C H A P T E R 4

Competency-Based HR Planning

Human resource planning is a necessary first step for aligning HR with

the organization’s strategic goals and objectives. HR planning assesses
the supply of existing human talent, determines current needs, and fore-
casts future demand for talent in the organization. By comparing cur-
rent supply to both current need and future demand, the HR profes-
sional can discern the gap between the organization’s people and the
competencies needed to achieve the organization’s strategic goals and
objectives in the present and the future. These gaps guide the develop-
ment and performance of HR department activities as well as suggest
the HR responsibilities of operating managers.
This chapter provides an overview of HR planning and addresses
the following key questions:
• What is HR planning?
• How is HR planning traditionally carried out?
• How can HR planning become competency based?
• What are the advantages and challenges of a competency-based
approach to HR planning?

61
62 Competency-Based Human Resource Management

• When should HR planning be competency based, and when should

it be handled traditionally?
• What model can guide competency-based HR planning, and how is
it implemented?
By addressing these questions, this chapter explains how traditional
HR planning efforts can be transformed through a competency-based
approach. Such an approach is not always appropriate, however, and we
will review situations in which a change is suitable and what it involves.

HR Planning Defined
HR planning has traditionally been defined as “the process of anticipat-
ing and making provision for the movement of people into, within, and
out of an organization” (Sherman, Bohlander, & Snell, 1998, p. 124). The
purpose of HR planning is to effectively utilize the resources represented
by these people in order to realize the organization’s goals.
The traditional view of HR planning is that the organization should
forecast, based on history, the head count needed to replace the people
who leave the organization. HR planning as traditionally practiced
focuses attention on quantity, the number of people, rather than the
quality, or underlying characteristics (that is, the talents or competen-
cies), of people.
In a different sense, it is also possible to understand HR planning as
the strategic business plan that guides the HR department or function,
which clarifies the mission and purpose of the department or function,
its goals and objectives, current strengths and weaknesses, possible
threats and opportunities, and long-term strategy (Rothwell & Kazanas,
2003). HR planning serves as a guide for an organization’s HR policies,
programs, and procedures; it is an important part of the organization’s
overall business plan. Combining strategy and HR planning creates a
greater capacity for change (Ulrich 1992). The challenge, however, as
Brockbank (1999, in Kesler, 2000) pointed out, continues to be identify-
ing ways in which to link HR plans and business strategy.
Interest in HR planning has increased greatly in recent years.
Rothwell and Sredl (2000) suggest reasons such as the importance of
people and their competencies to an organization, challenges created as
 Competency-Based HR Planning 63

people affect plans that apply to them; and the wide effect of HR plans
on the entire organization. HR planning cannot effectively be accom-
plished if it is aligned or linked with the business, yet done in isolation
as separate human resource efforts (Walker, 1994). Widespread down-
sizing has prompted growing attention to the qualitative difference in
people, since some people are, for instance, simply more creative or pro-
ductive than others.
It should be emphasized, however, that HR leadership is essential no
matter how HR planning is defined. The top HR official, usually a vice
president, plays a role in ensuring that the organization adopts a pro-
active, rather than a reactive, stance in winning the war for talent (Roth-
well, Prescott, & Taylor, 1998). Competency-based HR planning can play
an important part in giving the HR leader what he or she needs in order
to exert that important leadership role.

Traditional HR Planning
HR planning has its roots in military personnel planning. Initially, the
U.S. military faced the challenge of ensuring stable staffing levels as
some people concluded their tours of duty and left the military and oth-
ers advanced through the ranks. The goal at that time was to determine
the quantity of people sufficient to meet replacement needs and thereby
maintain staffing levels in different job categories, at different levels of
the organization, and in different locations.
Defense contractors adopted this military focus on head count.
They carried over the philosophy of equating head count to production
levels and, in turn, linking production levels to competitive success as
measured by achievement of the organization’s measurable strategic
goals and objectives. This approach seemed to work well until the 1960s.
At that time, three trends began to emerge that affected the success of
traditional HR planning:
1. Changing technology: Technology is continuously changing.
Organizations often undergo technological change in the hope of
achieving breakthroughs in productivity. With cutting-edge tech-
nology, fewer people may be able to produce the same or greater
outputs as were produced with traditional means.
64 Competency-Based Human Resource Management

2. Decreasing correlation of head count to outputs and success: A

widening gap began to develop between the number of people
employed by an organization, the output levels achieved by those
people, and the organization’s competitive success. There has never
been an easy or particularly effective way to correlate the organiza-
tion’s head count with productivity and, in turn, with competitive
success in a dynamic marketplace.
3. Increasing inaccuracy of labor forecasts: Labor forecasts based on
historical ratios between head count and competitive success have
been growing less accurate. Traditional forecasting bases predictions
of the future on the past or present. But as most businesspeople are
now keenly aware, tomorrow’s workplace may be radically different
from the workplaces of yesterday and today. We should note, too,
that individuals are not machines. One person’s production level is
not necessarily the same as another’s. Hence, historical forecasts not
only are often useless in predicting outputs or competitive success
but may mislead decision makers by presenting them with inaccu-
rate conclusions.1
The traditional approach to HR planning begins with an assessment
of the current supply of people at each level and of the current demand
at each level and then proceeds to balancing supply and demand. The
HR function performs balancing through such actions as recruitment,
hiring, development, and reduction. The traditional focus of HR plan-
ning, however, has been on taking action with people rather than on
achieving results.
To make the point more dramatically, and perhaps controversially,
many organizations operate as if they were simply recruiting to “fill
slots” or maintain the head count as vacancies occur. Recruiters concen-
trate on sourcing people whose perceived competencies appear to match
the qualifications in job specifications and whose work experience and
education make them appear qualified to carry out the work activities
listed on a job description for a targeted job opening.

