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PERFORMANCE MANAGEMENT- COMPETENCY Competence is a standardized requirement for an individual to properly perform a specific job. It encompasses a combination of knowledge, skills and behavior utilized to improve performance. More generally, competence is the state or quality of being adequately or well qualified, having the ability to perform a specific role. For instance, management competency includes the traits of systems thinking and emotional intelligence, and skills in influence and negotiation. A person possesses a competence as long as the skills, abilities, and knowledge that constitute that competence are a part of them, enabling the person to perform effective action within a certain workplace environment. Therefore, one might not lose knowledge, a skill, or an ability, but still lose a competence if what is needed to do a job well changes. Competence is also used to work with more general descriptions of the requirements of human beings in organizations and communities. Competency means the quality of being adequately or well qualified physically and intellectually. A core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria: 1. It provides consumer benefits 2. It is not easy for competitors to imitate 3. It can be leveraged widely to many products and markets. A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication. Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Few companies are likely to build world leadership in more than five or six fundamental competencies. The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization. The 'margin' depicted in the diagram is the same as added value. The organization is split into 'primary activities' and 'support activities'.
Challenge Competency analysis is necessary to identify the knowledge, skills and process abilities required to perform the organisation’s business activities so that they may be developed and used as a basis for workforce practices. CSC in India did not have competency analysis framework, thereby having no competencies defined for any role. The challenge was to formalise the competency analysis process starting from identification of workforce competencies required to perform the business activities to utilisation of competency information for workforce activities like staffing, training and development and competency development. To address these gaps, the organisation has established a competency analysis system where employees can map themselves against the competencies defined for their current and future roles. Methodology Competency analysis begins with identification of the workforce competencies required to perform the organisational business activities. Once the competencies are identified, a mapping between the targeted vs actual value of competencies is required to measure, analyse and predict the future capability of competencies and take necessary corrective/preventive action to either enhance or maintain the current capability. Identifying the tasks, skills, knowledge and attitude required to perform various organisational roles can be used in formulating job description, assessing employees’ current level of competency, and activities like planning career development and coordinating competency development.
Core Competence Analysis Get Ahead. Stay Ahead. The idea of the “core competence” is one of the most important business ideas that has shaped our world. It is one of the key ideas that lies behind the current wave of outsourcing, as businesses concentrate their efforts on things they do well, and outsource as much as they can of everything else. In this article we explain the idea and help you use it, on both corporate and personal levels. And by doing so, we show you how you can get ahead of your competition – and stay ahead. By using the idea, you can make the very most of the opportunities open to you:
You can focus your efforts so that you develop a unique level of expertise in areas that really matter to your customers. Because of this, you’ll command the rewards that come with this expertise; and You can learn to develop your own skills in a way that complements your company’s core competences. By building the skills and abilities that your company most values, you’ll win respect and be more likely to get the career advancement that you want.
Explaining Core Competences: The Value of Uniqueness The starting point for understanding core competences is understanding that businesses must have something that customers uniquely value if they're to make good profits. "Me too" businesses (with nothing unique to distinguish them from their competition) are doomed to compete on price: The only thing they can do to make themselves the customer's top choice is drop price. And as other "me too" businesses do the same, profit margins become thinner and thinner. This is why there's such an emphasis on building and selling USPs (Unique Selling Points) in business: If you're able to offer something uniquely good, customers will want to choose your products and will be willing to pay more for them. The question, though, is where this uniqueness comes from, and how it can be sustained. In their key 1990 paper "The Core Competence of the Corporation", C.K.Prahalad and Gary Hamel argue that "Core Competences" are some of the most important sources of uniqueness: These are the things that a company can do uniquely well, and that no-one else can copy quickly enough to affect competition. Prahalad and Hamel used examples of slow-growing and now-forgotten corporations that failed to recognize and capitalize on their strengths. They compared them with star performers of the 1980s (such as NEC, Canon and Honda), which had a very clear idea of what they were good at, and which grew very fast. Because these companies were focused on their core competences, and continually worked to build and reinforce them, their products were more advanced than those of their competitors, and customers were prepared to pay more for them. And as they switched effort away from areas where they were weak, and further focused on areas of strength, their products built up more and more of a market lead. Now you'll probably find this an attractive idea, and it's often easy to think about a whole range of things that a company does that it can do well. However, Hamel and Prahalad give three tests to see whether they are true core competences:
1. Relevance: Firstly, the competence must give your customer something that strongly influences him or her to choose your product or service. If it does not, then it has no effect on your competitive position and is not a core competence; 2. Difficulty of Imitation: Secondly, the core competence should be difficult to imitate. This allows you to provide products that are better than those of your competition. And because you're continually working to improve this competence, ir means that you can sustain your competitive position; and 3. Breadth of Application: Thirdly, it should be something that opens up a good number of potential markets. If it only opens up a few small, niche markets, then success in these markets will not be enough to sustain significant growth. An example: You might consider strong industry knowledge and expertise to be a core competence in serving your industry. However, if your competitors have equivalent expertise, then this is not a core competence. All it does is make it more difficult for new competitors to enter the market. More than this, it's unlikely to help you much in moving into new markets, which will have established experts already.
