Popularity of Competency Models

Introduction

This chapter sets the stage for what businesses could expect when adopting a competency-based approach, including competency models and competency-based performance management. The chapter discusses the popularity of competency models and their positive effect on industry when used as a strategic tool. When businesses select competency-based approaches, they can expect overall business performance improvement. The chapter provides a tone that readers could expect to observe throughout the discussions (see Table 2 Takeaways from the Chapter).

Competency-based performance management is an effective tool for achieving organizational results when considering their utility for managing organizational knowledge and monitoring organizational behaviors of performance. Organizational competencies or core competencies utilized in competency models identify the strategic organizational direction for guiding an organization and employees (Prahalad & Hamel, 1990; Teece et al., 1997; Teece, 2018).¹ Such performance management leads to the achievement of business outcomes. Competency-based performance management is more effective than traditional performance management systems and offers opportunities for skill development and organizational capacity building.

Businesses in today's economy have experienced changes brought by multiple eras, from the industrial age to the digital age to the gig economy to the era combining the features of the preceding ones with knowledge management in their efforts to gain a competitive advantage. Therefore, businesses are becoming knowledge-based organizations and organizations that approach their resources from a competency-based perspective.

Knowledge allows organizations to maximize business resources and assets through control and deployment. Therefore, knowledge and the management of its business knowledge has been a driver for businesses in today’s marketplace with businesses’ ability to effectively plan, coordinate, disseminate and acquire knowledge (Omotayo, 2015). All are organizational factors critical for ensuring organizational readiness and competitiveness for their short and long-term business viability (Foss & Pedersen, 2002; Grant, 1996). Combining knowledge management and competency-based management in a single system allows businesses to meet those critical factors. Knowledge management creates activities for which learning occurs and provides knowledge through acquisitions beneficial to the employees and organization. The theory of knowledge and the resource-based view of this concept in chapter 2 is about the practical nature of knowledge, precisely what it is, and how organizations and businesses should use it. Therefore, it addresses how businesses can create knowledge management environments and integrate competency models for effectiveness.

Organizational competencies are the strategic direction that guides the employees within the competency frameworks of an organization's strategic approach. Competency models provide the mechanisms for the factors of knowledge management to occur in controlled, effective, and collaborative ways. Competency models allow for the sharing of knowledge and the building of organizational capacity. According to Al-Haddad and Kotnour (2015), positive outcomes are expected when incorporating knowledge with any type of change management. Best-in-class businesses (in terms of performance and effectiveness) are those that have competency-based management systems. They are businesses that also incorporate knowledge management systems and competency-based approaches to managing for success effectively.

As pointed to in the Preface, the discussions will examine how to align business processes and procedures, management systems, and business objectives and goals under competency models. Businesses are committed to improving business practices of performance management, who wish to achieve their business outcome, and who wish to have consequences related to tangible business outcomes rather than business routines. Here is the primary question that must be asked:

• Are the organizations equipped with performance systems achieving the desired outcomes and making a positive difference in their organizational performance and effectiveness?