Making HR Planning Competency Based

Transforming HR planning to a competency basis requires a major par-
adigm shift in the way HR planners think about organizations and peo-
 Competency-Based HR Planning 65

ple. They must rethink what they are doing, why they are doing it, and
how they should do it.
Putting a competency-based HR planning system in place begins
with building the awareness of the organization’s decision makers. Since
they control the organization’s resources, they must be convinced that
the benefits of competency-based HR planning will outweigh the costs
associated with the change. Often, that requires a simple leap of faith.
After all, if Edison had waited to see a lightbulb before he invented one,
we would all still be in the dark. If decision makers demand solid cost-
benefit projections or evidence that other organizations achieved com-
petitive success by moving to competency-based HR planning, then the
effort may be dead. There are few published case studies of organiza-
tions that achieved this switchover for all aspects of HR. (And those who
have them would have a valuable secret weapon they would not be will-
ing to share.)
As a part of the larger ACA research study on competency-based
human resource management practices, 60 organizations with and in
the process of developing staffing applications that were competency
based provided details related to their practices on a separate question-
naire. Asked if they had a formal workforce planning process directed
toward organizational needs, assessing, forecasting, and deploying the
workforce, 59% indicated that such a planning process was in place. Of
those who used formal planning processes, 69% responded that compe-
tencies were used in making decisions associated with the planning
(Raising the Bar, 1996).
In a study conducted by Schoonover, Schoonover, Nemerov, and
Ehly (2000), 29% of the 300 respondents rated the use of competencies
in their strategic HR planning as either “effective” or “very effective”;
however, there was a correlation between the level of sophistication of
the implementers and the level of perceived effectiveness.
Competency-based HR planning requires, as a first step, that deci-
sion makers articulate the organization’s strategic goals or business
objectives. Every organization exists for at least one purpose. For in-
stance, a business exists to make a profit; a government agency exists to
meet a social need; and a charitable organization exists to offer services
that other organizations do not offer. The organization’s goals or objec-
tives must be translated into desired organizational outputs or results.
66 Competency-Based Human Resource Management

Workers support the achievement of their organization’s strategic

goals or business objectives. Competency-based HR planning requires
practitioners to determine the quantity and quality of work that must be
performed to support achievement of their organization’s strategic goals
or business objectives, the conditions and methods of work perfor-
mance, who should perform it, and what worker characteristics will re-
sult in successful performance.
To move to a competency-driven HR planning process, planners
must establish and maintain a human resource management system
in which to store, update, and, most important, instantaneously ac-
cess information about workers’ competencies. An information man-
agement system must display clearly the expertise available in the
organization. It should go beyond the old-style “skill inventory” and
become a “competency inventory” that catalogs and enables easy
access to what people can do and the results they can achieve, not, for
example, as in many skill inventories, their educational credentials.
After all, educational credentials may not be directly related to orga-
nizational results.
Companies are developing methods of tracking competencies and
then using the information and models created with software programs
and human capital development applications, spreadsheets, and even
paper when making important business decisions involving HR func-
tions such as recruiting, training, and succession planning. Virtual Inc.,
a small integrated management-marketing firm based in Wakefield,
Massachusetts, developed a matrix of skills and competencies to assist in
hiring and training to meet the specific and continuously changing
needs of the organization (Greengard, 2001).
After decision makers determine the organization’s required com-
petencies, they must compare their needs to the current workforce and
develop a plan to acquire the competencies that are lacking (Gendron,
1996). PepsiCo India uses a model that tracks the competencies for each
position through a period of 3 years, so that individuals who are hired
have the needed competencies at the time of hiring, but also have the
ability to acquire the competencies that will likely define their positions
in the future (Chowdhury, 1999).
 Competency-Based HR Planning 67

The Advantages and Challenges of

Competency-Based HR Planning
There are several key advantages to creating and using a competency-
based approach to HR planning.
First, competencies are the most important foundational require-
ment for human performance. It thus makes increasing sense in today’s
business world to think in terms of competencies—which speak to a
qualitative view of talent—rather than in terms of head count or work
activities. People are unique. People’s talents vary, and some people are
simply more talented at some things than other people. It makes sense
for the decision makers in an organization to know where to find that
unique talent when they need it on short notice to address real-time,
unique business needs or problems.
Second, a competency-based approach improves the specificity of
HR planning. Quantitative approaches, based on head count, do not
direct attention to the sought-after results. Quantitative approaches
focus on the accoutrements associated with ability—academic degrees,
certifications, credits, or job titles and responsibilities—not on the
measurable results people have achieved or have the potential to achieve
in the future. Form 2 illustrates the traditional information included in
a skill inventory. Compare that to the information included in a compe-
tency inventory, as shown in Form 3.
Of course, when an organization’s decision makers decide to pursue a
competency-based approach to HR planning, they face unique challenges.
First, leaders must understand the costs and benefits associated with
implementing and maintaining a competency-based HR system. They
will usually want to know what immediate payoffs or benefits can be
derived from a competency-based approach that could not be obtained
from a traditional one.
Second, leaders must commit the resources needed to identify the
organization’s strategic objectives, outputs, or results and the outputs,
results, characteristics, work activities, and tasks performed by its workers.
That usually requires devoting staff time to the effort. External consulting
may also be necessary.
68 Competency-Based Human Resource Management

Form 2: Traditional Worker Skills Inventory Questionnaire

Employee’s name

Employee’s work location

Current position

Current job title

Telephone number

E-mail address

PART I: WORK DUTIES AND RESPONSIBILITIES

Job title

Duties

Date position held (from/to)

PART II: EDUCATION AND TRAINING

Education and training

completed (summarize
briefly here)

High school

Undergraduate education,
college or university

Degree earned

Majors

Minors

Other education or training

completed (list all)
 Competency-Based HR Planning 69

Form 2: Traditional Worker Skills Inventory Questionnaire (continued)

PART III: PROFESSIONAL CERTIFICATIONS

Certifications held

Certifying body

Date granted

Expiration date

State

County

City

Licenses held

Licensing body

State

County

City

PART IV: CAREER OBJECTIVES

Describe your career objectives below:

