Purpose of this letter:
To encourage a dialog about performance. We will address one or more of the elements of performance and stake out a position in this letter. If you have supportive comments, a different position, or a great example that you would like to share, please forward them to us by clicking on "E-mail Us" at the bottom of this newsletter.
How are competencies related to performance?
For a company to be successful it must first know, and be committed to, its purpose, then it must have the right collection of organizational competencies. Without the competencies, it’s "all show and no go" - just desire without the ability to make it happen. Having a correct, and constantly up-to-date set of organizational competencies is what it takes to thrive in today’s competitive marketplace.
Having the set of organizational competencies required to produce the products and/or services to serve our customers is the price of admission. Taking the next step by maintaining an effective focus on our competencies and knowing when and how to apply new competencies within our company is an important key to industry leadership and winning away market share from the competition.
What are competencies?
"Competent" is defined as possessing knowledge, judgment, strength or skill needed to perform an indicated action. Just as individuals are (or are not) competent, companies need to have a certain collection of functional capabilities, resources, methodologies, information, organizational structure and the like to perform well against the competition and accomplish their goals. Also, individuals within the company must have certain knowledge, skills and attributes in order to contribute to the performance. For example: a manufacturer of large engines must have the organizational knowledge and the metal manipulating equipment to build the engine as well as the talented and trained people to run the computer programmed lathes, assemble the engines and sell them to customers. "Organizational competencies" includes both the required individual talents and organizational capabilities.
Why do we need to be concerned about competencies?
When building a new company from scratch, organizational competencies are an obvious concern. Nothing exists. Every competency and function must be identified and obtained for that new organization to accomplish its purpose. Established companies often give inadequate attention to the topic. Attention shifts toward the day-to-day operations, with the assumption that all needed competencies are in place. Even the most successful companies need to be concerned about competencies heres why:
- New goals and objectives: [This is the easy one.] Too often those charged with accomplishing new goals and objectives assume that all of the organizational competencies needed to accomplish those goals and objectives are already in place. The norm is to make assignments without ever a thought of the possible need for new and/or different competencies and expect the company (and the people in the company, team, etc.) to get the job done. But a better way might be to pause and take the "half step" of checking to see if there might be a better way of accomplishing things. Ask yourself:
- Are there tasks involved that we have not done before?
- Are there technologies and/or methodologies out there that would improve our effectiveness and/or efficiency?
- Is this something that we have not done but some of our competitors have?
- Even if our competitors have not done it either, are there companies outside of our industry that have experience in this?
Then ask yourself the "buy or build" questions:
- Do we go outside of our organization to obtain this new competency (buy it)?
- If we decide to build the capability internally, is someone going to need some support in the way of acquiring new knowledge and/or cultivating some new skills?
- And, either way, will we have to cultivate some new attitudes within the company to ensure that this new competency is implemented properly and remains effective within the company?
- New technology: Even when a company is continuing to do the same old thing, it should always be concerned about quality and keeping the costs down and the profits up. With the ever increasing pace of change no company should assume that it continues to know all there is to know about the best way to do things. There may be new technologies and/or new methodologies, or processes for accomplishing what the company has been doing for years. The application of these new technologies, methods, processes, etc. may be able to improve the quality of products or reduce costs, or both. Maintaining a constant vigil for new things that can contribute to the effectiveness and efficiency of the business will keep the company competitive. Obtaining and applying the new technologies, etc. will require addressing the same questions contained in the list above.
- Growth and renewal: Every so often there is some type of major advancement or revolution within an industry. The companies that are responsible for these quantum leaps are those who are paying attention to the identification and application of new competencies in their business. Companies with growth objectives (significant or otherwise) need to be concerned with identifying and implementing the new competencies that will create new markets and/or increase market share by performing better than competitors. Companies that want to lead their industry, or be the one making the quantum leaps, or at least not wanting to be left behind, must cultivate the search for, and application of, new competencies as an organizational competency area. In other words, the company must be able to identify and build new competencies so well that it is constantly renewing itself, and, in the process, maintaining a position of leadership in its competitive marketplace.
