.

There are two schools of thought concerning differences in the interpretation of competency. One school of thought maintains that competency implies knowledge or skill. The second interprets competency as any characteristic that supports performance. In the latter interpretation, competency can include knowledge or skill as well as any number of other characteristics such as levels of motivation and personality traits. Central to the second school of thought is the philosophy that the focus should be on the people who do the work, not on the work those people do.

There are different types and levels of competencies, and they are classified or organized in different ways. They can also be subdivided repeatedly, and very often are, but are frequently grouped as either organizational or individual. Within the category of individual competencies, there are different types of competencies, such as technical and personal functioning. Some practitioners simply make the distinction between technical and nontechnical competencies: Technical competencies are specific to certain roles, and nontechnical competencies are more generic in nature (Rothwell, Hohne, & King, 2000). Byham and Moyer (1998) classified competencies as organizational, job- or role-related, and personal.

In addition to the term competencies, with its range of definitions, some organizations use the term dimensions. Data on the behaviors, motivations, and knowledge related to job success or failure can be reliably described and grouped under both terms.

The language used in association with competency-based HR management practices is often referred to as a behavioral language. A behavioral language can be used to describe the actions necessary to achieve organizational goals, and it affords the opportunity to understand further what has been done in the past, what is occurring in the present, and what needs to occur in the future (Green, 1999). After the terms associated with competency-based practices are defined, competencies can provide a common language across an entire organization.[4] A common language is very useful for discussing the workforce and its skills, performance, impact, and much more.

Competency Measurement Methods

A competency may be demonstrated in many ways. One method of identifying the typical ways that competencies are demonstrated is to identify the behaviors or tangible results (outcomes) produced by their use in the context of the work performed. A behavior is an observable action that is taken to achieve results or that contributes to an accomplishment. Green (1999) defined behavior as an action that can be observed, described, and verified. Competencies could be measured by using behavioral indicators. A behavioral indicator is a statement of an action, or set of actions, that one would expect to observe when a person successfully uses a competency to perform work.

The Crucial Role of Corporate Culture

It is worth emphasizing here that appropriate behaviors linked to a competency may differ, depending on the corporate culture in which that competency is grounded. Corporate culture refers to the unspoken beliefs held in common by the people in an organization about the right and wrong ways to behave. Schein (1992) defined the culture of a group as follows:

A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems. (p. 12)

Hence, the demonstration of a competency is tied to the unique corporate culture in which it appears in much the same way that national culture determines the demonstration of success factors. For instance, to be successful in a tribe of headhunters, one must collect the most heads, and to be successful in a capitalist society, one must collect the most money.

Corporate cultures are embodiments of organizational values, and values are the underpinning of management decisions. Views about the equivalents to success are grounded in the culture. And so it is with behavioral indicators. The "right" and—by implication—the "wrong" behaviors differ across such disparate corporate cultures as those, for example, of the American Red Cross, Ford Motor Company, Intel, and the Internal Revenue Service. In short, one competency model for the same work does not fit all corporate cultures. The difference might be not in the statement or definition of the competency, for example, but how it is successfully demonstrated within the context of organizational culture, values, or strategic settings.

Outputs Versus Activities

In the discussion on outputs and results in chapter 1, we defined the term outputs as the goods or services (results) that workers produce and turn over to clients or constituents. A job output is a product or service delivered to others by an individual, a team, or a group. Job outputs can be measured through metrics associated with quantity, quality, time, cost, and requirements related to customer service (Rothwell & Kazanas, 1998).

Several other terms related to outputs and work activities in organizations are appropriate for discussion here. Work activities in most organizations include the performance of a series of tasks or units of work that generate outputs or results. The term task means an activity with a distinguishable beginning, middle, and end. The more specific term job task refers to a unit of work that contributes to the job outputs expected of an employee. A group of completed job tasks that produces job outputs is a job activity. Job competence is an employee's capacity to at least meet, if not exceed, job requirements by producing outputs or results at an expected level of quality within the constraints of the organizational environment.

In today's world of work, knowing and measuring the outputs or results that workers must produce, and the circumstances surrounding their production, is key to understanding organizational success. Workers achieve the desired results by carrying out job tasks. But what are the personal characteristics in the domains of thoughts, feelings, and actions that workers use to perform their tasks? These characteristics are their competencies. Therefore, competencies are essential to achieving work of any kind. This leads to a simplistic reduction: no competencies, no outputs, no organization.[5]

[1]For further review on Flanagan's work and the critical incident technique, see Flanagan (1954) or Flanagan in Zemke and Kramlinger (1982), pp. 277–317.

[2]For further review of the background and a historical perspective on some of the events associated with the development of this approach, see Spencer, McClelland, and Spencer (1994).