HR planners and organization leaders will have to think about HR

planning in new ways. They must make the transition from a strictly quan-
titative approach to one that incorporates qualitative measures of talent.
70 Competency-Based Human Resource Management

Form 3: Worker Competency Inventory Questionnaire

Employee’s name

Employee’s work location

Current position

Current job title

Telephone number

E-mail address

PART I: BASIC SKILLS COMPETENCIES

Competency Strength Rating Context Indicator Duration

1. Reading
comprehension

2. Reading speed

3. Reading accuracy

4. Sentence
composition

5. Operation of a
six-function
calculator

6. Mathematical
analysis (three-
step situations)

Deciding on Competency-Based or
Traditional HR Planning
Before the leaders of an organization commit to competency-based HR
planning, they must weigh a number of issues, but they do not have to
make an all-or-nothing decision. They may decide to use a competency-
based approach to HR planning in some parts or at some levels of the
organization, while they may continue to use a traditional approach in
other parts of the organization.
 Competency-Based HR Planning 71

Form 3: Worker Competency Inventory Questionnaire (continued)

PART II: OTHER COMPETENCIES OF EMPLOYEE

Competency Strength Rating Context Indicator Duration

1.

2.

3.

4.

5.

6.

PART III: CERTIFICATIONS HELD

Certifying body

Date granted

Expiration date

State

County

City

PART IV: LICENSES HELD

Licensing body

Date granted

Expiration date

State

County

City
72 Competency-Based Human Resource Management

Form 3: Worker Competency Inventory Questionnaire (continued)

PART V: PERSONAL FUNCTIONING COMPETENCIES

Competency Strength Rating Context Indicator Duration

1. Flexibility

2. Team leadership

3. Work group
leadership

4. Team
membership

5. Motivation to
achieve

6. Interpersonal
functioning

PART VI: TECHNICAL COMPETENCIES

Competency Strength Rating Context Indicator Duration

1. Laboratory
technique in
microbiology

2. Laboratory
safety
awareness

3. Laboratory
safety
knowledge

4. Laboratory
safety practice

5. Electrical
system design

6. Electrical
system
troubleshooting
 Competency-Based HR Planning 73

Form 3: Worker Competency Inventory Questionnaire (continued)

LIST THE OUTPUTS OR RESULTS THAT YOU PRODUCE

1.

2.

3.

4.

5.

LIST 10 OR FEWER WORK TASKS YOU COMPLETE

TO PRODUCE OUTPUTS OR RESULTS

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Competency-based HR planning is advisable when the organization’s

leaders are willing to experiment with innovative or new methods. This
may be entirely appropriate when qualitative approaches would be partic-
ularly helpful in meeting the need for talent. For instance, in a research
and development department, individual talents may be far more impor-
tant than head count. In such a situation, the potential payoffs of compe-
tency-based HR planning may outweigh the sizable costs of installing it.
74 Competency-Based Human Resource Management

An organization that is competing in a rapidly changing environ-

ment may have the most need for competency-based HR planning. A
high-tech firm such as Microsoft or Intel is highly dependent on first-
rate talent that can be found and used quickly and appropriately.
Qualitative responses to competitive challenges must be mobilized
quickly to head off disaster. Indeed, a competency-based HR planning
approach may be more appropriate than a traditional approach that
focuses on head count and relies on superficial approximations of talent
or other indicators of accomplishment that are not clearly linked to the
past or potential work results of individuals.
Competency-based HR planning may be more appropriate in an
organization with a large population of professional, technical, or man-
agerial employees. In those work categories, the quantity of the work-
force is far less important than the quality of its available talent.
Qualitative differences in talents such as interpersonal skill, emotional
intelligence, and other, less tangible associations with creative ability
may be key to success.
In organizations or departments that must assemble special teams
to work on ill-defined and extremely difficult problems, a competency-
based HR planning approach may be far more suitable to long-term
results. For instance, in a high-end consulting firm, success may depend
on the organization’s ability to field a dream team of consultants on
short notice to meet a unique challenge. Locating a certain number of
consultants is less important than finding the most effective team of
consultants who can work together to help the client solve a problem.
Organizations that rely on matrix management may benefit from
a competency-based HR planning approach. Matrix management en-
courages cross-functional sharing and is somewhat complex in nature.
In effect, leadership is diffuse. One manager may be responsible for a
project, while another is responsible for daily supervision. Selecting and
maintaining the right mix of leadership talent is essential to nurturing
future talent.
A competency-based approach may also be appropriate for organi-
zations that rely heavily on abstract competencies, such as interpersonal
skill or achievement motivation. In a sales organization, for example,
work results may hinge on a salesperson’s ability to consult with clients
and achieve complex solutions to difficult problems. Making the sale
 Competency-Based HR Planning 75

may require substantial industry knowledge. In that case, a competency-

based HR planning approach would be preferable to a traditional
approach.
But not all organizations are appropriate environments for compe-
tency-based HR planning. The success of a competency-based approach
requires leaders who are willing to add a qualitative aspect to their quan-
titative mind-sets and are open to rethinking what they mean by “per-
formance,” especially when the work to be accomplished is strategic to
the organization’s success. Decision makers also need to adopt an under-
standing of competencies. Those who believe that competencies pertain
only to knowledge components would not be adequate advocates for a
competency-based HR planning system.
Creating, implementing, and maintaining a competency-based HR
planning system each requires resources, and leaders must be willing to
make the necessary sustained commitment. Of course, leaders in some
organizations may prefer to use a competency-based HR planning
approach selectively. In departments that perform more routine or
repetitive work that is not of strategic importance, a traditional
approach may continue to be used. The circumstances in each organiza-
tion will usually provide clues to how or if competency-based HR plan-
ning should be used.

A Model for Competency-Based HR Planning

What model might be helpful in guiding competency-based HR plan-
ning? This section addresses that question. Consult the model in Figure
3; then read about each step in the following subsections.

