What is competency modeling and how is it applied in real

world human resources management practice?

Table of Contents

• World view...
• Philosophy
• Theory
• How competencies behave...
• Other ideas...
• Research tells us...
• Competency-Based HR Practice
• What we know...
• So what?

World View...

David C. McClelland's paper, Testing for Competence Rather Than Intelligence, started the
competency movement in 1973. Research findings revealed academic tests and school
grades "did not predict job performance or success in life" and "were often biased against
minorities, women, and persons from lower socioeconomic strata". These findings led
McClelland to look for ways to identify "competency variables". Competency variables
would "predict job performance" and would be "less biased by race, sex or socioeconomic
factors".(1)

McClelland conducted research studies with U.S. State Department Foreign Service
Information Officers and Massachusetts human service workers to test two methods for
identifying "competency variables":

People who have been successful in their job and/or life are compared with people not so
successful to define success characteristics (criterion sampling).
People involved in open-ended, unstructured situations are observed or interviewed for
thoughts and behavior related to successful outcomes (criterion analysis).
In 1991 these competency assessment methods were being used by more than 100
researchers in 24 countries.(2) "Competency [assessment] methods emphasize criterion
validity-what actually causes superior performance in a job-not what factors most reliably
describe all the characteristics of a person, in the hope that some of them will relate to job
performance" .(3) Competencies identified describe what successful employees actually do
in their particular work environments.
Philosophy...

Competencies in the workplace gained increasing attention in the 1990's. Debate ensued
and continues over what competencies are and how they can be measured primarily
because of the various methods used to identify competencies:

• Focus on the job or task. Task descriptions are generated through literature
review, training and career development materials, job analysis studies, etc. The
descriptions are ranked (most/least important) and sorted into clusters based on
performance requirements. Or, subject matter experts describe the work they do,
generate task descriptions and group them. (4)

• Focus on competency. Expert panels identify the skills necessary for the
workforce, or procedures are used to collect direct observations of human behavior
(critical incident method) that describe critical behaviors for success. Or a sample of
competent employees and a sample of less competent employees are asked to
describe critical incidents in the job through behavioral event interviews (BEI) to
determine competencies that distinguish superior performers.(5)

Darlene Russ-Eft, Chair ASTD Research Committee suggests:(6)

Identifying a competency should begin with those who perform the job.
The process used to define competencies should involve individuals at all levels
rather than a select few.
Job competencies need to be reexamined annually.
A full range of competencies should be defined before identifying those that
distinguish superior performance.

Theory...

The Personnel Resources and Development Center (PRDC) of the US Office of Personnel
Management conducted occupational analysis studies on managerial, clerical/technical, and
professional/administrative occupations using the Multipurpose Occupational Systems
Analysis Inventory--Closed-Ended (MOSAIC) approach. "The foundation of the MOSAIC
approach is a comprehensive literature review, which is conducted to develop the lists of
tasks and competencies (i.e., the common language) that can be used to describe all
occupations in a particular group." (7)

The MOSAIC approach to competency assessment occurs in five steps:

Step 1. Define performance effectiveness criteria

OPM Multipurpose Occupational Analysis studies make use of:

 • Literature review ("Psychological and job analytic literature is searched for work
conditions, future trends and projected roles and job requirements. Federal
agencies, state and local governments, and private and nonprofit organizations are
contacted for occupational information." (8))
• Dictionary of Occupational Titles (DOT)
• Classification and qualification standards
• Job analysis studies
• Training and career development materials
• Position descriptions

to identify tasks and competencies.

Step 2. Identify a criterion sample

In MOSAIC supervisors and incumbents of the jobs analyzed make up the sample of people
who have been successful in their jobs and the sample of people who have not been as
successful. In this case, 42,000 Federal employees and supervisors in 67 clerical and
technical occupations were identified; 10,000 Federal supervisors, managers and
executives were identified for the managerial study; and 40,000 employees in 105
professional and administrative occupations were identified. (9)

Step 3. Collect data

Panels of research psychologists and job analysts prioritize tasks and competencies
identified from the literature review according to importance to job success. The tasks and
competencies are then incorporated into occupational surveys administered to the criterion
sample.

The criterion sample rates the prioritized lists according to importance to job success to
establish content validity. Content validity means the tasks and competencies identified are
representative of important aspects of performance on the job.

Step 4. Analyze data and develop a competency model

Statistical analyses are conducted to establish the level of importance of each competency
for successful performance.

