An Asian multinational has a highly diversified portfolio of business. It is into tea, coffee, IT, hotels, travel, BPO, retail stores, pharmaceuticals, and so on. It is owned by a family of four brothers. The eldest is the chairperson and CEO of the company. The other three brothers handle three different business groups. The top team is assisted by four professional directors handling finance, HR, IT and FMCG, respectively. The profiles of the directors, as revealed by a 360° feedback study conducted by TVRLS, are presented in Table 3.1.
Lately, the CEO has begun to feel that the business is not doing well. The country’s tourism, retail, IT and BPO sectors are growing. However, the group itself has not been able to exploit the potential of all-round growth. The CEO feels that he is missing a golden opportunity of making a mark. At this point, the HR director decides to leave.
The answers to these questions reveal the economic sense of having the right people at the top, and at the other levels, manning the right jobs. If you do not have competent people to manage each role, the entire business suffers. The loss and the opportunity cost are enormous. This is evident at the top, but may not always be evident at the other levels. One must therefore be sensitive to the enormous opportunity costs of mismatched competencies. For example, in the case just referred to, by interchanging the director of travel, tours and hotels with the director of pharmaceuticals, enormous business growth can be achieved. Similarly, the right kind of HR manager can do a lot to guide the company’s top team towards higher profits. A simple 360° feedback can help a massive reorganization of the company, enabling it to exploit its fullest potential.
TABLE 3.1 A 360° feedback study
Competencies vary from job to job. Competencies are contextual. They depend on the following:
HR managers should understand the cultural context for effective talent management. For example, a giant Asian pharmaceuticals company recruited a US national as head of HR. After spending nearly four months with the company, at an enormous cost to it, the HR head had to leave as he was unable to implement a number of things he thought the company should do. Most of his suggestions were based on the way US corporations are run, and were the product of an American mindset. He had no idea that Asian minds work differently. It was a painful discovery for both the individual and the company. This company needed an HR manager who could break systems when necessary and create systems that suited the top management.
The required HR competencies vary from organization to organization. BPOs, pharmaceuticals and IT industries, cooperative organizations, small and medium enterprises (SMEs), PSUs and MNCs—each sector has a different requirement. The necessary competencies also vary on the basis of an organization’s history and size. Large organizations with their own traditions, like the Birla Group, the Tata Group, the Murugappa Group and the TVS Group, need certain unique competencies. By not paying adequate attention to these issues, an organization may plan everything well but may still face severe problems with regard to competency mapping and talent planning.
Much recent HR research has dealt with competency mapping. A lot of resources are being spent and consultants invited for the purpose. But more often than not, this reveals an organization’s ignorance and lack of experience. Competency mapping is a very simple matter and there have not been any new developments in its technology. The only difference is that corporations have become more aware of its need. The need arises because of:
In good organizations, competency mapping already exists. Traditionally, HR directors and the top management have always paid attention to competencies and incorporated them in their appraisal systems. For example, when L&T introduced the open appraisal system in the mid-1970s it debated on and identified a few competencies that everyone needed to exhibit, and incorporated them in its appraisal form. When ECC, Larsen & Toubro’s construction division, revisited this format it felt that competencies needed to be defined for every role separately, and jointly, by the appraiser and the appraisee, every year, and incorporated in their performance analysis and development system (PADS). L&T gave tasks the same weightage as competencies. It assigned 50 per cent of the points to task accomplishment and 50 per cent to competencies demonstrated, and focused the annual coaching around both competencies and task accomplishments. When LIC, NDDB, NOCIL, HLL (now known as HUL) and Bharat Petroleum revised their performance appraisal systems they decided, after much debate, to focus on the assessment of competencies. Role analysis was conducted and role directories prepared by IOC in the mid-1980s. Comprehensive competency mapping was also done simultaneously, under the guidance of Dr M. B. Athreya.
Why has there been a renewed emphasis on competency mapping?