[3]The meanings associated with the term competency vary rather remarkably. See, for example, Blank (1982); Boyatzis (1982), pp. 20–23; Byham (1996), p. 2; Byham and Moyer (1998), pp. 4–7; Cooper (2000), pp. 2–3; Davies (1973); Dubois (1993), p. 5; Dubois (1996), pp. 5–13; Dubois and Rothwell (2000), Vol. 1, p. 1–14; Folley (1980); Green (1999), p. 22; Klemp (1979); Kolodziejski (1991); Lucia and Lepsinger (1999), pp. 2, 5; Marlowe and Weinberg (1985); McLagan (1990); Rothwell (2000b), p. 152; Rothwell (1996), pp. 29, 263; Rothwell and Kazanas (1994), pp. 188–189; Rothwell and Kazanas (1998), pp. 141–142; Weiss and Hartle (1997), p. 29; Wood and Payne (1998), pp. 19–38; and Zemke (1982), pp. 28–31.

[4]Briscoe and Hall (1999); Cook and Bernthal (1998); and Robinson and Robinson (1995).

[5]For further review on work activities and outputs, see Dubois (1993) and Dubois and Rothwell (2000).

The Difference Between Fully Successful and Exemplary Performers

The view that all people are created equal is commonplace in U.S. culture. In reality, however, it is not true. If all people were equal, then everyone could produce mathematical results like Einstein's or write plays equal to those of Shakespeare.

People may be treated equally by the government, but that does not mean talent is equally distributed among them. Some individuals excel in certain spheres of human effort. We call those people exemplars. They are the best-in-class performers. Research indicates that they may be as much as 20 times more productive in achieving work results or outputs compared to other experienced job incumbents who have the same job titles, carry out the same duties and activities, and probably earn the same compensation.

One goal of looking at competencies is to discover the differences between the exemplary performers and the fully successful performers, those incumbents who meet job standards but are not outstanding. Why does this distinction matter? If we can pinpoint those differences in operational terms, we may be able to select more people who function at the exemplar's level or help others to develop that capability. Such an achievement would enable an organization to become dramatically more productive with the same staff. Exemplary performance is perhaps best understood as an ideal, a desired future performance level that is more than minimally adequate or the best performance currently possible. It signifies a goal that can be achieved through an infinite number of possible behaviors and activities.

While it is not possible to turn every worker into an exemplary performer—owing to what educators term "individual differences"—it is possible to develop select individuals who possess enhanced abilities in some areas or to build competence closer to the level of the exemplar. In addition, the information gained from identifying the competencies (traits or characteristics) used by exemplary performers helps all workers to improve their performance. Even modest improvement can significantly increase overall productivity. The concepts and practices described in this book are based on this key principle.

Given the cost and resources needed to rigorously identify and isolate the competencies of exemplary performers from those of their fully successful peers, we realize that not every organization can afford the endeavor. In other words, some organizations will be satisfied to identify and use, for HR management purposes, the baseline competencies of all fully successful workers without differentiating the competencies of exemplary performers. Organizations that make this decision will still achieve performance improvement benefits because the competencies of fully successful workers will be available for designing their HR practices.

Let's take a moment to learn about the desirable actions of exemplary performers and the organizational factors that affect them. Research reported by Fuller (1999) revealed that exemplary performers customize their work agendas, either eliminating unnecessary steps or entire processes or adding undocumented steps to their processes. Exemplary performers seek out the data and documentation they need from sources that might not be known to others in their organizations. They also create their own highly effective job aids based on their individual experience. Exemplary performers have passion for the work they do and are willing to "go the extra mile" to locate and acquire work tools for themselves. It is largely for this reason that the work tools of exemplary performers are better than those of their counterparts in the organization.

Fuller (1999) also discovered that exemplary performers tend to receive frequent coaching and better feedback from their managers. They are offered different incentives, since their managers generally understand the importance of recognition and rewards. Training did not appear to be a major contributor to exemplary performance; instead, emphasizing other HR management components enabled organizations to have greater impact on performance. Finally, when managers removed barriers, performance improved dramatically.

Competency Models

A competency model is a written description of the competencies required for fully successful or exemplary performance in a job category, work team, department, division, or organization. Competency identification and modeling can be a beginning point for strategic development plans linked to organizational and individual needs.

As you might expect, organizations express competency models in somewhat different ways. These variations reflect their different constraints, preferences, practices, values, business objectives, and reasons for using competencies. Competency models may also vary by type. Many organizations do not distinguish among competency models that underscore the differences between exemplary and fully successful performers, those that identify minimum requirements for job success, or so-called derailment studies that indicate the likely causes of failure. In general, then, the structure of a competency model, the way in which it is communicated to workers, and the manner of its use reflect the values of the organization's decision makers and leaders.