The competency model:

Each occupation has a competency profile. A competency profile is a list of competencies

identified as necessary for performing the job well. Each competency in the profile
provides a definition and is rank ordered by importance. Each competency also has
behavioral descriptors of varying proficiency levels. The model is useful for identifying job
requirements, developing proficiency rating criteria, and for matching jobs with people.
Step 5. Validate the competency model

OPM research psychologists and Career Service Authority personnel analysts "crosswalk"
(match for consistency) Denver jobs to the task and competency profiles in the HR
Manager (OPM's database containing the MOSAIC studies findings). The crosswalk
established "concurrent cross-validation" meaning the competency model predicts the
performance of a second group of people (in this case career service employees). (10)

Practical application of the competency model in the City's performance appraisal system,
compensation, classification, selection, career development and planning, and training
systems should establish "predictive validity" meaning people actually perform better in the
future.(11)

How competencies behave... Competency

"A competency is an underlying characteristic of an individual that is causally related to

criterion-referenced effective and/or superior performance in a job situation.

Underlying characteristic means the competency is a fairly deep and enduring part of a
person's personality and can predict behavior in a wide variety of situations and job tasks.

Causally related means that a competency causes or predicts behavior and performance.

Criterion-referenced means the competency actually predicts who does something well or
poorly, as measured on a specific criterion or standard." (12)

Competency profiles list threshold competencies and differentiating competencies:

Threshold Competencies

"Threshold competencies are the essential characteristics (usually knowledge or basic

skills, such as the ability to read) that everyone in a job needs to be minimally effective."
Threshold competencies "do not distinguish superior from average performers." (13)

Differentiating Competencies

"Differentiating competencies distinguish superior from average performers." (14)

Competency-Based Performance Management

Competency-based performance management combines planning, management and

appraisal of both performance results and competency behaviors. Achievement of
performance results is quantified, past oriented, and tied to unit goals, based on a short
term and used to make compensation decisions. Competency appraisal is more qualitative,
longer range, future oriented and used for employee development. A competency-based
performance management system should motivate employees to do better than their
current actual performance. (15)

"Competency-based performance management systems shift the emphasis of appraisal

from organization results achieved to employee behaviors and competencies
demonstrated. Diagnosis and problem solving to deal with poor performance takes this
form: 'If results are not at the desired level, give higher priority to these job tasks,
demonstrate these behaviors more often, and develop these competencies'. Managers
explicitly commit themselves to provide employees with formal training, coaching and
other competency development activities during the performance period." (16)

Competency-Based Classification

Competency modeling complements classification. Classification is work definition at the

organization level. Competency modeling is work definition at the individual level.
Classification is the basis for job requirements, performance criteria, assessing prevailing
market pay levels and addressing employment law issues. Competency modeling helps
individuals analyze their present understanding of their work, detect weaknesses, make
improvements and make easier transitions in changing work environments. The product of
classification is job specifications: broad/general description of the essential job
duties/responsibilities for a job family. The product of competency modeling is competency
profiles: lists of the essential characteristics that distinguish superior performance from
effective performance. Classification provides the basis for making personnel decisions and
competency modeling provides the basis for understanding/explaining personnel decisions.

Competency-Based Compensation

"Competency-based pay is compensation for individual characteristics, for skills or

competencies over and above the pay a job or organizational role itself commands.
Competency-based pay systems usually include (1) base pay based on the organization
job, (2) pay for competencies either brought to the job or acquired or demonstrated in it,
and (3) pay for individual, team or organization performance results. Fixed pay (salary) is
set by base pay for the job and on competencies the person brings to the job that predict
better than average performance. Variable pay (incentive pay) can include additional
compensation for competencies demonstrated on the job or acquired while in it, and for
actual performance." (17)

Competency-Based Selection

"Competency-based selection methods are based on the following hypothesis: The better
the fit between the requirements of a job and the competencies of the jobholder, the
higher job performance and job satisfaction will be. Successful job-person matching
therefore depends on (1) accurate assessment of individual competencies, (2) competency
models of jobs, and (3) a method of assessing the 'goodness of fit' between a person and
a job." (18)
"Competency-based recruiting and selection systems usually focus on screening methods
that winnow a small number of strong candidates from large numbers of applicants quickly
and efficiently." These systems stress identification of competencies that applicants have
developed and demonstrated to date, competencies that are likely to predict long-run
career success and are hard to develop on the job or through training, and competencies
that can be reliably assessed. (19)

Competency-Based Training and/or Development

"Competency-based training and/or development programs are based on gaps between

employees' competencies and the competency requirements of their present or future jobs.
Employees who lack a specific competency can be directed to developmental activities
designed to teach them the missing competency, improve their performance in their
existing jobs, or prepare them to advance to higher level jobs in the future." (20)

Other ideas...