Using This in Your Business and Career: To identify your core competences, use the following steps: 1. Brainstorm the factors that are important to your clients. If you're doing this on behalf of your company, identify the factors that influence people's purchase decisions when they're buying products or services like yours (make sure that you move beyond just product or service features and include all decision-making points.) If you're doing this for yourself, brainstorm the factors (for example) that people use in assessing you for annual performance reviews or promotion, or for new roles you want. Then dig into these factors, and identify the competences that lie behind them. As a corporate example, if customers value small products (e.g. cell phones), then the competence they value may be "component integration and miniaturization". 2. Brainstorm your existing competences and the things you do well. 3. For the list of your own competences, screen them against the tests of Relevance, Difficulty of Imitation and Breadth of Application, and see if any of the competences you've listed are core competences. 4. For the list of factors that are important to clients, screen them using these tests to see if you could develop these as core competences.
5. Review the two screened lists, and think about them: • If you've identified core competences that you already have, then great! Work on them and make sure that you build them as far as sensibly possible; • If you have no core competences, then look at ones that you could develop, and work to build those; or • If you have no core competences and it doesn't look as if you can build any that customers would value, then either you need another way of being unique in your market (see our USP Analysis article), or you need to consider finding another environment that better suits your competences. 6. Think of the most time-consuming and costly things that you do either as an individual or a company. If any of these things do not contribute to a core competence, ask yourself if you can outsource them effectively, clearing down time so that you can focus on core competences. For example, as an individual, are you still doing your own cleaning, ironing and decorating? As a small business, are you doing you own HR and payroll? As a bigger business, are you manufacturing non-core product components, or performing non-core activities? Tip 1: As with all brainstorming, you'll get better results if you involve other (carefully-chosen) people. Tip 2: On a personal basis and in the short term, it might be difficult to come up with truly unique core competences. However, keep this idea in mind and work to develop unique core competences. Tip 3: You may find it quite difficult to find any true core competences in your business. If you've got a successful business that's sustainably outperforming rivals, then maybe something else is fuelling your success (our article on USP Analysis may help you spot this). However, if you're working very hard, and you're still finding it difficult to make a profit, then you need to think carefully about crafting a unique competitive position. This may involve developing core competences that are relevant, real and sustainable. Tip 4:
As ever, if your going to put more effort into some areas, you're going to have to put less effort into others. You only have a finite amount of time, and if you try to do too much, you'll do little really well.
Competency-based pay Competencies are the knowledge-skills and the attitude needed by any individual employee to carry out their job effectively. These can be incorporated into a pay system to reward individuals who positively contribute to the overall values and objectives of an organisation. This is competency based pay: rewarding the way people work, not just recognising what they can deliver. How should competency based pay be introduced? How can the right competencies be defined? What is a competency framework? How can a competency framework be designed? How can competencies be assessed? Designing the pay structure Managing the system
How should competency based pay be introduced? Several factors need to be fully integrated within an organisation before competency based pay can be introduced: an employee appraisal process must already exist managers must already have been trained to assess competencies staff should be made aware of the competencies required and how to demonstrate them when it comes to their appraisals all employees must give their full commitment the system must be fair so that all employees are included
How can the right competencies be defined? Most competency based pay systems are determined by performance indicators. Typically, the competencies needed to drive progression are quantified by senior managers through employee interviews, surveys and job analysis. The following competencies are relevant here: core competencies that apply to any job within the organisation and reflect the organisation's core values the technical skills and expertise that are necessary to carry out the job competencies relating to a specific job category e.g. ‘leadership' for senior managers competencies that define the contribution an employee makes to their role including:
communication teamwork and motivation coaching knowledge and experience service delivery liaison and networking investigation analysis initiative and problem solving planning and organising resources decision making process and outcomes teamwork and motivation knowledge and experience liaison and networking initiative and problem solving decision making process and outcomes
What is a competency framework? A competency framework defines the behaviour needed by an employee to achieve effective job performance. The framework should enable employees to be clear about what is expected of them in terms of their behaviour and specific job role. How can a competency framework be designed? Authorities need to consider the following when devising a competency framework: encourage co-operation, ownership and commitment of employees by involving them throughout the process ensure the framework is relevant to both individual and organisational performance include a planned analysis of relevant jobs to combine the imminent changes which will affect the ways employees work ensure that the necessary data gathered is as objective as possible and is put into practice with discipline ensure that the relationship between competencies and job performance is not taken for granted make sure that the language used within the framework relates to its users and is easy to comprehend. It should also be tried and tested before it is implemented