Implementing the Model

The model shown in Figure 3 should generally lend itself to step-by-step
implementation. There is one exception: If an organization’s decision
makers do not use a formal approach to HR planning, they may need a
deeper understanding of the processes involved in implementing each
step. Experienced HR planners will already know most of the following
information. However, they may need to be briefed on the need to shift
from a purely quantitative to the combined quantitative and qualitative
approach utilized in competency-based HR planning.
76 Competency-Based Human Resource Management

Figure 3: Implementing Competency-Based HR Planning

Step 1
Create a system development plan.

Step 2
Deliver senior management briefing.

Step 3
Brief operations managers and users.

Step 4
Identify the organization’s strategic goals, business objectives,
and outputs or results.

Step 5
Identify tasks and work activities.

Step 6
Identify competencies.

Step 7
Determine and evaluate competency supply and demand.

Step 8
Pilot test the HR planning system.

Step 1: Create a system development plan

A plan is necessary for transforming a traditional HR planning system
to a competency-based approach. A well-thought-out system develop-
ment plan is an essential starting point.
Sometimes practitioners do not recognize the need to put a
macrolevel plan in place before briefing the organization’s leaders to gain
support for the transformation. In other words, there must be a plan in
order to plan. Senior leaders need to know the work, time, and resources
they must commit in order to achieve the project’s objectives. The
remaining steps in this model provide the framework for the macrolevel
 Competency-Based HR Planning 77

plan, and the plan represents the major content for the senior leadership
briefing session. As soon as leaders understand and endorse the ap-
proach, HR planners can proceed to later steps of the model.
As with any well-conceived project, the objectives must be clearly
stated and effectively communicated from inception. HR planners may
begin to establish the project objectives by answering questions such as
the following:
• Will the system accommodate HR planning for all work units in the
organization or for only certain ones (for example, finance, engi-
neering, research, distribution)?
• What will be the early, intermediate, and long-term outputs
and benefits of creating and maintaining a competency-based HR
planning system?
• Is the purpose of the new HR planning system to ensure adequate
human resources only for specific projects, development teams, and
so forth, or will it address organization-wide competency needs?
• What HR planning life cycle will the new or reinvented system
accommodate?
• How much emphasis will the system place on head count, and how
much on competencies?
Other system design issues and their subsequent objectives should
also be raised at the outset of project planning. For instance, will deci-
sion makers also want to establish a competency inventory system as
part of the project?
The project manager must also accurately assess the organization’s
environment and develop an estimate of the organization’s ability to cre-
ate, implement, and maintain the system. Answers to questions such as
the following may be useful:
• Do senior and other key leaders have a clear conception of the orga-
nization’s short- and long-term strategic goals or business objec-
tives? Can they name the measurable outputs or results that lead to
the organization’s success? Do members of the leadership team
agree on these items? If not, can they reach agreement on these
issues, which affect the direction of the HR planning system?
78 Competency-Based Human Resource Management

• Are workers’ outputs or results clearly identified through a formal

job analysis process? Have worker competencies been identified for
key organizational results areas? Is performance management based
on competencies? What other roles do competencies play in the
organization? If work tasks and competencies are not now available
or understood by key leaders, is the transition possible, and how
long will it take?
• Are the necessary sustainable human capabilities available—
internally or externally—to ensure the creation, implementation,
and maintenance of the system?
• Does the organization have the management information resources
needed to support a competency-based HR planning system? Plan-
ning to meet the new system’s information management needs
must be a high priority at the earliest stages of development. If the
organization’s management information staff cannot provide the
needed support, use of other resources (for example, software or
contractors) must be assured.
• Is a correct mix of human capabilities available to the project manager
for as long as is necessary to ensure the system’s long-term viability?
• Will resources be available to complete the collection and analyses
that produce the needed system inputs, such as data on work tasks,
competencies, outputs, or results?
• What is the probability that the persons assigned to work on the
project can show immediate results that are important to the orga-
nization’s senior leaders?
A project plan should be straightforward and easily understood. You
might want to consider using the following guidelines for preparing the
microlevel project plan:
• Begin with identifying the project tasks, which are the actions that
must be taken in order to achieve the project objectives. In the first
draft plan, which becomes the foundation for the leadership briefing
session, these actions can be broadly stated. Later, they must be made
sufficiently detailed and measurable to help guide project operations.
• Specify the resources required to complete each project task.
 Competency-Based HR Planning 79

• Clarify the specific output or result expected from each project

action.
• Source assistance from other organizations or persons as needed for
successful completion of tasks.
• Set a targeted completion date for each action step.
Both macrolevel and microlevel system plans are essential for
formulating and implementing a competency-based HR planning
approach. This investment is well worth the cost involved.

Step 2: Deliver senior management briefing

Although each organizational setting is unique, the project sponsor
might find it necessary to include the following key objectives in a sen-
ior management briefing session on competency-based HR planning. If
the organization has an established HR planning system, the briefing
should emphasize the benefits of reinventing the existing system. If the
organization has no formalized HR planning, the briefing should begin
with an explanation of what it is, how organizations are using it, and
the benefits those organizations derive from it. From there, it will be
possible to compare and contrast the traditional HR planning approach
to a competency-based approach.
The following list of topics can help to guide a senior management
briefing:

• What is HR planning, and how can it benefit the organization?