Research on the characteristics included in competency models is of much interest today. In one study with 300 respondents conducted by Arthur Andersen, Schoonover, and SHRM, the following categories were reported as included in competency models: technical skills, knowledge areas, performance behaviors, personal attributes, metrics/results, and key experiences (Schoonover, Schoonover, Nemerov, & Ehly, 2000, p. 7).

Competency Identification

We often advise clients in our consulting practice to ask for a quick definition from anyone who uses the term competency. There is good reason to do so. Not everyone uses the word in the same way, as you learned earlier in this chapter. Because there is confusion with the terms involved in competency work, establishing clear definitions is an important part of the field.[6] And to complicate matters, not everyone uses the same approach to discovering the competencies linked to job success, a process known as competency identification.

Confronting the Challenges of Competency Identification

Striking a balance between speed and rigor is perhaps the chief challenge of competency identification work. Speed refers to how quickly the competencies for a targeted group can be identified. Rigor refers to the validity and reliability of the competency modeling results. A very rigorous methodology for competency modeling may require such an extended time frame that the results are useless by the time they are delivered to impatient clients. This impatience on the part of clients is often warranted, as their production cycles may be short and must be modified to accommodate revised work methods.

Many other challenges await those who undertake competency identification. An organization may have difficulty matching the resources needed to conduct competency identification with the resources available to carry out the task. Decision makers are not always easily convinced that competency modeling efforts are worth the necessary effort and cost. Yet another challenge involves deciding whether to devote time and resources to producing culture-specific competency models or to find and use models from other sources.

Pickett (1998) mentioned challenges such as difficulty identifying competencies, not enough time allotted for the project, resistance from staff, and lack of management support and commitment. As the reasons for problems, he suggested poor communication, not enough background information made available, and unmet expectations. Cooper (2000) further noted challenges such as less than total commitment throughout the organization, an unawareness of the benefits, and a culture that does not support competency practices.

According to Lucia and Lepsinger (1999), lack of commitment is often caused by failure to clearly articulate the purpose for using a competency model, not enough stakeholders involved, and fear of changes, limited choices, and extra work. They suggested other issues that are critical to identify in the development stage of an action plan, such as conflicts related to time, influence of different individuals and key stakeholders, power and politics, availability of resources, resistance, and skill.

We should comment here, however, that a competency-based approach to HR management provides a method of dealing with each issue. Several research studies on competency-based HR management have addressed the topic of challenges and barriers and provided suggestions for meeting and overcoming them. Here is a brief look at the some of the results.

• From a survey on competency systems, both their design and use, conducted with 134 people, Green (1999) indicated that the findings suggest five broad categories of challenges: gaining buy-in, involvement, and participation; developing reliable and valid forms of measurement; addressing the challenge of negative feedback through introduction of acceptable and representative performance measurement; ensuring job relevance; and seeking methods of cost effectiveness.
• More than 130 HR executives were interviewed for a study during late 1999 and early 2000. The results indicated the following barriers to using competencies: no buy-in or visible commitment from top management; organizational unreadiness; lack of time and resources needed to develop and validate credible, useful models that could withstand legal challenge; insufficient time and resources for creating reliable, valid evaluations with which to guide follow-up steps (Rahbar-Daniels, Erickson, & Dalik, 2001).
• The Society for Human Resource Management sponsored a study in late 1999 and early 2000 that involved 300 organizations. The results suggested that barriers to success include lack of expertise, insufficient staff and financial resources, limited support, and conflicting priorities (Schoonover et al., 2000). Identifying realistic outcomes, determining resources needs and time requirements, and consistently using best practices were noted as contributors to positive outcomes (Schoonover et al., 2000).
• In 1998, researchers Cook and Bernthal Development Dimensions International conducted a study of 292 members of the HR Benchmark Group. The survey included a number of different questions about competencies and their use in organizations. One of the topics was barriers to the effective use of competencies. The findings suggested difficulties in the following areas: making resources available for job analyses, developing strategies for using competencies, linking competencies to organizational strategy, securing management support, identifying competencies, adapting to changing jobs and roles, assigning responsibility for competency identification, and providing clear, accurate definitions (Cook & Bernthal, 1998).

Professionals who work with competencies often have very good suggestions for addressing problems associated with competency projects. A few of these suggestions are briefly described here.

Representatives of organizations with competency-based HR management practices offered a number of approaches that include applying a consistent method of competency identification and using the same language across the organization, communicating and teaching competencies more effectively; obtaining involvement of the HR staff who need to apply competencies at the beginning and throughout the process, devoting sufficient time to implementation, and maintaining alignment of competencies with corporate strategy (Dewey, 1997). Lucia and Lepsinger (1999) had these suggestions for increasing the likelihood of positive outcomes with competency projects: establish ongoing communication, do not develop competency models in isolation, but rather in keeping with the business needs and job environment, and remain focused on original objectives.