Unfortunately, some Indian firms do not consider competency mapping a worthwhile exercise, unless it can be shown to merit a significant expenditure that shows up in their balance sheets. Alternatively, they might prefer to engage an international consultancy firm, which is worth mentioning in their annual reports or balance sheets.
Competency mapping is an essential exercise. Every well-managed firm should:
When India’s first HRD department was set up at L&T in 1975 with the help of IIMA, competency mapping was the first and primary task assigned to the new department. Twenty-five years later, when HRD departments have become the norm in the country, and two decades after specialized courses in HRD were started; it is disappointing to note that Indian corporations and their HRD departments still need consultants to map competencies for them. A number of them do not seem to realize that competency mapping is essentially an in-house job. Consultants can at best provide them the methodology and train their line managers and HR staff. They themselves cannot actually map the competencies because no consultant will ever have all the knowledge required to identify the technological, managerial, HR, attitudinal and skill-related peculiarities of a firm’s jobs. Excessive dependence on consultants’ data is much more likely to enrich the consulting firm than the client organization. The lower the consultant’s involvement, the more pressing is the need for essential work to be done internally. Consequently, the intellectual capital generation and retention within the organization will be much higher.
Any underlying characteristic required for performing a given task, activity or role successfully can be considered as competency. Competency may take the following forms:
Competencies may be clustered into various groups. In a classic article published in 1994 in Harvard Business Review, Daniel Katz grouped competencies under three categories, which were later expanded by Indian management specialists into the following four:
This is a convenient classification. A given competency may fall into one or more areas and may include more than one form. Competency dictionaries make and promote these combinations (technical, managerial, HR-related, conceptual, attitudinal, skill-related). A firm’s competency dictionary gives detailed descriptions of the language of competencies used by the firm. For example, the teamwork or team management competency can be defined in terms of organization-specific and level-specific behaviours for a given organization. At the top level it might mean, in case of a particular organization, the ability to identify, utilize and synergize the contributions of the project team. At another level, it might mean the ability to inspire and carry along the top management team, and also manage diversity. The preceding explanation is a rather simplistic one. In practice, competency mapping involves detailing all behaviour (observable, specific and measurable,) shown by persons occupying specified roles.
In the mid-1950s, a team of educationists lead by Benjamin Bloom in the USA laid the foundation for identifying educational objectives by defining the knowledge, attitudes and skills that needed to be developed in education. The task force led by Bloom took several years to make an exhaustive classification of the educational objectives grouped under the cognitive domain.
David McClelland, the well-known Harvard psychologist, has pioneered the competency movement across the world. His classic works Talent and Society, Achievement Motive, The Achieving Society, Motivating Economic Achievement and Power the Inner Experience have revealed several new dimensions of competency. These deal with the ‘affective domain’, in Bloom’s terminology. The turning point for the competency movement was a 1973 article by McClelland, published in American Psychologist, in which he presented data to show that traditional achievement and intelligence scores may not be able to predict job success, and what one needed to profile were the exact competencies required to perform a given job effectively and to measure them using a variety of tests. This article, combined with the work done by Douglas Brey and his associates at AT&T in the USA (where they presented evidence that competency can be assessed through assessment centres that can predict on-the-job success to some extent), laid the foundation for popularizing the competency movement.
Later, McBer, a consulting firm founded by David McClelland and his associate David Berlew, built a reputation for specializing in mapping the competencies of entrepreneurs and managers across the world. They even developed a new and simple methodology called behaviour event interviewing (BEI) to map competencies.
Thus the AT&T ‘Studies of Formative Years in Business’ indicated the predictability of future success. McClelland’s studies in the early 1970s indicated the limitations of intelligence and academic performance data. With increased recognition of the limitations of performance appraisal in predicting future performance, appraisals became more focused and assessment centres became increasingly popular in the 1970s. In India, the establishment of an assessment centre was an integral part of the HRD plan given to L&T by IIMA as early as 1975. L&T performed competency mapping but could not begin its assessment centres until much later, as it was not perceived as a priority area.