Competency modeling also has societal applications:

Competency-based workforce planning-state and national agencies try to identify future

jobs and plan education and training to prepare their citizens for these future jobs. The
State of Connecticut surveyed 200 companies and 1,000 education, business, labor and
government leaders on competency requirements for future jobs. Their study concluded:

1. Occupations requiring high levels of cognitive and interpersonal competencies are

growing most rapidly.

2. Employer-based training programs reach fewer than 20% of workers each year.
(21)

In 1991 the US Department of Labor published the SCANS report, a national competency
model for US workers. SCANS recommends:

1. Five core subjects (English, mathematics, science, history, and geography) "be
taught in ways that develop problem-solving and interpersonal skills in the context
of real-life and work problems." (22)

2. Schoolchildren's proficiency in the SCANS competencies is certified.

Competency research suggests that these competencies predict success at work and life:

• Achievement Orientation. The desire to attain standards of excellence and do better,

improve performance.
 • Initiative. Acting to attain goals and solve or avoid problems before being forced by
events.

• Information Seeking. Digging deeper for information.

• Conceptual Thinking. Making sense of data and using algorithms to solve problems.

• Interpersonal Understanding. Hearing the motives and feelings of diverse others.

• Self-confidence. A person's belief in his or her own efficacy, or ability to achieve

goals.

• Impact and Influence. A person's ability to persuade others to his or her viewpoint.

Collaborativeness. Working effectively with others to achieve common goals. (23)

"If these findings are true, the obvious implication for education and parenting is to
develop these competencies explicitly, as part of a conscious, goal directed curriculum."
(24)

Research tells us...

In The Role of Competencies in an Integrated HR Strategy, the American Compensation

Association's (now World at Work) competencies research team provides data from their
1996 study that focuses on the practices surrounding competency-based applications and
the effectiveness of the variety of approaches. Table 1 summarizes the approaches and the
effectiveness of each.
 Don't
Positive Negative No
Competencies used for: know/too
Effect Effect Effect
early to tell
Communicating valued
75% 0% 0% 25%
behaviors
"Raising the bar" of the
competency level of all 59% 0% 0% 41%
employees
Emphasizing people (vs.
job) capabilities enabling
69% 4% 4% 23%
the organization to gain
competitive advantage
Encouraging cross-
functional/team
56% 17% 17% 11%
behaviors critical to
business success
Reinforcing new values
while continuing to
67% 0% 6% 28%
support achievement of
business objectives
Closing skill gaps 50% 0% 0% 50%
Supporting superior
performance in
roles/units that have a 30% 0% 0% 70%
critical impact on
organization success
Focusing people on total
quality/customer 80% 0% 0% 20%
centered behaviors
Providing an integrating
vehicle for human 65% 6% 0% 29%
resources

Table 1: Effectiveness of Competency-Based Approaches(25)

The study found that competencies provide a framework for integrating HR applications.
The respondent organizations tended to start competencies application in one or more
areas of HR then gradually work their way to other areas. The key is not the order in which
areas are approached but how the applications employed leverage the business strategy.
The competency-based applications used by respondent organizations are staffing,
performance management, training and development, and compensation.
Competency-Based HR Practice (26)

Staffing

• Competency-based staffing applications focus on hiring, selection, promotion,

succession planning, termination and work force planning.
• One of the most common applications implemented and rated very effective or
effective by 53% of the respondent organizations.
• Competency-based interviews are used most often for hiring/selection and job
placement decisions.
• Managers are trained to do behavioral interviews.
• Competency criteria are provided to outside recruiters and/or placement firms.
• Rejecting candidates can be based solely on competency assessment.
• Competency-based reference checks are completed.

Performance Management

• Competency-based applications focus on performance planning, coaching and

feedback, and assessment.
• One of the most common applications implemented and rated very effective or
effective by 50% of the respondent organizations.
• Competencies and results are measured in performance appraisal programs.
• Competency data are used for employee development, pay, promotion and training
decisions.
• Both competency growth/improvement and competency level achieved are
measured.
• Several information sources are used to determine employee ratings:

1. Managers and supervisors

2. Employee's self-rating
3. Peers/team members
4. Internal customers
5. Subordinates
6. External customers

• Formal competency appraisal discussions with employees include the

manager/supervisor and may include a third party.
• Formal individual competency assessments are conducted frequently.
• Managers and employees mutually develop development plans and objectives.