Some organizations continuously seek ways of facilitating competency projects. For example, the Public Service Commission of Canada, collaborating with the Treasury Board Secretariat, conducted a survey that involved 57 organizations of the federal Public Service to ascertain interest in the use of competency-based human resource management. Members of the project team reported a number of practices that worked well in introducing the concept of competency-based HR management, including identifying a champion for a pilot of the competency project; creating a committee in some organizations for HR disciplines in order to establish a connection between competencies and the potential applications; inviting internal and external clients to participate in validating and assessing employee competency profiles; inviting unions to participate in the identification and validation of competency profiles; developing self-assessment guides with development tools; designing a manager's guide for facilitating the use of competency profiles; developing an information kit for distribution to all employees; using consultants to develop some expertise among personnel; and establishing a competency assessment center for employees (Competencies in the Public Service, 1998).

Yet, many HR practitioners who undertake competency identification efforts find themselves between the figurative rock and the hard place: they are expected to perform rigorous studies without the time and resources they need to do so. Under those circumstances, rigor is often sacrificed to expediency, and the competencies identified are neither valid nor reliable. Consequently, the identified competency model has no credibility with decision makers, who then become unenthusiastic about future competency modeling efforts. It is therefore very important that those who plan to pursue competency identification and modeling are clear about the time and other resources required to produce high-quality results. Decision makers should be informed about the relationship between resource availability or unavailability and the quality of the results they will receive.[7]

Competency Identification Methods

Competency identification is a means of clarifying key requirements for a job category or department and should be completed only after the dimensions of the work (for example, activities, tasks, setting, and tools) are identified. While it is not possible here to provide detailed descriptions of all competency identification methods, the following summary of common approaches will help those who are unfamiliar with the key methods.[8] Each approach has it costs, limitations, and strengths. It is essential to remember, however, that the selection of an appropriate competency identification method is a strategic decision.

The Job Competence Assessment Method (JCAM)

JCAM was one of the first competency identification methods created to provide information on workers and the work they perform, and it can lead to the development of a highly valid and reliable competency model when the model is carefully applied. Harvard psychologist David McClelland originated the process, which is generally used to identify the abstract, or less obvious, competencies with which workers achieve exemplary and fully successful performance.[9]

The method relies on the collection and analysis of data obtained through a process called behavior event interviewing. The behavioral event interview (BEI) is a technique developed by McClelland and Charles Dailey (1973). It combines Flanagan's (1954) critical incident technique with other data based on more than 30 years of McClelland's (1985) studies on motivation, called the Thematic Apperception Test (TAT). In the BEI, the interviewer asks a series of detailed questions about actions performed in the work setting that workers perceive to be successful or unsuccessful and the thoughts, feelings, and outcomes that accompanied them (Spencer, McClelland, & Spencer, 1994). Isolating the characteristics unique to exemplary performers is a common goal of this approach.

Through the use of BEIs, exemplary and fully successful workers are first identified and then interviewed about critical events in their work experience. The interviewer asks participants to provide detailed descriptions of both successful and unsuccessful work experiences. Respondents are prompted to fully describe their thoughts and feelings, the actions they took, and the circumstances surrounding or influencing each work event. After obtaining permission from the person being interviewed, the session is taped, and the researcher later has a verbatim, written transcript prepared. In most cases, researchers require at least 6 to 12 individual interviews for each job they are modeling. Once the interviews have been collected and the transcripts prepared, interviewers work together to identify the characteristics (which are potential competencies) that were revealed during the interviews. Key themes from the transcripts are subjected to coding with appropriate qualitative data analytical methods (Miles & Huberman, 1994). The persons doing the coding, usually the interviewers, do not know whether the transcript represents an interview with an exemplary or a fully successful worker.

The data are tabulated and subjected to rigorous statistical analyses. Three sets of characteristics are identified: those used by only the exemplary performers, those used by both exemplary and fully successful performers, and those cited by the fully successful but not the exemplary performers. The worker competencies that distinguish performance are represented by the first of the preceding sets; the minimum worker competencies are represented by the second set; and the characteristics of the third set are discarded, as they are not used by the exemplary performers even to achieve at least fully successful performance. Consequently, the characteristics, or traits, in this third group are not competencies. A trait emerges as a competency only when it is shown to be required for fully successful or exemplary work performance.

Although BEIs produce rich and comprehensive work-related data, they do have limitations. First, they cannot be used to identify competencies for future work. After all, the interviews rely on the experiences of the respondents. Second, BEIs require skilled interviewers and statistical support services. For that reason, an organization might need to contract with outside sources to complete many of the tasks required for this approach. Third, key employees must be available for interviews, which does result in lost work time. It is easy to see why conducting BEIs can be a costly and time-consuming process. (For a further review of behavioral event interviewing, including the advantages and challenges, see Spencer & Spencer, 1993, pp. 97–99.)