Competency mapping is the process of identification of the competencies required to successfully perform a particular job or role or a set of tasks at a given point of time. It consists of breaking the given job into its constituent tasks or activities, and identifying the competencies needed to perform the job successfully. Competency assessment is the assessment of the extent to which an individual, or a set of individuals, possesses the competencies required by a given role or set of roles. Assessment centres use multiple methods and assessors to evaluate the competencies of a given individual or a group of individuals. In order to enhance objectivity, they use trained assessors and multiple methods, including psychometric tests, simulation exercises, presentations, in-basket exercises, interviews, role-plays and group discussions. The methods used depend on the nature of the competencies.
Competencies can be identified by one or more of the following categories of people: experts, HR specialists, job analysts, psychologists and industrial engineers. They usually consult with line managers, past and present role holders (persons who are currently doing the given jobs), supervising seniors, reporting and reviewing officers, internal customers, the subordinates of the role holders and other role set members (all those who have expectations from the role holder and interact with her/him).
The following methods are used in combination for competency mapping:
The process of identification is not very complex. Some of the steps are as follows:
Alternatively, one could appoint a task force for each role. The task force should consist of some current incumbents who are performing the role well, the reporting and reviewing officers for that role, and some successful past incumbents. Make sure that the task force includes at least one member who has some understanding of competencies and the nature of competencies. Most professional managers with MBA degrees should have this competency, which is actually easy to acquire. When I worked with the Ministry of Health in Indonesia with Udai Pareek and Rolf Lynton, a three-day workshop on competency mapping was found to be sufficient to train the ‘province staff’. And this, despite having to work with groups of Indonesians who spoke only Bahasa Indonesia
Use technical language for technical competencies (for example, “knowledge of hydraulics” in businesses involving engines and pumps). Use business language for business competencies (for example, “knowledge of business or strategic thinking” for managing a watch business). Use personal and familiar language or standard terms for interpersonal competencies (for example, “the ability to negotiate, interpersonal sensitivity and sales techniques”).
Competency mapping can be done by a variety of people. Nowadays, all management schools—and certainly the ones specializing in HR—train students in competency mapping. When I taught a course on the management of talent at the Indian School of Business (ISB), Hyderabad, in 2000–2001 with just a two-hour introduction to the process of competency mapping, the students did a great job of mapping the competencies for a given set of roles.
In short:
Anyone with a master’s degree in management or the social sciences, or an employee with equivalent experience and training, can develop these competencies. A conceptual background and an understanding of the business are important. Familiarity with businesses and organizations pertaining to the general, management and behavioural sciences is also useful. HR managers, management graduates and applied psychologists are sufficiently qualified to map competencies. Most institutions specializing in HR train candidates in competency mapping.
The following are some tips on mapping competencies economically:
For an illustration of competencies, see Pareek and Rao (2003).
Competency mapping does not cost much. A competent HR staff can do the needful at no extra cost. Only some managerial time is required. Even consulting companies charge very little. At the top levels, at a conservative estimate, it may cost between 30,000 and 1 lakh, and if an organization undertakes competency mapping for all its roles the costs may come down to as little as 15,000 to 20,000, or a month’s salary for each separate role incumbent. Most organizations have around 50 to 100 roles and a competency directory (listing the competencies required for all the organization’s roles) may cost less than the annual salary of a top-level manager. But the benefits are enormous and the flow continuous.
How does an organization benefit from competency mapping? Consider the following example.
When 83 senior executives in a company were asked the question ‘In the last six months, to what extent do you think your competencies were utilized by the company?’ this is what they felt:
This means that about a third of the managerial competencies is unutilized. Crudely put, if the company used all the competencies of its managers, it could do the work with less than a third of the managerial workforce. This is an alarmingly high percentage. In fact, in many organizations managers do not even know what tasks they are expected to perform and what knowledge, attitudes and skills they are expected to bring to their work. Quite evidently, they have not mapped the required competencies. Without competency mapping you will not know what kind of people you need. Neither will you know what tasks to assign them once you recruit them, or how to measure their performance. In other words, you will not know how to manage your people and get the best out of them. Good competency mapping lays the foundation for human resource utilization and adds to the firm’s intellectual capital.
