How to Model and Assess Employee Competencies: A step-by-step guide for creating a valid and reliable competency modeling process

Chapter 1

Introduction to Competency-Based Human Resources Applications

Learning Points

Competency-based HR applications must focus on job position competencies, not organizational core competencies.

Quality standards mandate that organizations document the qualifications of their employees to perform to standard and have processes in place to eliminate competency gaps.

Today’s competitive environment requires frontline workers who are qualified to  perform complex processes end-to-end in order to maximize efficiencies and customer satisfaction.

Competency-based applications apply to the entire spectrum of HR functions, but are easiest to initiate in the Skills Management step.

Most organizations are still no further than the early adoption cycle and have yet to see strong benefits from the application of competency principles.

Competence is the qualification to correctly perform processes of a job position. It is not performance or an input, output, trait, capability, ability, or attitude. Letting these be considered competencies will destroy subsequent efforts to build valid models and assessment instruments.

Key factors in the definition of competence are: (1) significance to the job, (2) correlated with performance, (3) measurable to standards, and (4) can be improved.

Develop and agree on a vocabulary before initiating any other tasks, or risk having difficulty throughout the entire life of competency-based HR application development.

COMPETENCE IS ONE OF the hot topics in the world of human resources. Top management is identifying corporate core competencies and working to establish them throughout the organization. Corporate universities support the learning organization in the development of competitive excellence. The human resources (HR) department builds competency-based models of performance measurement that drive business results. Enterprise resource planning (ERP) software vendors have integrated competencies into their human resource software modules. It’s a regular extravaganza of jargon.

Commercially, there are lots of products and service offerings addressing competencies. Most include one or two components of competency-based solutions. Others provide little actual functionality while trying to capitalize on competencies as the latest fad.

Organizationally, everyone is talking about competencies. Some employers have truly worked the concept into several of their processes. But few enterprises have a fully implemented competency modeling and reporting system in place that addresses the development of people from process design through succession.

Several years ago at the user group meeting of a major training administration vendor, due to high interest in the topic, an optional 7:00 a.m. session on competency modeling was added to the agenda at the last minute. In an informal hands-up poll, only two of the approximately one hundred companies represented by the attendees had experience with any form of competency based applications. Of these two, one was early in the design phase and the other appeared to have an initial process in place. There were two questions everyone in attendance was asking:

What exactly is competency modeling?

How do we measure up?

The user group attendees first wanted to understand exactly what competency modeling was. Everyone was talking about it, but no one could consistently define it. These training department and HR attendees also wanted to know what state-of-the-art was and how their organizations compared.

Since then, some large organizations have begun work on competency-based applications, particularly in training and development. But most organizations of all sizes are still struggling with defining, designing, and implementing competency-model projects. (For example, major ERP software vendors have competency capabilities built into their HR modules, yet customer implementations are currently almost nonexistent.)

This book is designed to provide a competency-based project blueprint. It provides definitions of the relevant terms, the lack of which is often a roadblock to getting started. It defines the major process activities required, and it highlights specific decisions to be made at each step.

The process described is completely customizable. Individual competency design decisions are driven by a number of organizational factors, including management philosophy, customer requirements, business needs, and in-place processes. These factors are rarely consistent among different organizations, requiring a custom approach to competencies in the workplace. The result is that, although the  book’s content is the same for everyone, individual readers will end up with very different competency implementations depending upon their design decisions along the way. This customization is essential to the overall success of competency efforts, since every organization must integrate competency concepts into its own job design, recruitment, hiring, orientation, development, and succession processes.

Organizational Competencies vs. Individual Competencies

At this point, it is important to clarify the use of the word competency. This term often refers to two related but separate concepts, core competencies and workplace competencies.  Before proceeding, it must be absolutely clear which concept is being discussed here.

In their book, Competing for the Future, authors Gary Hamel and C. K. Prahalad wrote that core competencies transcend any particular product or service, and indeed may transcend any single business unit within the organization.¹ The idea is that certain projects are so massive, so pervasive, that no individual can possess the competencies required to see them through to completion. Therefore, organizations have to identify, develop, and manage organizational core competencies that drive large, enterprise critical projects.