The Competency Menu Method

The competency menu method is becoming increasingly popular as a means of identifying competencies. It relies on competency lists obtained from sources in the private and public domains. Practitioners create menus from the lists and then use the menus to identify the competencies necessary for a work role or traditional job in an organization. Many vendors have made competency menus available; they can also be found through a quick search of the World-Wide Web.

As a starting point for developing an organization-specific competency model, competency menus tend to be less costly than the Job Competence Assessment Method we described earlier. But there is a trade-off. Competency menus from external sources may be of questionable value to an organization, although menus of high quality have been devised from credible research conducted by professional associations or government agencies. The real question is this: How did a vendor create the competency menu?

To be both useful and defensible, a competency menu must be comprehensive for the work it embraces. It must also represent the current state of the art and state of the practice for its work area. These factors affect the validity and reliability of the competency models derived from a menu. Validity refers to the measurement of the competencies needed to bring about desired business results, and reliability refers to the means of measurement that accurately reflects the actual competency levels of employees (Cooper, 2000). Accordingly, practitioners should carefully examine the origins of the competency menus they have found.

Competency models built from competency menus can be organized in a variety of ways, depending on the needs or preferences of the user. Competencies can be organized around work roles, traditional jobs, or work outputs or results. Flexibility is one of the key selling points for competency menus, especially in organizations that must accommodate frequent change.

A competency menu must be modified—a process that some call "tailoring"—to meet the needs of a unique corporate culture. Modifications may be accomplished in several ways, such as by using card sorts, focus groups, surveys, or a combination of the three. Each approach has its advantages and challenges.

A card sort activity is easy to design. Competency statements (taken verbatim or edited from a menu) are placed on index cards. A respondent group is identified, and group members meet to sort the cards. Members may be instructed, for example, to sort the cards to identify not more than 15 competencies that they believe job incumbents must be able to demonstrate in order to perform their jobs successfully. The objectives of the activity will dictate the procedures that are used. The resulting list may be further refined if desired.

Focus groups also can be used to identify competencies from a menu. With focus groups, researchers must take care to avoid groupthink and grandstanding. Groupthink refers to a situation in which a majority of participants have the same ideas or opinions and dissenters are reluctant to speak their minds. As a result, the group becomes focused on one train of thought. Grandstanding occurs when dominant personalities in a focus group exercise too much influence. Traditional focus groups alone, used without comprehensive competency menus available to them at the time of competency identification, are predicted to identify only about 40% of the key competencies for a targeted job category.

Printed surveys are composed of a competency menu (or elements of one) and a scale with which respondents rate the importance of each competency. This method can be problematic for several reasons. First, long questionnaires may produce a response set in which participants rate all the competencies as having the same importance or value. Second, managers may delegate completion of the questionnaires to less informed subordinates.

In summary, the way in which a competency menu is used dramatically influences the quality of the results obtained.[10]

The Modified DACUM Method

The modified DACUM method is based on the "Developing A CurriculUM" (DACUM) method (Norton, 1997). DACUM is a popular job analysis process that relies on a disciplined, focus group approach for information collection, analysis, and presentation of results. Dubois and Rothwell (2000) extended the DACUM process to include the identification of abstract competencies (for example, patience) that are frequently difficult to identify and verify.

The modified DACUM method begins by assembling work experts. These experts may be exemplary performers, managers, supervisors, team leaders, and possibly customers if they are highly informed about the work to be profiled. The experts are asked to describe the work activities people perform daily to achieve the necessary results. These work activities become the basis for discovering the underlying competencies essential to achieving work outputs or results.

Application of the modified DACUM method increases understanding in the following areas: organizational business needs and the effects of project outcomes on meeting those needs; work outputs, activities, and tasks; and the nontask or abstract competencies required for successful performance of the work.

Other Aspects of Competency Identification

Competency identification also requires consideration of other factors.

Sources

Regardless of the method, data about competencies are dependent on sources, whether internal, external, or both. Practices regarding the types and number of sources vary from one organization to another.

The Job/Role Competency Practices study conducted by researchers Cook and Bernthal (1998) received responses from 292 members of the HR Benchmark Group, Development Dimensions International. One of the topics in the survey was sources of data used in competency identification practices. Results of the group surveyed showed that 85% or more of the organizations responding depend on information from managers and job incumbents in defining job and role competencies. Input from HR staff, while not as extensive, was nevertheless common. Other, less frequently used sources were "senior leaders, incumbents in similar positions, external consultants, direct reports, outside publications, and external customers" (p. 7). Another finding of this study on the subject of sources indicated that 86% of organizations collect job and role competency data from three to seven sources and that consulting additional sources "gains buy-in from various groups and helps make the competency selection and definition process more accurate and comprehensive" (p. 7).