• How is HR planning carried out?
• What resources are needed to establish and maintain an HR plan-
ning system?
• Why are planning systems based on head count no longer adequate
to ensure many organizations the talent they need for success?
• How are the terms job/work competence and competency defined
operationally for employees and the organization?
• What is competency-based HR planning, and how does it differ
from traditional HR planning?
• What are the benefits to the organization of using competency-
based HR planning?
80 Competency-Based Human Resource Management

• What general project plan will help the organization develop, imple-
ment, and maintain a competency-based HR planning system?
• What are the costs involved in implementing this plan? Do the costs
outweigh the benefits of having the system in place and successfully
running?
• What applications within the organization immediately come to
mind as initial outputs of the competency-based HR planning sys-
tem described earlier? What strategic impact will these results have
on the organization?
• Do decision makers have any questions or comments about chang-
ing to a competency-based HR planning approach?
• Are the organization’s leaders willing to support a pilot test of a
competency-based system at this time? (Note: The briefing facilita-
tor should insist that senior leaders give the project manager a “go”
or “no go” decision at this stage.)
Next steps in the briefing might include the following:

• Summarize the briefing content and leaders’ agreements up to this

point. On an easel chart page, write the key points and agreements,
the specific actions each party will take, and the resources that will
be assigned to achieve the project objectives.
• Establish a specific target completion date for each project stage or
deliverable.
• Establish guidelines for cross-communication among project par-
ticipants.
• Set a date for reviewing project progress with the leaders or man-
agement group.
It is most important that the project manager establish open com-
munication with the organization’s leaders and other key stakeholders
who are involved with the project. Involvement encourages commit-
ment, which is necessary for project success. Thank the participants for
their attention, time, and support.

Step 3: Brief operations managers and users

The objective of this step is to ensure that those who will be most af-
fected by the new HR planning system—the users or customers of the
 Competency-Based HR Planning 81

HR planning system—are actively engaged in planning it. Human

resource management systems must always be customer focused, and
customers of the HR planning system must be involved in planning and
implementing it.
We suggest that this briefing, which covers many of the same issues
presented to senior managers, take place shortly after their briefing, if
organizational circumstances permit. The major reason for this is that
leadership decisions regarding the project will determine the informa-
tion presented to managers and other users.
We suggest that this briefing session address issues such as the
following:
• What is HR planning, and how can it benefit the organization?
• How is HR planning carried out?
• Why are HR planning systems based on head count no longer suffi-
cient to ensure certain organizations the talent they need for success?
• How are the terms job/work competence and competency defined?
• What is competency-based HR planning, and how does it differ
from traditional HR planning?
• What are the benefits to the organization and to users when a com-
petency-based HR planning approach is used?
• What general project plan will help the organization develop, imple-
ment, and maintain a competency-based HR planning system? This
plan should contain an overview of the key project steps, with special
emphasis on the need to complete work analysis if that information is
not yet available. It is essential that system users understand that state-
ments of the outputs or results, work tasks, and the required compe-
tencies are prerequisites to competency-based HR planning. Their
support in securing these components is critical to project success.
• What resources are needed for implementing the plan? What
resources may be needed from participants to create, implement,
and maintain the system?
• What applications within the organization immediately come to
mind as initial outputs of the competency-based HR planning sys-
tem described earlier? What strategic impact will these results have
on the organization?
82 Competency-Based Human Resource Management

• What questions or comments do the participants have about what

they heard about the project plan?
• Are participants willing to support a pilot test of a competency-
based HR system in their work units as senior leaders have deter-
mined? (Note: At this time, the briefing facilitator should commu-
nicate the decisions of senior managers regarding their participation
if he or she has not already done so.)
Next steps for this briefing might include the following:

• Summarize the briefing content and participants’ agreements up to

this point. On an easel chart page, write the key points and agree-
ments, the specific actions each party will take, and the resources
that will be assigned to achieve the project objectives.
• Establish a specific target completion date for each project stage or
deliverable, per the preferences of senior leaders.
• Establish guidelines for cross-communication among the partici-
pants and with the project manager, per agreements with senior
leaders.
• Set a date for reviewing project progress with the participants and
confirm other dates or commitments as appropriate.
• Be sure to thank the participants for their attention, time, and
support.

Step 4: Identify the organization’s strategic goals,

business objectives, and outputs or results
Many people equate HR planning to the related process of organiza-
tional strategic planning. Consequently, it is easy to make the case that
HR planning must be done with an awareness of where the organization
is today and where it hopes to be in the future. Setting business objec-
tives in today’s global business environment is like looking into a crystal
ball and then throwing the dice. Predictions are often unreliable and
may be greatly influenced by chance events. That points to the need for
flexible HR planning that can readily accommodate change.
The organization’s strategic objectives and desired results are the
foundation of HR planning. Analysis of the organization’s results deter-
mines the results workers should produce for internal and external cus-
 Competency-Based HR Planning 83

tomers. How specifically should those results be expressed? That

depends on several factors. The size of the organization is one consider-
ation. Another is the number of results provided to external and inter-
nal customers. The practitioner must carefully manage the degree of
grading in the lists of results so that they will be useful in later stages of
the project.
These lists should give HR planners (and project managers) a deeper
understanding of the resources necessary to achieve project results. HR
planners may wish to bear in mind that all workers in an organization are
“strategic” relative to their contributions to the organization’s strategic
success. If the contribution is assessed as inadequate, managers should
seriously consider whether the person should complete the assigned work.
In summary, every organization exists for the purpose of producing
outputs or results that are needed (or perceived as needed) by its cus-
tomers. The organization’s strategic objectives drive the results it will
produce and deliver to its customers and determine the timetable for
delivery. The organization’s human resources produce these results,
either directly or indirectly, so in order to plan the appropriate HR com-
petency mix, HR planners and other HR leaders must start by ascertain-
ing the organization’s current situation or competitive position and the
results its leaders hope to achieve in the future. Otherwise, the HR plan-
ning system will have no justifiable foundation on which to base actions
such as recruitment, selection, training, and staff assignment.
The organization’s results are interpreted to clarify the results work-
ers must produce to ensure organizational success. In some cases, these
results might be the same as those desired from the organization; in oth-
ers, they will be only indirectly related. The information identified and
organized in this step of the model provides the input for the next step:
identifying the work activities that produce the necessary results.