If a company recruits a new CEO without considering the competencies required to lead the company at that point in time, and the CEO turns out to be a misfit, the organization may lose a minimum of a year in replacing her/him and bringing the company back on track. This period is long enough to erode the company’s brand value, and for the company to lose out on crucial business opportunities. Competency mapping ensures that the right resources are in place.
A 10 per cent gain in the time earlier spent by each employee on unwanted tasks, or a 10 per cent better utilization of talent in a single year, can generate returns worth the total cost of competency mapping.
The negative effect on ROI becomes evident in cases of competency mismatches or plain incompetence. Imagine the wrong placement of a unit head (at, say, 25 lakh per annum) of a manufacturing/marketing/materials management unit handling a 10 crore business. It may take six months to discover that she/he is a misfit and another six months to get rid of her/him and find a replacement. Such efforts also have hidden costs in terms of the opportunities lost during that year, the loss of morale within the team, and the company’s loss of image, to name just a few. But all these losses can be avoided by a one-time expense of 50,000 to 1 lakh at most (a mere 2 per cent to 4 per cent of the CTC of this role holder).
The fee for mapping competencies is 50,000 (the average charge per role for top management to middle management roles).
The negotiation time for the HR staff is as follows:
Total = 8 HR-manager-hours per role; R-COT = 8,000 (calculated with a CTC base of 20 lakh per annum).
The line managers’ time for providing inputs is as follows:
Total = 8 line-manager-hours per role; R-COT = 8,000 (calculated with a CTC base of 20 lakh per annum).
The total person-hours spent by the company HR manager for commissioning the study, and by line managers for providing the database and ratifying the results = 16 hours.
Total cost of competency mapping per role = 50,000 + 16,000 = 66,000.
Opportunity cost or ROI expected = consultant’s costs + O-COT = 50,000 + 16,000 × 4 = 1,14,000 (1.14 lakh). Assuming that competency mapping is done for the top 25 roles in the company, total cost = 66,000 × 25 = 16,50,000 + 3,50,000 (consultant’s travel, stay and other charges) + 5,00,000 (taxes and other miscellaneous expenses) = 25,00,000 (25 lakh). Thus, at the maximum, the cost will be around 25 lakh. When all taxes and miscellaneous expenses are included, this works out to about 1 lakh a role.
This may come down to about half for junior management roles. Normally, an organization will not have more than 25 to 50 roles at the other levels.
The expected returns are: fixed costs (consultant’s costs) + opportunity costs for the time spent by the full-time staff (O-COT) = 1,14,000 × 25 + 3,50,000 = 28,50,000 + 3,50,000 = 31,00,000 to 36,00,000 (31 lakh to 36 lakh). O-COT or ROI for each role will be 1.5 lakh.
Now the decision becomes very simple: If a company gets its competencies mapped by spending 1 lakh per role, can it expect to earn returns of 1.5 lakh? And, if so, in how much time?
Competency mapping ensures the following:
The case illustrated at the beginning of this chapter should be sufficient to encourage investment in mapping competencies.
Here are a few tips to reduce the cost of competency mapping and increase ROI:
Here is an example of the tasks and competencies of a sales manager in a banking services company. First, his tasks are described, followed by a list of competencies required to perform this role.
Tasks The sales manager’s tasks are as follows:
Key competency requirements A list of competencies required to perform the sales manager’s job is given here. Any given candidate can be assessed on each of the competencies discussed in this section using the following five-point scale of the skill levels:
Pareek, Udai and Rao, T. V., 2003, Designing and Managing Human Resource Systems, New Delhi: Oxford & IBH.
TV Rao Learning Systems, 2003, Competency Mapping Manuals, Ahmedabad: TVRLS.