There seem to be just over a dozen groups of competencies that most companies must provide for. Talent and resources will have to be applied to "institutionalize" each of these groups of organizational competencies. A set of competency groupings is suggested below:
- Direction and Strategy: In this group are organizational competencies that relate to the manner in which the strategic direction of the company is formulated and managed at the top levels of the company. Obviously, this competency group is very much related to customer satisfaction, decision support systems and a number of others described below.
- Customer Satisfaction: The organizational competencies that form this group relate to cultivating an intense customer focus in all facets and at all levels of the company. This group of competencies establishes and perpetuates a company mind set that is always focused on meeting the needs of our customers in ways that are perceived as adding more value than the competition.
- Growth and Renewal: There are a number of functions that are needed to pursue the companys desired growth strategy whether it be rapid, aggressive growth or not. Also, there is this issue of company renewal - keeping an eye on the continuing viability and freshness of the companys mission, products and services in light of emerging technologies and the changing needs of customers. Renewal is an easy competency group to forget when a company is doing well, and easier still to put aside when a company is not doing well. However, these are the competencies that make companies into long term industry leaders.
- Planning and Implementation: A companys abilities to collect and analyze data, and to formulate and evaluate alternative plans for accomplishing its chosen strategies are essential for continued success. So too are the companys abilities and capacities for actually implementing the selected plans successfully. Managing change and dealing with the organizational culture are also among the competencies in this group.
- Product Development: There is a wide range of specific organizational functions and competencies and individual attitudes and skills in this grouping. The accomplishment to which this group is related is that of creating the product development, first-to-market, capabilities needed for continuing success in a highly competitive marketplace.
- Marketing: This group is one that requires the coordination of many different interrelated organizational competencies. The accomplishment to which this group relates is to create, and aggressively pursue on a continuing basis, the organizational capability to be insightful and remarkably successful in the formulation, implementation and management of marketing and sales activities. Implied in this grouping is the notion that most sales activities should be pursuant to a carefully constructed marketing plan that strategically focuses the companys attention on the needs of the companys customers and the realities of the competitive marketplace for maximum profitability and growth.
- Production: This group of organizational competencies is the one that varies the most from company to company. It can also be the largest, most diverse group of competencies. Obviously, the competencies in this group will vary widely from industry to industry, but examples might include: manufacturing, service delivery, engineering, process design, methodology development, transportation, cost management, inventory, supply chain management and many more.
- Sales: Products and services need to be sold to customers and clients in order for a company to meet its revenue and profitability goals. Though linked strongly to customer satisfaction, product development, marketing and production; there are a number of organizational competencies that are specific to sales. There are also a number of sales-specific individual talents and skills that are required for success in a companys sales efforts.
- Decision Support Systems: Like administration and production support, this competency group supports almost all of the others. Proper planning, implementation, and continuing management of all company initiatives requires lots of good information provided to appropriate people on a timely basis in a very usable format. Identifying and gathering the correct information and creating a management information system that has these characteristics is the desired result of this competencies group.
- Communication: Another group of competencies that supports others is communication. The communication competencies provide the vehicles through which goals and strategies are made real to the work force, employees are empowered, ideas are traded, and the company maintains relationships with its customers, investors, and the public. Without these competencies there would be no commitment to the accomplishment of company goals and no individual commitment to personal efforts required to achieve those ultimate goals.
- Resource Management: Maybe not entirely separate from the production set of competencies are the competencies required to identify, obtain, deploy and utilize all of the resources that are needed by the company. The extent to which the company manages its resources (including its human capital) effectively and efficiently can constitute formidable competitive advantages.
- Fiscal Management: The procurement, leverage, management, and tracking of the financial resources of the company is a set of competencies essential to success and the accomplishment of company goals. Billing systems also support production and sales. And, the manner in which expenses are captured, tracked, allocated and paid are important for profitability and in the determination of incremental contribution of products and business units to the overall goals of the company.
- Administration and Production Support: This competency group includes a number of administrative systems and processes (e.g., human resources, compensation and benefits, training and education, legal, etc.) that impact and support the performance of individuals which, of course, aggregates to the performance of the company as a whole.
