What are competencies and what are their uses

The OD Group What are competencies and what are their uses? 4 October 2006 Julie Naismith Principal, Towers Perrin © 2005 Towers Perrin Competencies are critical to an organization’s business performance The Towers Perrin Linkage FrameworkTM Employee competencies have an impact on the drivers of customer behavior and ultimately business performance People systems and programs  Rewards and Employee behavior  Employee behavior Customer behavior  Customer Business performance  Revenue growth  COGS  SG&A  EPS  Stock performance  ROIC recognition  Performance management  Learning and is heavily influenced by their competencies satisfaction  Loyalty  Market share  Brand power development  Communication  Policies and procedures © 2005 Towers Perrin 1 They allow an organization to achieve its business strategy by defining what employees need to do  Competencies are the combination of knowledge, skills, abilities and other characteristics that are important for:  Organizational or functional success  Personal performance  Enhanced contribution  Competencies bridge what an STRATEGY  What is the vision?  What are the values?  What are the key business drivers? organization or function wants to achieve and the specific ways it will get there by describing what employees need to do  What must employees do exceptionally well to help the organization succeed in achieving its vision and goals? COMPETENCIES For competencies to be truly valuable, they should be future-focused and aligned with the organization’s strategy © 2005 Towers Perrin 2 Competencies can be linked to the success of the organisation Top-down approach  Driven by organization-level information  More future-focused  Most effective for:  Enabling competencies  Broad organization-wide models  Applications like performance management, Organization capabilities Top-down approach management development, pay Bottom-up approach  Driven by individual-level information  More present-focused  Most effective for:  Domain competencies  More narrow models (job, function, role)  Applications like selection, succession Bottom-up approach Employee competencies © 2005 Towers Perrin 3 The best competency models have three key objectives 1 Strategic  Reinforce the linkage between executing the business strategy and the people knowledge, skills and abilities needed for success  Focus not only on what is necessary for success now, but what will be critical for success in the future  Enhance, but not overshadow, an organization’s focus on results 2 Focused  Include a limited number of competencies to focus employees’ attention on those that are truly critical to the organization’s success  Scaled to reflect behavioral expectations for different levels of performance  Expressed in clear, simple, straightforward language to support ease of application  Supported by all levels of leadership and viewed as an important 3 Integrated tool across all business units  Applied to multiple talent management programs (e.g., succession planning, learning and development, recruitment and selection, performance management) to promote consistency in terminology and focus © 2005 Towers Perrin 4 Generally, there are two types of competency models Domain: Function, Role or Job-based Competencies  Necessary for success in a particular function, Organizational Competency Models  Essential to realizing organizational business goals  Generally relevant to all employees in the organization  Communication and Teamwork are common examples  For some companies, these competencies may role, or job  Applicable to most, but not all, employees of a particular domain (e.g., sales, finance, human resources)  Typically not applicable to all employees of the company  Usually involve knowledge in a technical, be reflected in their Core Values professional or process area  An example of an HR function competency is Staffing and Facilitating Change Organizational Competencies are the same across a company but Domain Competencies are different for various groups in the company © 2005 Towers Perrin 5 Each type of competency model is focused on a specific segment of the employee population Organizational competencies  Competencies that are common across the organization Role-based competencies  Competencies specific to a particular role (e.g., Manager) Job-based competencies  Competencies specific to a particular job (e.g., Call Center Rep) Function competencies  Competencies specific to the technical requirements of a specific function (e.g., Sales) © 2005 Towers Perrin 6 Scaling competencies with behavioral anchors is a critical step in the process  When implementing a competency model, and using it to assess performance, it is important to create a common understanding of expectations by scaling the competencies to describe different levels of contribution  Scaling the model in recognizable organization-specific language allows individual employees to better understand what is expected of them Behavioral anchors are:  Descriptive statements  “Snapshots” to help communicate Level 1  Behavioral Competency Name and Definition Level 2  Behavioral Level 3  Behavioral Level 4  Behavioral what demonstration of a competency