Step 5: Identify tasks and work activities

In this step, we attempt to understand the work completed by the orga-
nization’s workers by identifying the tasks they complete to achieve
results that meet the time and quality requirements they are given.
Analysts often organize tasks into a hierarchy of macrolevel and
microlevel tasks. In a similar manner, meaningful collections of tasks are
clustered to form work activities.
84 Competency-Based Human Resource Management

Figure 4 illustrates the dynamic relationships that exist among a

desired organizational result, a work activity, a macrolevel task, a micro-
level task, worker competencies, and the outputs or results expected of
the worker. It also underscores the importance of performing a thorough
work analysis before attempting to identify the competencies necessary
for achieving the desired performance and thus the required work results.
A key point warrants emphasis here. The definitions of macrolevel
and microlevel and the detail required for an effective work analysis
depend on the answers to several questions. Why is the work analysis
being done? How will the results be used? What results will be most use-
ful for the purposes at hand? What are the preferences of the HR plan-
ner or work analyst? What is the exact nature of the work to be analyzed,
and to what level of detail will it be analyzed? Consequently, it is diffi-
cult to provide specific advice for this step of the HR planning system
process.2
The “Develop A CurriculUM” (DACUM) method is one excellent
approach to the identification of current work activities and tasks
(Norton, 1997). Created by the vocational education specialists at Ohio
State University, DACUM provides rapid, accurate analysis of work
completed for a given job by using a disciplined, focus group approach
with job experts. The process has been improved over the years by its
founders and committed users. The method’s two key advantages are
that (1) it provides rich results when a limited amount of time is avail-
able for collecting information and (2) it has a form of built-in endorse-
ment from the organization’s senior leaders, since the focus group
includes job experts and managers. These two factors make DACUM a
highly appealing method for completing work analyses.3
In summary, the identification both of organizational and worker
results and of the tasks and work activities workers perform must be
focused on helping planners to design a user-friendly HR planning sys-
tem that is easy to maintain as the work changes. That often requires sys-
tem planners, analysts, and their clients to revisit their methods of col-
lecting data for the system and the amount of detail they include.
Collecting all details inevitably leads to disappointment. It is important
to experiment to determine the level that is appropriate for users and to
build the system to meet their needs.
 Competency-Based HR Planning 85

Figure 4: Dynamic Relationships

At least 95% or more

Organizational result of our customers are satisfied
with the services we provide.

Sample work activity Provide counter service for a

customer within the retail facility.

Sample macrolevel task Accept a request for service.

Formulate a logical series of inquiries

Sample microlevel task that will help to identify or clarify a
customer’s needs, wants, or concerns.

Understand customer communication,

Select worker competencies identify problem, perform problem
solving, show respect for customer.

Customer leaves the service counter

Worker result with needs, wants, or concerns
satisfactorily addressed.

Step 6: Identify competencies

Although we discussed competency identification in chapter 2, we
believe it is essential to review the meaning of competent job (or work)
performance and the definition of the word competency.
What constitutes competent performance? It is performance that
meets or exceeds a job’s requirements and produces outputs at the level
of quality expected within the constraints of internal and external orga-
nizational environments. This definition requires users to adopt broad
parameters when judging whether an individual is competent. Note that
competent performance, although centered on worker attributes, is
influenced both by the expectations of other people about the quality of
the work and by the individual’s willingness to address the constraints
imposed by organizational context. Small wonder that leaders, man-
agers, and employees alike have struggled with the notion of competence
86 Competency-Based Human Resource Management

and competent performance for many years. This definition is not per-
fect, but it is important that an organization’s leaders consider their con-
cepts of competent performance when they decide to establish compe-
tency-based HR planning.
How do we define the word competency? Perhaps the best definition
is the classic one. A competency is an underlying characteristic (motive,
trait, skill, aspect of self-image, social role, body of knowledge) that an
employee uses and that results in effective or superior performance
(Boyatzis, 1982; Klemp, 1980).
A worker characteristic is a competency only if its use can be shown
to contribute directly to successful work performance. Many percep-
tions of certain human characteristics as essential to successful work
performance do not stand up to rigorous competency identification
methods. That is one reason why an open-ended, or traditional, focus
group approach is usually unsatisfactory for competency identification
purposes. If an organization adopts a competency-based foundation for
its HR planning system, decision makers must be prepared to provide
highly valid and reliable lists of the required competencies for the dura-
tion of planning. We should note here that competency lists for all
levels of the organization should include abstract (for example, patience,
perseverance, customer awareness) as well as concrete competencies,
since work of any kind requires the effective application of both.4
Successful competency identification relies on the following infor-
mation:
• A thorough understanding of the organization’s strategic business
objectives
• The current and future work outputs or results to be achieved by the
organization
• The outputs or results expected of the worker group under investi-
gation, and how those outputs or results support the achievement of
organizational objectives
• The major work tasks that must be performed in order to achieve
the required outputs or results
This information must be available for use before competency
identification begins. Recall that these components are the outcomes of
 Competency-Based HR Planning 87

Step 4 of the model shown in Figure 2. The components must be investi-

gated in this order if valid and reliable competency identification results
are to be obtained.
After competency identification is completed, managers of the
workers under investigation and appropriate organizational leaders
must endorse the competency lists and their definitions. A general rule
to follow is, the more strategic the work, the higher the level of endorse-
ment must be.
Two other questions deserve the attention of those who are consid-
ering competency-based HR planning. Is awareness of the competencies
that distinguish fully successful from exemplary performance of value to
the organization? And if so, for which types of work should differentiat-
ing competencies be identified? By knowing the competencies that dis-
tinguish an exemplary performer from a fully successful one, it is possi-
ble to help all workers who do the same job achieve beyond the fully suc-
cessful level. Deciding to identify the competencies of exemplary per-
formers will greatly affect the competency identification methods the
organization will eventually use (see Dubois & Rothwell, 2000). Although
the decision to identify exemplary worker competencies expands the
scope of the competency identification initiative, doing so can help the
organization direct HR requirements toward achieving exemplary per-
formance. The importance the organization’s leaders place on having this
capability directly affects how much they are willing to invest in getting
those results. HR planners should be keenly aware of this option.
To summarize, competency identification must be an outgrowth of
the organization’s earlier work to identify its desired strategic results, the
relationship of those results to business success, and the connection
between worker results and organizational success. After these facts are
known, work analyses must identify and verify the tasks workers per-
form and pinpoint the results expected of them, at a given level of qual-
ity, within the constraints of the organization. The information gained
in Steps 6 and 7 completes the foundation for competency identification
and verification.
Step 7: Determine and evaluate competency supply and demand
At this point in the model, valid and reliable work analysis data should be
available. That information should include an estimate of the competen-
88 Competency-Based Human Resource Management