Examples of organizational core competencies include Anheuser-Busch’s using attention-getting advertising and the brewing and delivery system to guarantee the freshest beer; IBM under Lou Gerstner adding the competencies of providing leading-edge business and internet service to its manufacturing and sales orientation; and insurance companies building competencies in banking. Core competencies can also be more generic, with leadership working to make everyone more creative, more quality oriented, or more financially astute with open book management.

Table 1–1 summarizes the differences between these core and workplace competencies.

Table 1–1. Core competencies vs. workplace competencies.

WORKPLACE COMPETENCIES focus on individuals instead of the organization, and they vary by job position versus enterprise endeavors. The unit of measure is people rather than business unit. Although there may be core competencies that appear in every position’s competency model, most workplace competencies are typically specific to the position. This means that it takes an enormous amount of work to set up organization-wide competency-based applications.

This book addresses workplace competencies. It details a customizable process to create complete competency-based HR applications addressing every position in the organization. It goes beyond core competencies to address the position competencies required to perform daily, tactical work tasks. To understand why this is such an important effort today, it is helpful to review the changing role of competency in modern organizations.

A Quick History of Competency

In the twenty-first century, business has come full circle in its attitude toward workplace competencies. At the beginning of the twentieth century, workers brought complex skills to the  job. Accountants knew how to post and balance ledgers. Cabinetmakers built marvelous individual  pieces of furniture. The Wright brothers assembled bicycles and airplanes by hand. Horses were shod, houses were built, and engines were maintained by experts with skills developed  throughout a lifetime.

Typical business processes of a hundred or more years ago required that people possess specific competencies for the task at hand. The necessary level of competency for many jobs was neither trivial nor easy to acquire. Few workers had a postsecondary education, and many had little education beyond grade school. Competencies could only be acquired through years of on-the-job learning and practice. But this soon changed. There were a number of significant influences that moved the focus away from competencies.

Frederick Taylor’s scientific management and Henry Ford’s use of the assembly line shifted competencies from workers to time-and-motion-study industrial engineers. The assumption was that minimizing the complexity of work would result in maximizing the efficiency of production. Any complex job could be broken down into a series of simple steps. With the workplace flooded by mass immigration from overseas and mass migration to the cities, this was a viable way to employ a largely unskilled and uneducated workforce.

With mass production, employee competency was defined as a physical factor. Simple work tasks could readily be mastered if the employee possessed sufficient dexterity, strength, and endurance. So the bicycle builder of 1900, working in a shop, became the tire mounter of 1930, working in the middle of an assembly line.

With this philosophy, and in a depression economy, employees had little value. They were considered more of a consumable than a resource. Because process expertise resided at the management and engineering level, there was little training required. Costs of employee turnover were negligible. If workers couldn’t handle the boredom or the physical strain, an unlimited number of applicants were available to fill openings.

World War II reinforced this management-centric view of work. Millions of men and women underwent the ultimate command-and-control experience—military service. Here officers gave orders to subordinates who obeyed commands without question. Why? Because somebody had to run things and only those in command were assumed to have the information, perspective, and abilities to make decisions. Those who refused to follow orders risked loss of freedom or even loss of their life.

Work in the military was highly segmented. Everyone had a specialization and a specific role, right down to the squad level. You were a mechanic or a pilot, but not both. People were trained to do a specific job, and then placed in the system.

At the end of the war, millions of veterans returned to the workplace. They had lived under a command-and-control hierarchy, fought under one, and naturally re-created it at work. Leaders led, and the front line charged up the next hill. People had specific roles and stuck to them. In civilian life after World War II, work was still divided into small tasks and handled by a series of specialists. At this point many jobs were not much fun, but the system was very efficient at turning out the mass quantities of goods Americans wanted after the war.

In the postwar decades of unparalleled demand and little competition, the focus was on getting the numbers out. Quality and service were secondary to meeting production quotas. Concerns about workers were more the result of pressure from organized labor than strategic thinking. This was the low point for the idea of competencies in the workplace.

The turnaround began with the work of David C. McClelland, a former Harvard psychologist and founder of McBer, a consulting company that helps clients assess and train employees. In the early 1960s, McClelland wrote a landmark article in the American Psychologist asserting that I.Q. and personality tests then in common use were poor predictors of competency. He felt that companies should hire based upon competencies rather than test scores.²

A decade later, McClelland was asked by the U.S. Foreign Service to develop new methods that could predict human performance. The goal was to eliminate the potential biases of traditional intelligence and aptitude testing. This was the beginning of the field of competence measurement. The next step was for competency concepts to find their way into mainstream business practices.