Training and Development

• Competency-based training and development applications focus on training needs

analysis, training curriculum, coaching executives, and team or career development.
 • One of the most common applications implemented and rated very effective or
effective by 42% of the respondent organizations.
• Training programs attempt to broaden all types of competencies:

1. Performance behaviors (e.g., teamwork, leadership)

2. Personal attributes such as traits, motives and attitudes (e.g., flexibility,
drive for results, customer focus)
3. Knowledge areas (e.g., business or product knowledge)
4. Technical skills (e.g., GAAP accounting, selling skills)

• A combination of classroom and experiential approaches support employee

competency development:

1. Formal inside or outside classroom training

2. Job expansion/development experiences
3. Other self-directed study
4. Job rotation

• Competency gaps determine which individuals are selected for training and
development.

Compensation

• Competency-based applications focus on role definition, salary increases, incentives

and work/job classification.
• Only one-third of the respondent organizations use competency-based pay and 18%
of them rated their implementation as very effective or effective.
• Competencies are used most often for salary increase determination: pay increases
are affected by change/growth in competencies, competency level attained, position
relative to market or target pay and job/role results.
• Competencies are factored into annual salary adjustments: base pay increases or a
combination of base pay increases and lump sum payments are used.
• Competencies are used with other factors in job evaluation: competencies,
accountability and know-how are the job evaluation elements used most;
experience and education are used less.
• Competencies required on the job determine the positioning of an employee in the
pay structure.
• Movement from one pay grade/band to another is determined by competency
growth.
• Employees who are paid more than is warranted by their demonstrated
competencies see slower or no salary growth: pay is frozen, employees are
grandfathered for a specific period of time, pay is reduced, employees are
reassigned or screened for termination.
What we know...

Lessons learned over the 30 years competencies have been successfully used:

1. Competencies raise the performance bar at all employee levels.

2. Competencies add the greatest value in the area of defining performance
expectations.
3. Competencies are not a panacea-they are part of a tool kit to enhance performance.
4. Competency-based applications are most effective when they are linked to multiple
applications.
5. Competency-based applications are most successful when implementers focus more
on what competencies do than on what they are.
6. Competency-based human resource applications, by nature, take time.
7. Managing the change that any competency-based application brings to the
organization is the greatest challenge, not the application.
8. Competencies selected by organizations need to be understood by all affected and
validated empirically to truly add value.
9. Successful programs use integrated approaches to competency implementation,
provide tools and job aids to managers and team members and apply change
management principles during rollout.

So what?

"Human resources management adds value when it helps individuals and organizations do
better than their present level of performance. Competencies provide a common language
and method that can integrate all human resource functions and services to help people,
firms and even societies be more productive in the challenging years ahead." (27)

--------------------------------------------------------------------------------

Notes

(1)Spencer, L. M. & Spencer, S. M. (1993), Competence at Work: Models for Superior Performance, New York: John
Wiley & Sons, Inc. p.3

(2)Competence at Work: Models for Superior Performance, p. 7

(3)Competence at Work: Models for Superior Performance, p. 7

(4)Russ-Eft, D. (1995) Defining Competencies: A Critique. Human Resource Development Quarterly, 6 (4) 329-335

(5)Defining Competencies: A Critique p. 330

(6)Defining Competencies: A Critique p. 334

(7)HR Manager Occupational Crosswalk, City and County of Denver, Colorado, Final Report. US Office of Personnel
Management, PRDC-03-01, April 2001 p. 1

(8)Ibid.
(9)Multipurpose Occupational Analysis Studies in Solutions for Federal, State and Local Government Organizations, US
Office of Personnel Management, Employment Service.

(10)Spencer, L. M. & Spencer, S. M. (1993), Competence at Work: Models for Superior Performance, New York: John
Wiley & Sons, Inc. p.105

(11)Spencer & Spencer, p. 106

(12)Spencer & Spencer, p. 15

(13)Spencer & Spencer, p. 15

(14)Spencer & Spencer, p. 15

(15)Spencer & Spencer, p. 266

(16)Spencer & Spencer, p.270

(17)Spencer & Spencer, p. 305, 311

(18)Spencer & Spencer, p. 239

(19)Spencer & Spencer, p. 258

(20)Spencer & Spencer, p. 259

(21)Spencer & Spencer, p. 329

(22)Spencer & Spencer, p. 332

(23)Spencer & Spencer, p. 336

(24)Spencer & Spencer, p. 336

(25)From The Role of Competencies in an Integrated HR Strategy, ACA Journal, Summer 1996. p. 7, 8

(26)This entire section from The Role of Competencies in an Integrated HR Strategy, ACA Journal, Summer 1996.

(27)Spencer, L. M. & Spencer, S. M. (1993), Competence at Work: Models for Superior Performance, New York: John
Wiley & Sons, Inc. p. 347