Tuesday 19 February 2013

Core Competencies – Part 1 of 2

core competencies
Pop quiz:

Question 1: What are your organization’s core competencies? 
Question 2: Provide an example of the last time that you demonstrated all of them.

Were you able to answer these two questions?  If you are like employees of most organizations I come across, the answer is no.  Worse, I find the further away you are from the leadership team, the less likely you are able to answer these two questions.  Bear with me for a few paragraphs while I explain where organizations have gone wrong, and how we make it better.

In the Beginning
My first exposure to core competencies, like many others, is through the theories proposed by C.K. Pralahad and Gary Hamel in “The Core Competence of the Corporation.”  Pralahad and Hamel introduce core competencies as those capabilities that differentiate a business from its competitors – the things that make it unique and give it a competitive advantage.  Some refer to this as a Core Organizational Competency.

They proposed three tests to validate that the competencies are core to the business:
  1. They must provide the opportunity to access diverse markets.
  2. They must add value to the end product.
  3. They must be difficult to imitate by the competition.
The authors are careful to explain that competence and performance are two very different things.  For example, Google and Microsoft have very powerful search engines.  However, Google’s core competence lies in their ability to sell your search information to advertisers (Edelman & Eisenmann, 2011).  Both may perform well, however Google has a strong core competence that meets all of the tests listed above.

Core Competence and Competency-based HR Management
So how does Pralahad and Hamel’s definition of core competence fit into competency-based management (CBM)? 

At CompetencyCore.com, we define competencies, the central element to CBM, as the observable abilities, skills, knowledge, motivations or traits, defined in terms of the behaviors, needed for successful job performance.  There are however many different types of competencies, for example general (behavioral/soft skills), technical (hard skills) and leadership.  Together, these form a dictionary of competencies that an organization can use.  In addition, an organization should also select a specific number of competencies from their dictionary that are core.

We use the term core competency to denote those competencies that are fundamental to organizational success; tied to the vision, values and core business; and needed by every employee.  They are the competencies that appear on everyone’s job competency profile, and are incorporated into every competency-based HR activity.  So where Pralahad and Hamel have defined CORPORATE or ORGANIZATIONAL core competencies, we have provided a definition for core EMPLOYEE competencies.

On the surface, the two definitions for core competencies might seem completely different; however, I believe that the two definitions work hand in hand.  For an organization to truly succeed they must find those unique characteristics that allow it to pass Pralahad and Hamel’s three tests.  And in order to take action and actually leverage those abilities, they must be demonstrated by everyone in the organization and therefore must be integrated into each HR function within the organization.

Let’s go back to our Google example mentioned earlier.  Here’s how Google’s core competency might be represented by the two different definitions:

Core Organizational CompetencyCore Employee Competencies
Leveraging personal and search information for sale to advertisersInformation Gathering and Processing: Locating and collecting data from appropriate sources and analyzing it to prepare meaningful and concise reports that summarize the information.

Business Perspective: Using an understanding of business issues, processes and outcomes to enhance business performance.

Resource Management:  Manages resources (financial, physical and information) to achieve planned goals

So by taking their core organizational competency and mapping it to specific employee competencies we have made the logical and important link between the two definitions of core competency. Using this strategy, each employee in the organization can be selected, evaluated and developed based on these core employee competencies; therefore, building a strong employee base equipped to support the achievement of the core organizational competency.

So to sum up, your organization should be able to define the core organizational competencies that meet Pralahad and Hamel’s three tests and that are fundamental to achieving success.  These should be linked to the individual core competencies that each employee must display to achieve the organization’s vision and values, and deliver on the core organizational competencies.

For the rest of this post I will refer to both types of core competencies, since both should be defined together, used together and meet all of the tests and defined above.

Where it all Went Wrong
Although I am a progeny of a business school, I tend to be a cynic of management cure-all theories.  Much of what I find on the “Business” shelves of the local bookstore, I liken to snake oil.  However, much of the error in business school theory lies in the application.  Leaders tend to read the latest and greatest theory and haphazardly apply it to their organization seeking a short-term fix to whatever the organizational ailment might be. 

I’ve already discussed how some organizations have lost sight of their competency initiatives, and thus their laser-focus on core competencies.  The issue is not due to a failure of the theory, but its application.  Few organizations of late have focused, and identified and leveraged their core competencies (think of Apple1), while others have failed (I will refrain from pointing fingers here, but there are more than a handful that come to mind). 

Most organizations that I have encountered have identified some form of core competencies, but many easily fail Palahad and Hamel’s test and therefore have failed to have any impact on the organizations.  Where most fail is test three.  If I had a nickel for every organization I’ve worked with who has at least one of Teamwork, Communication and Customer Service in their core competencies... well, I think you know where this is going.

Check back later this week for the Part 2 in this series to learn more about how effectively applying core competencies can add significant value to an organization. We will examine some common myths related to core competencies as well as a step by step process to ensure successful and effective implementation.

1 http://techland.time.com/2012/05/07/six-reasons-why-apple-is-successful/  (Point 3)

HRSG is a leader in Competency Development and Competency-based Talent Management. Contact us today to find out how we can help you.

Want to learn more? Competency-based Talent Management, or CbTM, is the best practice for defining job requirements and building effective HR programs to develop skilled, engaged and productive workforces. Download this Best Practice Guide to learn how competencies can increase workforce effectiveness and improve business practices.

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