Experience

Research indicates that the use of competencies in HR management practices is enhanced with experience. Schoonover et al. (2000) pointed out that "more experienced and sophisticated end users developed richer and more encompassing competency frameworks" (p. 7).

[6]See, for example, Byham and Moyer (1996); Dubois (1993); Dubois and Rothwell (2000); and Green (1999).

[7]For further review on the validity of competency models, see Block and Rebell (1980); Byham (1996); Byham and Moyer (1996); Cooper (2000); Dubois (1993); Dubois and Rothwell (2000); Harlan, Klemp, and Schaalman (1980); Huff, Klemp, Spencer, and Williamson (1980); Lucia and Lepsinger (1999); Pottinger, Wiesfeld, Tochen, Cohen, and Schaalman (1980); and Spencer and Spencer (1993).

[8]For more extensive discussions on competency identification methods, see Dubois (1993) and Dubois and Rothwell (2000).

[9]Details of the JCAM process can be found in Dubois (1993); Spencer, McClelland, and Spencer (1994); and Spencer and Spencer (1993).

[10]For an in-depth description of the competency menu method, see Dubois and Rothwell (2000).

HR Management

Human resource management has been defined in various ways. But essential to any definition is the understanding that effective organizations must be able to find, use, keep, and develop human beings in order to achieve results. HR management is the process of helping organizations do just that.

The manner in which organizations manage their people is a potential source of sustained competitive advantage. As Sherman, Bohlander, and Snell (1998) noted, "the term ‘human resources’ implies that people have capabilities that drive organizational performance (along with other resources such as money, materials, information, and the like). Other terms such as ‘human capital’ and ‘intellectual assets’ all have in common the idea that people make the difference in how an organization performs" (p. 4).

The Nobel Prize–winning economist Theodore W. Schultz was the first to use the term human capital in the article "Investment in Human Capital," which appeared in the American Economic Review in 1961 (Davenport, 1999). The four elements of human capital investment can be seen in this human capital equation: "(ability + behavior) × effort × time" (p. 22).

Jac Fitz-enz, a leader in human capital performance benchmarking, pointed out that

The knowledge, skills, and attitudes of the workforce separate the winning companies from the also-rans. It is a complex combination of factors. Still, people per se are not the only force behind the inherent power of human capital. If the key to wealth creation were only a head count, then the dullest, lowest-level person would be as valuable as the brightest, highest-level person. In actuality, it is the information that the person possesses and his or her ability and willingness to share it that establish value potential. Data and people are inexorably linked as never before. Either one without the other is suboptimized. (Fitz-enz, 2000, p. 6)

Fitz-enz (2000) also suggested that "the key to sustaining a profitable company or a healthy economy is the productivity of the workforce, our human capital" (p. 1).

Human capital is the topic of much discussion in organizations today. It has also been the subject of a number of research studies. The term human capital is interpreted differently, however, depending on the viewpoint. For example, Ulrich, Zenger, and Smallwood (1999) incorporated the distinction they see between what employees can do and will do into the following measurable definition of human capital: employee capability multiplied by employee commitment.

Competency Based HR Management

In chapter 1, we saw that it is no longer enough to focus on work activities and jobs. Work-based HR management cannot keep up with the pace of change. In addition, a focus on work activities does not direct management attention to desired performance or results, nor does it enable the organization to capitalize on the high productivity of exemplary performers.

In contrast, competency-based HR management concentrates first on the person and then on his or her outputs or results. Competencies are enduring, while work activities and specific work tasks are transitory. Competency models can supplement traditional job descriptions and become the foundation for an entire HR system. When that happens, an organization is using competency-based HR management.

Competency-based HR management views the needed outputs and the organization's work roles or requirements from a person-oriented rather than a job-oriented perspective. This approach makes competencies the foundation for the entire HR management function. Competencies drive recruitment, selection, placement, orientation, training, performance management, and workers' rewards. With all aspects of HR management integrated through competencies, rather than through traditional notions of jobs or work activities, the organization has a competency-based HR system.

Exemplary, not fully successful, performance is the goal of most organizations with competency-based systems. Competencies must therefore be both valid and reliable in differentiating exemplary and fully successful performers.[11]

[11]For further review on establishing content-valid competency-based HR systems and subsystems, see Byham (1996). For information on reliability and validity, see Klein (1996).

