Do competencies matter? making sure your competency model is properly tuned
By Lynn Summers who can be contacted at www.performaworks.com
Competency models abound. Companies create and use them to specify the employee behaviors, knowledge, and motivations that they believe are necessary to produce organizationally critical results. But if the model is not quite right, the organization will suffer. To determine if the model is right, you can look at actual data -- assessments of employees' competencies and of the results they achieve. Analysis of the correlations between competencies and results will tell you which competencies are most relevant, and whether your model might warrant a bit of fine-tuning. For job groups that have quantifiable goals, you can place a dollar value on raising the competency level, confirming the logical conclusion that competencies, when well tuned, do impact business results.
2. Why competencies should matter
Competencies are usually defined as the behaviors, knowledge, and motivations that are required to be effective in a job. Most companies these days have some form of competency model that maps competencies to all the positions in the company. Employees "see" at least some of these competencies at evaluation time when their managers rate them on how well they have exhibited each of the competencies that apply to them in their positions.
Why do employees get rated on competencies? Why do competencies matter? Too often, the real value of competencies is not acknowledged. They have become part of the organizational routine and taken for granted, or they are perceived as just another program from Human Resources.
Far from being the humdrum byproduct of some corporate program du jour, however, competencies are a big piece of the organizational "engine" that converts your company's strategy into outcomes. A competency model makes explicit your organization's assumptions about what individual behaviors, knowledge, and motivations are important to produce results that, cumulatively, help the organization succeed. Its raison d'etre is to specify the attributes required of its workforce in order to produce organizationally relevant results.
In other words, it is through the competencies of its employees -- executives, managers, and individual contributors -- that a corporation executes its strategy and achieves results that are crucial to its success. Looked at from this perspective, competencies become a lot more exciting.
Notice, however, that there is a big assumption embedded in the individual-competencies-beget-corporate-success logic. That assumption is that the organization has correctly identified the competencies that really matter. Think of the ways competencies get used -- as criteria for selecting people into the organization, as targets for employees' training and development efforts, and as one of the bases on which employees are managed, evaluated, and rewarded.
If your organization's competency model does not express the competencies that really matter, then people with the wrong skills will be hired, they will be trained and developed on the wrong skills, and they will be rewarded for engaging in the wrong behaviors. The net is that the organization's execution and delivery of results will fall short. So it would be a good idea to check to see if your competency model really "works."
3. How to find out if competencies matter
One way to test the assumption that you have identified the right competencies is to look at how well the corporation's existing competency model actually maps to employees' abilities to produce desired results.
On the competencies side of the equation you have those competencies the company has identified as critical. And you have actual data -- from performance evaluations or 360s -- about how well employees measure up to those competencies. On the other side of the equation, you have goal achievement -- the results employees have delivered. You would expect employees with more of the desired competencies to produce better results than employees with less of the desired competencies. That expectation can be put to the test by looking at actual data.
And here, for one job group in one company, is the outcome of a test of the assumption. The job group is district sales managers. This position is covered by a set of fifteen competencies. The sales managers were assessed against these competencies in a 360-feedback program. The primary result these district sales managers are accountable for is the company's market share within their districts. (In the industry to which this company belongs, a product's market share can be tracked quite accurately within defined geographies.) The bar graphs depict the relationship between the sales managers' 360 ratings on their competencies and the actual market share they achieved in their respective districts.
Most of the competencies are at least moderately correlated with market share. Three competencies especially stand out: Sales managers who are more effective at setting goals, managing their teams' performance, and delivering on commitments tend to produce better results. Conversely, managers who are less effective on these competencies tend to produce poorer results. These are clearly competencies that matter. These findings affirm the company's assumption that good things will follow by: hiring people into the sales career path who have these competencies, developing these competencies in candidates for sales manager positions, and rewarding current sales managers for utilizing these competencies.