Competencies and the Quality Movement

THE QUALITY MOVEMENT began in 1950, but in Japan not America. This is the year that Dr. W. Edwards Deming began teaching modern quality control methods to Japanese industries.³ Deming emphasized that quality, not quantity, was the main goal. Quality processes, when combined with continuous quality improvement, would drive efficiency up and costs down. This, coupled with research into customer needs and expectations, would secure long-term success for an organization. Deming’s approach was ultimately dubbed total quality management or TQM.

The Japanese were enormously successful in implementing TQM, rebuilding their economy and becoming strong competitors on the world market. All this was done using quality principles developed in the United States and taught by U.S. experts. Yet TQM was relatively unknown in the United States until the June 24, 1980, broadcast of a CBS documentary entitled, If Japan Can...Why Can’t We?

In the last portion of the program, Lloyd Dobyns interviewed Dr. Deming and the president of Nashua Corporation, which had saved millions of dollars as a client of Deming. The next day, both CBS and Dr. Deming were deluged with calls from managers seeking more information. Deming went on to become a leading spokesman and trainer for TQM.

Several principles of TQM are closely related to competencies. First is the observation that frontline employees are often far more knowledgeable than supervisors about their job and customer needs. Consequently, organizational authority to make important decisions should be placed further down the management chain. Empowering frontline workers to do planning, analysis, and decision-making tasks normally reserved for managers leads to quality improvements. (For the Japanese, this involved the use of quality circles, a practice that met with mixed success in the United States.)

A second principle of TQM is that the best person to satisfy customers is usually the first employee contacted. When customer requests have to be passed up the line for management approval, customers begin to take emotional credit for demanding results rather than being astounded and amazed by receiving superior service.

Exceeding customer expectations and operating efficient processes require employees who are well trained and who are empowered to deal with situations on the spot. This mandates a very different set of employee competencies than the traditional get the numbers out, command-and-control approach.

This is reflected in the various worldwide quality standards. For example, International Organization for Standardization (ISO) 9001, Section 4.18, states:

The supplier shall establish and maintain documented procedures for identifying training needs and provide for the training of all personnel performing activities affecting quality. Personnel performing specific assigned tasks shall be qualified on the basis of appropriate education, training and/or experience, as required. Appropriate records of training hall be maintained.

International Organization for Standardization, Quality Systems—Model for Quality Assurance in Design, Development, Production, Installation, and Servicing (New York: American National Standards Institute, 1994), 10. Copyright International Organization for Standardization (ISO). This material is reproduced from ISO 9001:1994 with permission of the American National Standards Institute on behalf of ISO. No part of this material may be copied or reproduced in any form, electronic retrieval system or otherwise made available on the Internet, a public network, by satellite or otherwise without the prior written consent of the American National Standards Institute, 11West 42nd Street, New York, NY 10036.

Organizations seeking ISO 9001 certification must develop a process to identify tasks that affect quality and to ensure that employees are qualified to correctly perform those tasks or are being developed to do so.

Similarly, the Malcolm Baldrige National Quality Award Criteria for Performance Excellence states:

5. Human Resource Development and Management

"Describe how the company’s education and training address key company plans and needs, including building knowledge and capabilities, and contributing to improved employee performance and development.

Notes N1. Education and training address the knowledge and skills employees need to meet their overall work and developmental objectives."⁴

It is clear that enhancing individual workplace competencies is a required component in becoming a high-performing organization, and in achieving national and worldwide quality certifications. Organizations must be able to document job requirements, identify workers as certified to meet those requirements, and develop those who have gaps in knowledge or skills.

Reengineering and the Case Worker

In their landmark book, Reengineering the Corporation, Michael Hammer and James Champy discuss the difficulty in improving established workplace processes.⁵ While TQM’s continuous quality improvement (CQI) approach generates a nearly endless series of incremental process enhancements, it is not well-suited to generating the fundamental, radical, and dramatic leaps that Hammer and Champy assert are required.