Meeting Business Needs Through Competency Based HR Management

Used properly, competency-based HR management has the potential to meet many business needs. It can, for example, be of value to organizations that seek to achieve the following goals:

• Enhance competitive advantage
• Develop better quality in products and services
• Increase productivity
• Position the organization for future growth
• Facilitate culture change and transformation
• Assist with large-scale organizational change
• Foster positive outcomes with customers or suppliers
• Increase financial performance
• Establish systematic linkages and integration among HR management practices
• Align HR management practices with the mission, vision, values, or the business strategies or objectives of the organization

In addition to pursuing the actions listed above, organizations adopt competency-based HR management practices for several key reasons.

Pritchard (1997) saw competencies as a way to integrate HR strategy with business strategy, thus adding performance value to the organization. He explained that the use of competencies empowers individuals and teams and frees management from complex HR processes.

Cooper, Lawrence, Kierstead, Lynch, and Luce (1998) noted some of the positive outcomes produced by valid and reliable competency-based HR management models. These include linking individual competencies directly to the organization's strategies and goals; developing profiles for positions or roles and matching individuals to the task sets and responsibilities; affording the opportunity to continuously monitor and refine competency profiles; facilitating the selection and evaluation of employees as well as the training and development; assisting with the hiring of individuals with unique competencies that are costly and not easily developed; assisting organizations in the ranking of competencies for both compensation and performance management.

Lucia and Lepsinger (1999) mentioned these additional business needs that can be addressed through the use of competency models: providing clarification for both job and work expectations, assisting in creating effective hiring practices, enhancing productivity, creating effective processes for 360-degree feedback, providing a tool that can assist in meeting today's needs as well as assist with changing needs, and aligning behaviors with strategies of the organization and its values.

Some of the most frequently given reasons for the introduction of competencies are to improve organization performance, increase the ability to be competitive, support culture change, enhance training and development effectiveness, improve processes associated with recruitment and selection, reduce turnover, clarify managerial roles and specialist roles, increase emphasis on business objectives, aid in career and succession planning, analyze skills and be able to identify the current and projected deficiencies in skills, improve workforce flexibility, support the integration of overall HR strategies, and provide a basis for compensation and reward programs (Pickett, 1998). Research studies reveal more reasons for using competency-based HR management. Cook and Bernthal (1998) asked respondents in the Job/Role Competency Practices study of the HR Benchmark Group, Development Dimensions International, to rate the performance of their organization compared to 1997 as it related to the following success indicators: "retention of quality employees, customer satisfaction, quality of products and services, employee satisfaction, productivity, and financial performance" (pp. 12–13). The results suggest that improved organizational performance and improvements to the bottom line can occur when competencies support even a few HR systems. Nine out of ten organizations indicated overall improvement when job/role competencies support six HR systems, and with support from competencies in four HR systems or more, the percentage of organizations that experience improvement almost doubles.

The use of competencies is appealing because it enables HR systems to concentrate on the factors that contribute directly to the organization's success (Raising the Bar, 1996). The practice of identifying, defining, and applying competencies helps employees to understand the areas in which their efforts will improve their performance, and this in turn helps the entire organization. The American Compensation Association (ACA), in cooperation with Hay Group, Hewitt Associates LLC, Towers Perrin, and William M. Mercer, Inc., conducted a study about competency-based HR applications, distributing 19,016 fax-back questionnaires to 19,016 North American companies. A total of 426 companies responded, and the identification of 1,257 competency-based applications was made. Five different questions were developed and distributed to the respondents and other organizations that were known by the researchers to be in the development stages, in an effort to gather information about the applications. At this stage of the study, 217 companies responded, indicating 247 competency-based applications either in place or in the process of development. There were many findings as a result of this study, a few of which are listed here. The study results suggest that some of the reasons that companies use competency-based human resource management include "raising the bar" and enhancing employee performance, providing a focus on the culture and values of an organization, and facilitating the integration of HR applications by providing a framework (p. 7). Other findings from the study include that information about competencies is obtained from a number of sources and business strategy plays an important role in the development; competencies emphasize the ways in which performance results are achieved; applications for competencies are "evolutionary, not revolutionary"; compensation is the less frequently used and newest application; and the newness of some of the applications mean that it's too soon to determine their effectiveness (p. 7).

Researchers associated with the ACA study participated in a round-table discussion noting that the study results of the previous year were fairly reflective of the practices of the following year as well. The researchers noted that performance, values, and culture continue to be drivers of competencies, with business strategies playing an important role in the competencies found in the best applications. The discussion served as a year in review about competencies and their applications in the year following the study.