How can competencies be assessed? Competencies are assessed through a regular appraisal process to facilitate pay progression within a grade. The best approach is probably to describe each job in terms of the competencies needed to do it. These can be taken from a set of common or ‘core’ competencies. More complex individual competencies will need to be added for more complex senior roles. Designing the pay structure There are two established methods of competency based pay structures: broad banding and job families. Competencies within broad banded pay structures The band boundaries are defined using job evaluation and market rates. The employees' position in the band is reflective of their competency within their role. Employees' expectations can be problematic in 'open' broad bands. In some systems employers use market rate and job evaluation factors to split the bands into zones. An employee’s position within the band zone will depend upon their technical competencies. Advantages:
can develop their careers horizontally on the basis of their experience and competence. Pay progression and career development can be achieved without the need for individual promotion Disadvantages:
can be difficult to manage the expectations of employees, particularly new recruits, who may be under the delusion that they can automatically move to a much higher salary simply by doing their job satisfactorily. In fact, they actually need to develop their competencies. In managing the process, effective communication between line managers and staff needs to be put into place Competencies within a job family structure Different pay structures can be established for different job families under occupational or functional groupings. As work activities and basic skills are common within these groups it is possible to set out the different levels of responsibility, skill and competence.
progression based on increases in skill or competence can be planned and individuals have the clarity to perceive how far they can develop within the job family Disadvantages:
instances where these job families are segregated by gender it could appear that pay differentials are gender rather than content biased. In order to avoid equal pay claims managers must explain to employees and their representatives how the pay system is structured and work to encourage a better gender mix across jobs Managing the system To manage a competency based pay system effectively, the framework must be simple and concise so that all employees can fully grasp its meaning. Introducing the system Initially, employees need to be given a chance to become familiar with the concept itself. To help this along, it is advisable that the framework focuses on a limited number of common basic activities. Once the system is established, the framework can be expanded. Here, it can introduce a more sophisticated structure which includes the competencies that address the specific priorities of the authority and its job families and/or employee groups. Many organisations often fail to manage competency based pay systems because employees have not been sufficiently involved in the process. Before competency systems are introduced, it may be necessary to explain the following to staff: how customer focus and better teamworking can help change working practices and so help to improve services. why encouraging individuals to take responsibility for their continual learning and self- development leads to an increased flexibility of the workforce through the acquisition of a wider range of skills managers who assess their employees' competencies play a pivotal role in the overall success of the process and need to be trained appropriately
Explanations should include: eliminating the notion that it is simply a replacement for a skills list or task analysis effectively assessing competence requires the need to focus on those aspects of performance that are efficient and effective and it is not what an individual
does that is important but what they should do and what should happen in the workplace eliminating the narrow view that judging efficiency and effectiveness involves little more than applying rules and procedures to assess limited routine tasks education in the concepts that competencies are encouraging individuals to take more responsibility within the work environment in terms of flexibility, adaptability, multiskilling and versatility emphasising the overriding message that 'competence', in the context of people at work means people who are suitable for work, sufficiently skilled for the work they do, fit for work and efficient in their work
Advantages: employees can be developed by closely associating service objectives with remuneration rewarding employees for the acquisition of competencies provides a viable option to incremental progression based on length of service in the grade it has great appeal to local authorities because they are not profit driven and find it difficult to establish measurable achievement targets focusing on competencies enables an organisation to gain a more rounded picture of its employees lateral career moves can be identified in flatter structures via a competency framework if competencies emphasise attributes resulting in higher levels of quality/customer service an authority can differentiate itself from its competitors competencies are an effective way for an authority to spell out what it expects from its employees authorities with a series of competency levels can define a clearer progression path
Disadvantages: it may unnecessarily add to the pay-bill if competencies are not constantly monitored to ensure they continue to be required for an authority's effectiveness it can be labour intensive in its introduction and sustainability and incur sizeable training and support costs competencies are difficult to define in writing and not easy to measure there is the difficulty of making sure that managers do not distort the assessment criteria because this has the real danger of bias being introduced into an authority's pay systems