Importance of Competency-Based PMS

Competency-based performance management helps organizations in the accomplishment of their vision, mission, and objectives.

This achievement is possible because competency management enhances the worth of human capital by evolving distinct and unimitable human competencies.

Enriched human capital optimizes other organizational resources and leverages the existing strengths for organizational growth.

Though competency management is potent enough to create an indelible, positive, and contributory impact on all organizational activities, a few of the essential advantages are indicated below:

Importance of Competency-Based PMS

1. Realisation of Organisational Goal: Competency-based performance management facilitates contribution to the achievement of organizational goals.

This is done by aligning the role of every employee and the functioning of every department with organizational goals in terms of competencies.

2. Realisation of Human Resource Potential: The structure of competency-based performance management is built on a well-articulated model of achievement motivation.

Competency profiling provides a direction for employee growth in a meaningful way:

  1. Firstly, it identifies the inner potential of an individual in terms of technical dexterity and attitudinal chemistry.
  2. Secondly, it matches the competency profile of this individual with a suitable role/position within the organization.
  3. Thirdly, it contributes to the planning and development of the professional growth of that individual. In this process, competency management enhances the performance of the employee and inspires them to realize the potential in the most efficient and fulfilling manner.

3. Realisation of Objectivity and Accuracy: The essence of management, particularly people management, lies in ensuring equity in decision-making.

Unfortunately, subjectivity rules the decision-making pattern most of the time, in most cases, and in a majority of organizations.

This subjectivity occurs in the management of recruitment and selection, training and development, performance appraisals, career planning, and reward distribution.

Employees perceive subjectivity as arbitrariness that in turn destroys the social fabric of an organization and causes loss of morale.

This subjectivity occurs not necessarily because a manager intends to be biased or favors subjectivism. Often, the absence of objective and accurate measures/indices leads managers to choose the intuitive way.

Competency management bridges this gap in a scientific manner:

  1. Firstly, competency management contributes to developing and freezing the most pertinent knowledge, skills, and characteristics to perform a job in the most efficient manner. This competency index helps in accurate and objective-decision making in all spheres of people management.
  2. Secondly, competency-based performance management strategy streamlines all activities in such a manner that it leaves proportionate and judicious discretion to managers to influence things based on personal perception.
  3. Thirdly, system, data, and analysis replace personalized decision-making.

4. Realisation of Consistency and Completeness: Logical consequence of objectivity and accuracy is consistency in the decision, making.

Consistency happens because competency-based performance management drives data and fact-based decision-making and expels subjective perceptions.

Understanding of performance criterion and evaluation is uniform across organizations, no matter how wide operations/activities of that organization are spread.

Secondly, competency-based performance management develops parameters on extensive study of all, directly and indirectly, related aspects of performance.

Parameters that exist are comprehensive in nature. The strategy of competency-based performance management realizes consistency and completeness in the management of performance.

5. Maximises Productivity, Performance, and Efficiency: Developmental and growing role that competency-based performance management performs automatically enhances productivity, performance, and efficiency levels.

This occurs on account of three broad factors:

  1. Firstly, competency management plots the right people with the right skills to the right roles. Such a match makes work as natural to people, and they derive utmost esteem and satisfaction while working. It implies that competency management ensures that what people intend to do in life and what they actually do in the organization are the same.
  2. Secondly, competency management aids in development efforts with result orientation.
  3. Thirdly, tangible measures that competency management evolves assist in self-monitoring of performance.

5. Creates Benchmarking: Possessing benchmarking culture is one of the real value advantages to organizations.

The ultimate objective of a competency-based performance management strategy is to create benchmarks in all areas of performance.

The objective, measurable, and well-articulated competency models not only contribute to peak performances and optimization of efforts but also set new standards in working and problem-solving methods.

Breaking existing norms, revising, freezing new norms, and again breaking these norms for perfection happen on a continuous basis.

Continuous improvement is thus, the hallmark of competency I management in the context of performance management.

7. Provides Strategic Advantage: In an ever-changing and competitive business environment, an organization’s search for gaining competitive advantage grows.

Many times past experiences of organizations in gaining supremacy with the support of state-of-the-art technology, heavy capital investments, economies of scale, large-scale mergers, and acquisitions have not been very encouraging.

Technology, capital, and other corporate strategies are equally available to all organizations. All these resources are imitable and substitutable.

In these circumstances, it is conclusively proved that the only resource that can provide a distinct competitive advantage to organizations is the knowledge, skills, and characteristics of human resources.

Competency-based performance management puts organizations in a vantage position and gives a precious strategic edge over competitors and rivals.

8. Enables Change Adaptation: The success of an organization is also largely influenced by its ability to adapt to environmental changes and also its capability to influence the direction and type of changes.

Competency-based performance management builds organizational flexibility and agility through the creation of relevant competencies.

In competency-based management, people and organizations acquire the right competency profile. This enables them to lead organizations in the conditions of micro and macro-level changes.

The central issue is that competency management emphasizes attitudinal development in equal measures as that of technical/functional competencies.

An organization with a wealth of competency stock can dominate the business scenario and precipitate changes in its own favor.

9. Sharpens Human Resource Management System: Competency management significantly contributes to the systematic practice of human resource management in the areas of recruitment and selection, performance appraisal, training and development, career and succession planning.

The strategy of competency-based performance management performs a central role in all human resource management functions in a direct and tangible manner.

10. Infuses Growth and Learning Optimism: The greatest advantage of competency-based performance management strategy is that due to its focus on identifying and building the right blend of competencies on regular basis, it infuses the tendency of growth and learning optimism.

Employees can stay in a state of incorrigible optimism when they involve learning, sharpening, and adding competencies on a continuous basis.

This optimism is precisely what many corporate organizations solicit in the environment of fluctuating business fortunes.

Competency orientation also drives people and organizations to be growth-focused, which is an excellent trait to make steady progress.

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