In Competencies and the Competitive Edge (1998), Watson Wyatt researchers reported the results of a 1997 study in which they examined trends and explored people strategies. The study was based on survey responses from 1,020 North American organizations, in-depth case studies conducted with 17 companies, and on-site evaluations and interviews. The role of competencies was one of the areas reviewed. Noting that competencies can define and convey an organization's strategy and its meaning and assist employees in understanding the strategy and achieving its goals, the report suggests the roles of competencies in organizations, including articulating organizational values; providing a common language in which to describe value creation; creating a new paradigm for the programs in HR (organizational levers); emphasizing the development of individuals instead of the organization's structure; connecting pay, promotions, and growth to what the organization deems to be of value; and guiding employees and managers concerning expectations as well as how value is defined during change and restructuring. The results indicated that competency-based practices contribute positively to the bottom line, and that contributions to the organization are related to the roles of individuals rather than to their jobs. In addition, results suggest that endeavors designed to further employee commitment have the potential to generate positive returns, and that training and development are viewed as drivers of future success.

The 300 respondents participating in an electronic survey conducted in 2000 by Schoonover et al. (2000) on competency-based HR applications were queried on their reasons for applying competencies. The results of these findings indicated that enhanced performance expectations and integrating the HR processes were the major causes with 33% of respondents specifying the first reason and 20% specifying the second. Other goals for competency-based practices were to align behavior with core values (11%); provide a career framework and create bands of competence or levels of competence (both 8%); focus on the way in which work gets done and support exemplary performance (both 7%); and communicate generic leadership skills and develop specific roles (both 2%).

In an interview with several practitioners in the field, the subject of competency models was discussed (Johnson Brackey, 1998). After the skills of the best performers are known, the competency model provides value and usefulness both for training and motivation and as the basis for acquiring the competencies the organization needed to change. Included in the interview were the following comments about competency models. There is a growing interest in competency models because of an increased focus on the individual since the workforce is becoming more knowledge based and businesses are more technology based, according to Sandra O'Neil Gaffin. Also, the process involved with creating a model often places a strong focus on the company's resources and goals, according to Edward J. Cripe. Incorrect, noted Maxine Dalton, are companies that devote their efforts to the development of the model but then do not seriously implement it.

Competency-based HR management practices produce significant benefits to organizations and their employees. The value of using competencies to help meet business needs cannot be overemphasized.

Aligning Competencies With Business Plans, Objectives, and Needs

Business plans identify the organization's competitive targets. Key decision makers formulate a strategic plan for the purpose of clarifying the organization's long-term direction. A business strategy expresses the way in which the organization plans, implements, and evaluates its competitive process. It is basically a means to a desired end.

With the goal of meeting business needs, organizations are adopting strategies and practices that nurture competence. Competencies have value when there is a strategy to apply and align them with organizational objectives (Cook & Bernthal, 1998). HR is often held accountable for changing workforce competencies, and it is vital to adopt an effective strategy (McDowell, 1996). "The alignment of workforce capabilities with business strategies must be strategic, collaborative and business-focused to be successful" (p. 6).[12]

HR plays a significant role in creating business strategy. The HR department should have a list of technical knowledge and skills in the organization and should be able to supply information about the organization's cultural strengths and weaknesses. HR practitioners should be able to suggest methods for determining the kind of culture that will maximize opportunities and must also be prepared to provide the reasons for their suggestions (Brockbank, 1997). Business objectives are the measurable targets to be achieved. When business objectives are expressed in measurable terms, they can be linked to worker results and, therefore, to the competencies those workers must possess and use in order to produce those results.

Do not confuse worker competencies, or job/role competencies as they are often called, with organizational core competence. In their seminal work, Prahalad and Hamel (1990) suggest that "core competencies are the collective learning in the organization," and that "if core competence is about harmonizing streams of technology, it is also about the organization of work and the delivery of value." Core competence is also "communication, involvement, and a deep commitment to working across organizational boundaries." Further,

Core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared. But competencies still need to be nurtured and protected; knowledge fades if it is not used. Competencies are the glue that binds existing businesses. (p. 81)

An organization's core competence is built on its core competencies. An organizational core competency is an organization's strategic strength. It is what the organization does best and what it should never outsource. Organizational core competencies—the unique resources of an organization—affect many products and services and provide a competitive advantage in the marketplace (Green, 1999).

Employee core competence could have two possible meanings. In one sense, an employee core competency is a characteristic that an employee has and uses in ways that contribute to the organization's core competence. In a second sense, an employee core competency could be regarded as an individual strategic strength when compared to other persons.

Frequently Asked Questions

When we talk and listen to others about competency-based HR management, we receive numerous questions from intrigued listeners who had thought about this topic. We present the most frequently asked questions and our responses to them in Appendix A. We hope our readers will find that reading this appendix will enrich their understanding of the concepts.

[12]For examples, see Dubois (1993, 1996) and Dubois and Rothwell (2000).

Summary

In this chapter, we defined the meanings of competency, competency model, human resource management, and competency-based human resource management. We explained the differences between fully successful and exemplary performers. We examined the process of identifying competencies and aligning them with an organization's business plans, needs, and objectives. And finally, we explained the business needs that are met through the use of competency-based HR management.