Interestingly, there are a couple competencies whose correlations with market share are weak. What this means is that being a good role model and showing managerial courage don't really matter when it comes to producing sales results. Does this mean the company ought to drop these competencies for this position? Not necessarily. These competencies may be useful in producing results other than market share that are important to the company. They may also represent "solid citizen" competencies -- behaviors and skills that are consistent with corporate values or that are necessary to maintaining a civil workplace. These could be competencies the company expects its employees to exhibit with the understanding that they do not contribute directly or immediately to, in this case, sales.
4. The real-life behavioral soup
Correlations of .15 to .25 may not seem real impressive. But for behavioral data, they actually are. Think about what these correlations say. They say that, despite all the other influences on market share -- competitive activity in the districts, the whims and preferences of customers, prevailing economic conditions, pricing, promotions, historical factors, and so on -- there is still a significant relationship between a district sales manager's behavior and the results the manager achieves in his or her district. Keep in mind also that the sales manager's behavior is operating through his or her sales reps, not directly on clients. So, to achieve "modest" correlations in the .15 to .25 range is rather good.
In fact, it's actually much better than that. Consider that sales managers do not use just one competency at a time, which our bar graph might suggest. When they do their jobs, they employ all their competencies mixed together in a sort of behavioral soup. If you combine the competencies, the relationship is considerably more dramatic. When you combine all the significant behaviors defined by the sales manager's competencies (through a statistical technique called multiple regression), the correlation rises to .60.
This scattergram illustrates the strength of this relationship. In the graph, the squares represent each of the 100-plus district sales managers. They are positioned on the graph based on their combined "scores" on the competencies (the scale at the bottom of the graph) and the market share attained in their districts (the scale at the left). The sales managers tend to cluster rather tightly around the diagonal "line of best fit," indicating that the relationship between competencies and results is anything but random.
5. Taking It to the bank
The conclusion is inescapable: Competencies matter. Sales managers with higher levels of the critical competencies produce better results than sales manager with lower levels. Because the results in this illustration -- market share -- are readily convertible to dollars, we can take this analysis one step further and estimate the dollar value of raising or lowering the overall level of sales managers' competencies.
Although the actual dollar figures are client confidential, we can insert some hypothetical numbers for illustrative purposes. Suppose each percent of market share is worth $50 million and your company's market share currently is about 15%, as shown in the above scattergram. What would be the dollar value of raising the competency level of your sales managers by one standard deviation (from 0 to 1 on the scattergram's bottom scale)? Such an increase in competency level would translate into a 1.14% increase in market share, or $57 million.
Now, is it really possible to raise competency levels that much? And, if it were, how would you do it? Recall that, in our example, competencies were measured in a 360-feedback program. The program used a 5-point rating scale. One standard deviation is about a quarter of a point on that rating scale. So, raising the average rating of a group of 100-plus sales managers by one standard deviation -- one-quarter of a point on a 5-point rating scale -- seems doable.
How would you do it? There are several levers you can pull to raise competency levels. Possibly some combination of incentives, training and development of current sales managers, and focused selection of new sales managers would do the trick. These efforts, of course, would be focused on those competencies that you know contribute most to producing results. For example, you could give sales managers intensive training on goal setting, and evaluate and reward them on their ability to actively manage their teams.
6. Doing the analysis without quantifiable results
In this illustration, we have looked at the correlations between competency ratings and market share data for district sales managers. This enabled us to see how well the competencies defined for the sales manager position actually drive the key results for which this position is accountable. But can the same approach work for positions whose results are not so easily quantifiable?
In most performance management systems, even if employees' goals cannot be quantified as easily as sales managers' goals, employees are still held accountable for achieving results. They set goals at the beginning of a performance period and, in mutual agreement with their managers, agree on what results will be expected and how they will determine, at the end of the period, if those expectations are met. In their performance evaluations, employees are rated on their competencies and on achievement of their goals. By looking at the correlation of employees' competency ratings with their overall goal achievement, you can conduct the same type of analysis described above.
Conducting such an analysis is vital when you consider the consequences of continuing year after year with a competency model that is not properly tuned.
*Reprinted by permission