cies required for organizational work. It is now time to determine and

evaluate the competency pool (or competency supply) among the organi-
zation’s workers. It is also time to forecast demand for competencies based
on current and projected organizational needs. Approaches to completing
this step of the model vary according to the scope of the competency-
based HR planning system. Certainly a competency-based system for an
organization requires more work than does a limited system for only one
department or job category. This discussion of supply and demand there-
fore is somewhat general, so that it may apply to many different situations
in which competency-based HR planning might be used.
First, we will examine the supply side of the equation. Supply in this
context means the availability of worker competencies that are tied to
organizational success. After an organization’s strategic objectives have
been clarified and the desired results are clear, the competencies
required to achieve those outputs can be assessed. In its broadest sense,
the following question remains: What is the availability of strategic com-
petencies within the current employee competency pool?
Availability is determined by completing a competency assessment
process (CAP). A CAP determines which employees, in what perfor-
mance context, have which competencies of strategic importance, with
what amount of performance experience, and to what level of perfor-
mance strength. Several CAPs are used in organizations today. The HR
planner must decide which type of CAP would best serve the compe-
tency data needs of the organization and help to establish a competency-
based HR planning system. Considerable literature on many methods of
competency assessment is readily available.5 If this is a new practice area
for you, we suggest that you consult one or more references for specific
guidance on using competency assessment.
We will provide a brief overview of the following common compe-
tency assessment methods: self-assessment, superior or “boss” assess-
ment, peer and work expert assessment, customer or client assessment,
certification or licensing assessment, and assessment centers.
Self-assessment is one approach to obtaining competency assess-
ment information from employees, but of all the CAPs, it produces the
least valid and reliable results. The major reason is that individuals often
have inflated perceptions of their competencies. (In some cases, the
reverse is true, and workers’ perceptions of their abilities are lower than
 Competency-Based HR Planning 89

is accurate.) Readers experienced in the use of multirater competency

assessment systems in organizations will be among the first to support
this assertion. Although individuals are usually able to provide accurate
assessments of their competency strengths in the proper rating direction
(that is, whether they do or do not have the competency), they are rarely
realistic in assessing how strongly they rate on a competency. Individuals
sometimes erect protective walls around their egos, and that usually
explains why their self-perceptions of competence differ from the rat-
ings of others. Motivation, insight, consistency, and lack of understand-
ing are some of the areas of concern with self-assessment (Cooper,
2000). Competency self-assessment has a place as long as it is properly
employed. It is especially useful for obtaining initial assessment screen-
ings with employees to determine the potential competency strengths of
an employee group. After an initial competency pool is identified, addi-
tional assessment methods can be used to refine estimates of the com-
petency strengths of those in the pool.
Other CAPs rely on external observers, who assess competencies
in the context of the corporate culture or performance setting. It is
common practice to use competency assessments made by employees’
supervisors. These ratings are usually one component of an organiza-
tion’s employee performance management and appraisal system. Their
reliability is based on several unspoken assumptions about supervisors:
that they are qualified to make the assessments, that they will not be
biased, that their contact with employees is frequent enough and of suf-
ficient quality to enable accurate assessments, and that they are “work
performance experts” who know how the competency should be applied
and can thus provide valid assessments. Even though any one of these
assumptions may be flawed, depending on a supervisor’s judgment is a
very popular approach. These assessments are often used to determine
work assignments, areas for future development, and other work activi-
ties that affect the relationship between employee and employer.
Therefore, it is advisable to remember the possible limitations of super-
visor-based CAPs when the assessments are interpreted and used.
A CAP that relies on the judgment of expert work performers is
usually valid for those assessed. In fact, many organizations depend
heavily on expert judgment to identify the most critical competencies
needed to perform the work. Generally speaking, the use of work experts
90 Competency-Based Human Resource Management

to identify and assess competency is highly regarded by organization

leaders.
The popularity of peer assessments has been growing in recent
years, and with good reason. Research supports the view that peer
assessments are perhaps the most valid and reliable means by which to
assess individual competence (Lewin & Zwany, 1976a, 1976b; Kane &
Lawler, 1978). Of course, the word peer means an individual who per-
forms work identical or nearly identical to that of the person assessed.
Many organizations administer peer review or peer assessment systems
so that they may gain a view of an employee’s performance other than
the one offered by the supervisor, team facilitator, or leader.
Another CAP uses a worker’s customers as a source of competency
assessment. Although these data do provide insight into worker per-
formance from those who count, the validity and reliability of the infor-
mation could be limited by the extent of the contact between worker and
customer. Customer opinions are also easily influenced by one failure. A
customer can forget the employee’s years of high performance and
become fixated on one incidence of failure. For that reason, when they
serve as the sole rationale, customer ratings or reviews of an employee’s
performance must be considered thoughtfully and verified with great
care before any corrective action is taken.
Professional associations establish certification programs that assess
and verify the competencies of practitioners. The objective of the pro-
grams is usually to build credibility for the profession. State and local
government licensing agencies often require certification for those who
apply to practice in their jurisdictions. In addition to written competency
examinations, certification may also necessitate supervised professional
practice. It is common, for example, to ask those requesting certification
to provide letters of endorsement from professional colleagues, who
often must be certified, or from employers or schools that provided train-
ing. Competency examination questions generally are developed and
endorsed by persons recognized as experts in the subject area covered by
the examination. Accordingly, this type of CAP is based on a peer assess-
ment process.
Multirater competency assessment is an increasingly popular
approach in organizations. Many variations are possible, depending on
organizational setting, resources available, and other factors.
 Competency-Based HR Planning 91