looks like  Hierarchical  Level 1 is lower than anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor  Behavioral anchor anchor anchor anchor Level 2  Cumulative  The behavior described at Competency is described in behavioral terms, to illustrate how the same competency may be performed at different levels of contribution or career progression Level 2 implies an ability to demonstrate the behavior described at Level 1  Serve as the foundation for employee competency assessment © 2005 Towers Perrin 7 Here is an example of a scaled competency ILLUSTRATIVE SALES FUNCTION COMPETENCY Competency Definition Negotiation Skills Effectively persuades customers and colleagues in order to reach mutually beneficial agreements and influence important outcomes Foundational Intermediate Negotiates standard contracts with confidence and builds trust with the negotiating party Creates a common ground by recognizing areas of agreement and focusing on areas of disagreement in a negotiation Captures the full value of an offer, accounting for all factors in a negotiation (e.g., brand, freight, consulting services) Advanced Negotiates complex contracts (multi-year, high dollar volume) maximizing the full value for all parts of the offering Adapts to different negotiation styles (cultural and behavioral) within an organization and resolves issues without negative impact on the relationship Keeps all stakeholders informed and in alignment on difficult or complex negotiation terms Strategic Negotiates global or multi-regional arrangements; develops negotiation strategies based on an in-depth understanding of the deal Alters negotiation approach to address the needs of stakeholders at different tiers in the value chain Positions self and company for the future; knows the key influencers in an organization and “pre-sells” an arrangement Described at four levels Negotiates simple, shortterm offers; seeks assistance with more difficult negotiations Arms self with information prior to negotiating with a customer; asks questions to understand the other party’s position Learns to ask for a commitment and persists despite initial rejection Behavioral Anchor © 2005 Towers Perrin 8 Competencies come to life when integrated into talent and development programs …  Integrated talent programs are developed by establishing a consistent set of expectations (competencies), assessing individuals’ performance against them and using the information to drive talent related decisions Succession Planning Training Compensation and Rewards Development Competency Model Career Management Recruitment Selection (internal and external) Performance Management © 2005 Towers Perrin 9 …by creating a set of common criteria around each of the programs Talent Programs Training Tools and Processes  Learning objectives  Content  Attendee selection based on skill Implications  People know what is needed for their job/role  Right people learn right skills and gaps Development  Development needs defined in terms knowledge  People know what is expected in their of competencies required by role/job  Development program objectives current role  People know what is required to get to the next level  Identifies paths to strengthen Career Management  Communication of requirements for alternative career paths and/or target positions Performance Management  Basis for job/role requirements  Used as basis for assessment  Links performance management to succession planning  Communicates job/role requirements learning and development to job incumbents and managers  Provides a clear mechanism to improve individual performance Continued… © 2005 Towers Perrin 10 …by creating a set of common criteria around each of the programs Talent Management Programs Selection (internal and external) Tools and Processes  Basis for consistently defining open Implications  Greater assurance of hired position requirements  Interviewing protocols  Redeployment tools  Assessment tools - tests, assessment employee’s success in position  Reduced turnover centers Recruitment  Communicate requirements of open  Improved self-selection positions Compensation and Rewards Succession Planning  Pay and recognition programs keyed  Motivated employees to demonstrate to competency demonstration  Successor candidate identification the competencies  Increased “bench strength” and prioritization © 2005 Towers Perrin 11 Common competencies in use today Problem Solving Adaptability/Flexibility Decision Making Development of Self/Others Leadership Business Insight Innovation/Creativity Results Orientation Customer Focus Teamwork Communication 0% 10% 20% 30% 40% 50% US 60% UK 70% 80% 90% 100% Source: 40 Towers Perrin competency projects conducted in the US and UK. © 2005 Towers Perrin 12 Some Towers Perrin guiding principles on competencies  There is no universal set of competencies: one size does not fit all  Competencies should support the key elements of the HR platforms  Competencies are not a replacement for results  The number of competencies must be focused  Competencies must be validated and must be “renewed”  Competency frameworks must be simple to use, owned by managers, and linked to outcomes that are relevant to employees © 2005 Towers Perrin 13