Critical to the definition of reengineered processes is a reversal of the assembly-line  approach. In the old system, processes were divided between many individuals and departments. The only individual common to the entire process was a higher-level manager who never talked to the customer or did any actual process work. With so many process participants, and with everyone responsible for the customer, no one was truly responsible.

The new worker in a reengineered process becomes what Hammer and Champy call a case worker (or part of a case worker team). Ideally, the case worker (or team) is responsible for a process from end to end. This provides a clear overall responsibility for process efficiency and for customer satisfaction.

Reengineered processes are no longer a series of predetermined decisions and steps. There is no single flowchart covering every possible situation. Because the case worker controls the process from end to end, procedures are much more flexible. Customers can now be handled on a case-by-case basis rather than as a group with an invariant process by class.

The potential improvements with reengineering can be startling. Technology becomes a key enabler and a strategic resource. Elapsed process time can be cut by 75 percent or more. Handoffs to other individuals or teams are greatly reduced or eliminated. Customer issues are resolved immediately, by the first person the customer contacts. The organization is flattened and downsized. Multiple layers of management are no longer necessary, since most of the work is delegated to frontline workers. The organizational pyramid truly is reversed, with process power and expertise residing at the base of the pyramid (frontline) rather than at the top.

The classic low-skilled, poorly educated worker doing simple tasks over and over under the guidance of managers and engineering experts is been replace by the educated, knowledgeable, and responsible case worker in control of an entire process without much management oversight. Instead of production volume, success is now measured on quality issues such as cycle time, error rate, and internal and external customer satisfaction.

This completes the competency circle back to the early years of the twentieth century. Case workers not only require a new set of competencies, but also demand much deeper competencies than ever before. Organizations that can identify competencies by position, measure the qualifications of workers to deliver those competencies, and develop those who fall short will succeed in the long term. Organizations that cannot adapt to this new competency-based approach will continue to have gaps between their goals and their actual business results.

Competency-Based Applications

Competency-based concepts apply to the full range of HR functions. Competency should play a role as the employee moves through the organization in cyclical fashion from position to position. These major HR functions are shown in Figure 1–1 and described below.

Figure 1–1. Competency-based HR applications.

1. POSITION REQUIREMENTS

A. Process design. Everything starts with well-designed processes. The process determines what skills are required and what knowledge is needed. Desired business results form the basis of a measurement system for determining qualifications of workers in the process.

B. Job design. Process tasks can then be assigned to individuals or teams. Job requirements are used to identify employee competency levels and qualifications.

2. Position Fulfillment

A. Recruitment. Competencies are used to determine who should be interviewed and evaluated. This is a costly and time-consuming effort that can be reduced through proper understanding of what competencies a candidate brings to the job.

B. Qualification. Competency evaluation is necessary to determine if a candidate is qualified to perform the job or can potentially master the requirements of the position.

C. Selection. Where more than one candidate appears qualified, competency assessments are used to determine the best person to fill the position.

D. Orientation. This refers to developing the general competencies required of an employee by the organization.

E. Training. This refers to developing the specific competencies required to meet performance standards for a position being filled. Of particular interest will be the discussion in Chapter 2 concerning whether candidates should possess required competencies before being selected, or whether they’re expected to obtain them after being put in the position.

3. Skills Management

A. Measurement. This is the classic competency-based application. The measurement of workplace competencies is essential in modern organizations, where people drive processes rather than the reverse.

B. Development. This differs from training, which is received before and immediately after obtaining a new position. Whereas training focuses on developing required competencies and is intended to meet a minimum absolute standard, development activities are relative in that they are designed to support the continuous improvement of workplace competencies while on the job.

4. Promotion

A. Training. This is similar to the training that takes place in the Position Fulfillment function. Again, the idea is to prepare individuals for new positions before placing them there. The goal is for employees in a new job to be immediately productive. Competencies help determine when a candidate is ready to move up.

B. Succession. This function provides a stronger personal link between incoming and departing employees. The added requirement here is for continuity of effort, meaning that incoming workers need more than baseline competencies. They must be able to take over current projects without disrupting the processes involved. The goal is to cause as little disruption as possible with personnel changes.

Note that performance management is not part of the flow described above. This is a point that will continue to be made strongly throughout this discussion of competency-based applications. Performance management measures both results