One such assessment occurs at the airline operations for United Parcel
Service, headquartered in Louisville, Kentucky. Every six months, between
1,200 and 1,300 management employees participate in an automated 360-
degree feedback process. Prior to participating in the evaluation process,
participants receive training that describes the purpose and methods of the
survey tool. Additional training on giving and receiving feedback is also
provided. The Quality Performance Review, as it is called, measures key
skills such as “customer focus, financial and internal business process
knowledge, people skills, business values and leadership.” Employees then
develop goals based on the feedback provided during these reviews.
Informal meetings, called Talk, Listen, Act, are also held to bring together
supervisors and individuals directly reporting to them for discussions on
work-related issues. (“Traveling Beyond 360-Degree Evaluations,” 1999)

Multirater competency assessments provide very powerful feedback,

while at the same time, administrative chores such as preparing, distrib-
uting, and tabulating the data are fairly easy (Cooper, 2000). In addition,
multirater assessments produce comprehensive information, establish
job performance requirements and accountability for performance im-
provement, identify expectations, and integrate 360-degree assessment
results with other systems and subsystems. There are disadvantages,
however, such as expense, lack of meaning if ratings are derived using
criteria such as competencies that are not specific to the culture, and the
overwhelming task of analyzing data from a large number of individu-
als (Rothwell, 2001).6 Another area of concern is ensuring that the rater
is qualified to assess competencies such as insight, consistency, and
motivation (Cooper, 2000).
Assessment centers warrant special attention. They are often used to
determine the development needs of high-potential candidates for senior
leadership positions. They can also provide competency assessment for
managers, supervisors, and individual contributors. These results may be
used to help individuals improve performance or prepare for new work
roles, to assess individual potential, or to determine which employees
would be the “best fit” for specific work projects or roles. Recent evidence
suggests that assessment centers are making a comeback for just these
reasons (Jansen & Jongh, 1998). An assessment center can be an impor-
tant element in a competency-based HR planning approach.
In the assessment center process, the persons who are being assessed
perform work activities in simulated environments or future scenarios
92 Competency-Based Human Resource Management

under the direct observation of trained assessors. Assessors are usually

work experts, managers, or senior managers. If the work has strategic
import to the organization, the chief executive officer or chief operating
officer should be chosen as the observer. Participants typically are
coached by their managers or mentors beforehand. After the experience,
they are given both individual and group assessments and feedback on
their performance, including action plans tailored to help build their
competencies for current or future work. Assessment center results con-
tain much useful information about current or potential performance in
relation to the organization’s future talent requirements.7
Earlier in this chapter we noted the importance of establishing a
management information system that provides sufficient storage capa-
bility and allows competency pool data to be easily retrieved. This infor-
mation is collected from employees through a competency inventory, so
named to distinguish it from the traditional, and less useful, skill inven-
tory. The purpose of a competency inventory is to enable the organiza-
tion’s decision makers to find talent quickly when it is needed to solve
business problems. Its design therefore should be based on user needs
and requirements. Time has become a strategic resource of greatest
importance, and few organizations can afford the luxury of not know-
ing what talent is already available.8 (For a further review on maintain-
ing talent inventories, see Rothwell, 2001).
After a CAP has been completed, the information must be organized
and then stored for easy retrieval and analysis. See Figure 5 for one
example of how to organize the data. Other forms may be even more
effective if they are grounded in the language used by managers and
other decision makers.
Note that the table shell in Figure 5 is centered on key competencies
targeted by decision makers for the purpose of competency-based HR
planning. It notes employees and the context in which they applied the
competencies. Their level of experience with the competency, and the
strength of the competency, could also be made an element of the data
profile. Of course, other or more detailed data useful for HR planning
could be included in the inventory. The table shell in the figure is in-
tended as a starting point.
Finally, the competency inventory should be tested against user
needs. For example, the project manager could request specific informa-
tion for users and observe how well the system performs.
 Competency-Based HR Planning 93

Figure 5: Summary of Competency Inventory Data Useful for HR Planning

Employee* Comp. 1 Comp. 2 Comp. 3 Comp. 4 Comp. 5 Comp. 6

A1

A2

B1

B2

C1

C2

D1

D2

*Note: The letters in this column identify employees by department.

Step 8: Pilot test the HR planning system

There is no real substitute for a pilot test of a competency-based HR
planning approach. It will either demonstrate the value of the approach
or point out the folly of the effort.
Here are some suggestions on pilot testing the new system:
• Pilot tests should put strain on only the most elemental components
of the planning system. For example, try completing a plan for a
limited (noncomplex) project that affects a single work unit and
allow elongated time frames for completing each step of the work.
• Actively involve the HR planning customer in each step in the plan-
ning process.
• Listen to customers’ recommendations and agree to only those sys-
tem changes that will not limit the system’s applicability to any
organization planning project.
• Identify potential difficulties and make plans for roadblocks that
could affect system performance and customer satisfaction.
• Keep the organization’s leaders informed about the project. Include
mention of the benefits of the system and any other information
that will encourage their continued support.
94 Competency-Based Human Resource Management

• Work to ensure the user-friendliness of the new system.

• Seek guidance from others, including the organization’s leaders, when
help is needed to resolve system constraints, concerns, or failures.
• Promise only what can be delivered, and deliver what was promised.

Summary
This chapter was devoted to a discussion of HR planning and the design
and implementation of a competency-based HR planning system. The
chapter opened by defining HR planning. We then explained traditional
HR planning and explored approaches to making HR planning compe-
tency based. A competency-based approach has advantages and chal-
lenges, and we offered guidelines for determining when HR planning
should become competency based and when it should be handled tradi-
tionally. We presented and explained an eight-step model to guide the
formulation and installation of a competency-based HR planning sys-
tem for an organization.