- Performance Improvement and Quality: This grouping is based on the recognition that continuous improvement is needed in the effectiveness and efficiency of all processes within the company. Without continuous improvement any company will be outstripped by its competitors. Administrative processes and production process are both addressed in this group, as are both the process aspects and the attitudinal shifts required to be successful in significantly improving the performance of the company.
The Dimensions of "Organizational Competencies:"
There are several dimensions or aspects to all organizational competencies. To tailor each competency in each of the groupings above for the success of a company, it is necessary to address each one of the aspects listed below:
- Functions: On a very grand scale manufacturing is a function, so is building maintenance, and maintaining a general accounts ledger. A company must have all of the functions that it needs to accomplish its goals. An example a single function related to the accomplishment of goals concerning growing a company might be that of identifying acquisition candidates. The trick is to ensure that all functions necessary to the accomplishment of company goals have provided for.
- Competencies: In order for a function to work well enough to enable a company to accomplish its goals it is necessary that there be some qualitative level of performance. The talents of the individual(s) performing the function are a related factor, but thats not the concern here. At issue is organizational competence. The company must posses a certain organizational knowledge and/or have in place processes or systems that are capable of producing the desired results. It is more than having manufacturing know-how or a consulting process; it is the companys ability to uniformly and consistently use those things to produce good results for the company and its customers and clients. This is far more than merely bringing in a person, or team, with the right knowledge and skills. The company must determine what level of qualitative competency it needs for each specific function to perform well enough to accomplish its goals.
- Capacities: Just having a function within a company, even a function that (through competence) works very well, is not enough. The organization must have the right amount of that function. Another way of stating this is that the organization must have the appropriate functional capacity in all areas to accomplish it mission. It is not enough for a small team in headquarters to be up and running and performing well if that same function is needed in all company locations around the globe. It is an issue of quantity. To ensure that an organization can accomplish its goals it must have the right quantity of all functions in place (organizational capacity). [Oh, by the way, these capacities need to be in the right places (geographical locations) too.]
- Cultural attributes: In addition to functions, an organization must have the right work environment to foster commitment among the work force to perform their functions with the right attitude. It is not enough to merely have a process in place that should lead to the development of new products. If you want to be a leader in introducing disruptive technologies the work environment must be one in which creativity and innovation is truly encouraged. People must feel like creativity is valued. Since real creativity usually means that for every good idea there are many more that arent so good, there must be some tolerance (maybe even encouragement) for ideas that never make it to production. These are examples of the characteristics of the work environment, or cultural attributes, that are required to support each competency required for a company to achieve its goals.
- Individual talent: In addition to the organizational side of having the right functions, competencies, capacities, and culture in place, it is also necessary to have talented individuals in the right positions to perform these functions well. Individual talent is usually evaluated in three dimensions:
- Knowledge: Does the individual bring with him or her the right collection of things stored in their head? This knowledge can come by education and/or experience. Examples include knowledge of the industry, and knowledge of a discipline (engineering, management, or financial accounting), etc.
- Skills: Does the individual have the right blend of intelligence, common sense, professional acumen, and other learned behaviors to apply his or her personal knowledge and use the organizational competencies to the accomplishment of their tasks? Are they skilled in their work? Can they get the job done?
- Attributes: Once in a while you encounter an individual who seems to have all of the correct knowledge and skills but whose performance is blocked by some personal attribute. Lack of commitment, lack of physical stamina or mental resilience, inability to work with people, failure to deal well with uncertainty are some examples. If these examples are stated in positive terms (rather than the negative) these are attributes that are desirable to have in the work force.
Dealing with competencies is the very functional side of organizational performance. The essence is specifying just exactly what it is that the company has to be able to do in order to accomplish its purpose. Then, the company must ensure that it has the know-how, support and talent in place to perform every single task that in some way contributes to the accomplishment of company goals.
In this and previous issues of this newsletter we have briefly discussed the importance of purpose, commitment, and competencies to improving performance. In future issues we will address each of the other major factors essential to performance. [View previous issues of our newsletter of a list of these factors.]
I hope you enjoy our newsletter. We always welcome your comments; let us hear from you.
Copyright 2001, Saville Consulting Service. All rights reserved. We encourage you to share this letter with friends and colleagues in whole or in part if copyright and attribution are always included.