Why competency (in staff and suppliers) is critical for firms

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nurse computerWhy competency matters

To be competent or to have competency in some area of business or activity is to be able to perform to a required standard. This blog discusses why it is that competency (in staff and suppliers) is critical for firms.

Competency therefore relates to ‘job performance’. Job performance relates in turn to what we might call ‘operational outcomes’ like productivity. Productivity means optimising the number of units sold or processed or served per unit of labour. If we expand the reasoning, operational outcomes lead to ‘business outcomes’ like turnover and profit. So having staff and suppliers that are competent is fundamental to the success of a business – competency links to turnover and profit.

We soon know if a staff member or supplier is not competent. In the case of staff, others have to work extra to achieve the outcomes needed. In the case of suppliers, they don’t deliver the products needed to achieve the operational outcomes so turnover and profit suffer. If the supplier is providing a service to help the firm progress, that progression is less pronounced at best and at worst, the business position is damaged.

But competency also applies to groups within firms and firms as a whole. If a group or a firm lacks competency, the firm will simply not perform in whatever it aimed to perform in.

What is competency?

Competency is defined as having the skills, knowledge and personal characteristics to perform. It’s the same whether we’re talking about a staff member or a supplier. So where do skills, knowledge and personal characteristics come from? What makes someone or some supplier competent?

Competency requires both skills and knowledge. One or other in isolation is not sufficient.

Let’s take skills. Skills are learned. Generally to acquire a skill, a person needs a large number of hours of tuition and practice. In his book ‘Outliers’, Malcolm Gladwell postulated that a person needs 10,000 hours of practice to excel at a particular skill. At a couple of hours a day, that suggests that some 14 years of tuition and practice are needed.

We can argue the actual amount of time needed, but what is certain is that without a significant number of years spent learning and practicing the activity in question, competency will not be achieved.

Looking at knowledge, this is acquired by engaging with the body of knowledge of the activity (the repository of information commonly available). Transfer of knowledge from repository to person and their being able to recall salient points of that body of knowledge are essential. Without transfer and recollection, the finished product or service can’t be envisioned.

People use skills to make use of knowledge to achieve performance. Skill alone cannot achieve an end result. And someone with knowledge alone can’t even start down the road of performance.

Confidence and other personal characteristics come from the person’s personality and from experience. Without experience, one can perform but it’s difficult to perceive how the required standard of the activity can be realised. And only experience gives the confidence that the job can be done.

How does one achieve competency?

Given these definitions discussed above, the answer is simple. For a person to be competent in a particular activity, they need to have spent time learning the relevant body of knowledge. That done, they need to have spent time practicing the activity. And they need to have done it before in order to given the confidence of the required outcome.

And for an organisation to be competent, the aggregation of knowledge, skills and abilities within the organization must be adequate to achieve the required performance.

By way of example, if someone is to advise on a firm’s finances, they must have the necessary knowledge, skills and abilities. They will need to have spent many years studying the accountancy body of knowledge, many years practicing and many years gaining experience. It is unlikely that anyone who has not done this will be ‘competent’ in financial accounting.

Similarly, if someone is to advise on how a firm can improve its sales, they must have studied selling, practiced it and experienced it for a good number of years. It is unlikely that anyone without this background will be ‘competent’ in selling. On top of that they must be competent at analysing firms’ sales performance and in developing options for change.

What if the competency falls short of the requirement?

On the one hand, any person that lacks competency will fail to perform. The company employing them will suffer.

On the other hand there are more serious ramifications. We live in litigious times. We all rely on insurance to protect us all in the event that something inadvertent occurs. Insurance underwriters demand that the people carrying out services or developing and manufacturing product are competent to do so.

Performing a service when not competent is likely to invalidate the supplier’s professional indemnity insurance. And developing and manufacturing product using staff who are not competent will result in a breach of safety or other mandatory requirement. No company can avoid its product liability.

So at best, employing someone who is not competent risks organisational outcomes. And at worst, employing someone who is not competent risks the existence of the firm if there’s any reason to question its products and services.

Why Competency (in staff and suppliers) is Critical for Firms

So competency is absolutely critical to a firm’s success. It’s the Holy Grail of business.

Firms must achieve competency in all their staff. And they must select competent suppliers.

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