What is Competency-Based Management?

Competency-based management focuses on leading an organization through the business environment using core competencies. Core competencies represent the knowledge, skills or abilities a company uses to produce goods and services. These competencies are not easily duplicated by other businesses. The main tenets of competency-based management are defining core competencies within the company, getting top management to “buy in” to the programs and competencies that will lead the company, restructuring human resources around the competencies, and creating a mission statement based on this information.

Core competencies can be just about any process or operation a company uses on a repeated basis. Two main qualifications exist for core competencies. First, the competencies must be difficult for a competitor to replicate. Second, the company must be able to leverage these competencies into many different product lines or markets in the business environment. Examples include specialized production techniques, products that operate on a limited group of technology components, customer service practices, strategic relationships with other businesses or a research and development pipeline than consistently churns out new ideas or products for consumers.

To engage in competency-based management, owners and executives must conduct a thorough analysis to determine which competencies represent core competencies. Most companies will have three to five competencies they turn into their core group. Attempting to make every competency into a core competency can become burdensome. In most cases, it may even result in losing competencies to competitors, as it is difficult to maintain too many competencies over extended periods of time. After this definition stage, owners and executives must roll out the idea of competency-based management to top-level managers.

In management, old habits often die hard. Telling top managers they focus on a management perspective linked to core competencies can result in potentially negative feedback or reactions. Managers who soon discover their preferred competency is going to the back burner in favor of another competency may have initial resistance to the new competency-based management framework. Owners and managers must anticipate this and decide if a change is necessary. This is why restructuring human resources is necessary. The company must hire individuals who are willing to work under the constraints of the new management framework.

The final stage of competency-based management is to design, develop, and implement a mission statement based on the new core competencies. The mission statement is the overarching goal an organization wants its employees to follow. This statement flows from the top levels of the company down to the lowest levels of employees. Older organizations may need to redefine their mission statement to meet the few goals of core competencies.