It’s easy to conclude that the discipline of human resources management is vague and lacking structure. Indeed this it’s easy to conclude this of many of the domains in the social sciences. The result is that those of us who like structure find difficulty in taking anything from HRM other than a set of good but unlinked practices. This could not be further from the truth. All of HRM is structured, often using modelling from psychology to describe the tools of the trade. HRM has at its core various approaches to the problems of managing people. And for those who like structure, this helps understanding and practice of its many principles.

This blog takes five HRM tools and links them through one key tenet – competence. Competence theory is a way of looking at how management can measure staff contribution to the business. And once measured, management can use the five tools to optimise engagement.

Defining Competence

To start we must define competence. Competence is the added value in a firm that comes from the staff resource that is input to production. As added value it is therefore the gross profit, the difference between what goods and services are sold for and the direct costs of materials. Competence is also knowledge acted upon by skills. Skills themselves come from training and experience of the staff. So competence expressed mathematically is [knowledge x experience x training]. Competence can be measured. One measurement system suggests four levels – expert, practitioner, supervised practitioner and trainee. Staff work at one of these levels in each of the competences they bring to their job.

Tool 1: Job Design

The first of the people management tools is job design. Jobs exist in job families – in engineering we might have graduate engineer, engineer, lead engineer and principal engineer. Jobs comprise one or more specialisations. An engineering manager is first an engineer and second a manager. Each specialisation comprises several competences. Jobs are designed by grouping competences together in a fashion that allows the job holder to excel. Jobs are not cast in stone and can be re-designed to make best use of the available competences and staff. Job design is key in planning how the firm develops and in deciding what competences to recruit and what to let go through redundancy.

Tool 2: Pay

The second tool is pay. Pay can be thought of to have three components – base pay, competence-related pay and performance pay. Base pay and competence pay, when summed, can be matched to the employment market rate for the job. Typically we might match a practitioner lead engineer with the median of the frequency distribution of salaries from information taken from adverts for the same job. Each specialisation normally comprises about five competences. To determine competence pay, each person in the job must be scored and a grade (expert, practitioner, supervised practitioner, trainee) awarded for each competence. Inevitably the job holder will not be at one level in all competences and will for example be expert in one, practitioner in two, supervised practitioner in one and trainee in the last. When awarded points for this group of competences the job holder is perhaps awarded 40% of the available marks and therefore earns 40% of the available competence pay. If the job holder acquires greater competence, the points will rise and with it the competence element of pay.

Tool 3: Staff appraisals

The third tool is appraisals. Management needs to measure the performance of all staff in order to set objectives for improvement. There is a direct link between competence and performance. A fully competent member of staff is likely to perform better than someone with lesser competence though performance is somewhat separate and a function of several environmental factors such as motivation. This means that the measurement activity comprises assessment of competence and assessment of performance. Appraisal must therefore measure competence. It must identify job, specialisation and competences. And it must score the competences that the person brings at that time.

Tool 4: Staff Development

The fourth tool is staff development. Staff bring competence and performance. They are motivated to perform and develop competence. This means that competence is the central measure to say where an employee is now, where (in terms of competence) the employee needs to be and hence what developmental action is needed to make the change. In staff development, staff are scored for their competence. The firm is able to say where it needs them to be. An example might be where someone is a supervised practitioner in project management. The firm needs them to be a practitioner and a programme can be implemented to make the change over a period. Competence is key to understanding the change needed.

Tool 5: Performance Management

The final tool is performance management. From time to time employees don’t perform as they should. There is some gap between what they should be capable of and how they actually perform. By knowing the competence, management can assess the performance that should be. The performance that exists is apparent and hence the gap is measurable. Once the gap between what is and what should be is apparent, performance management techniques can be employed to bridge the gap and cause the employee to perform in line with their competence and expectation.

The Competence Approach to HRM

This blog has considered one approach to human resources management or people management in firms – the competence approach. It has suggested that competence is a means of assessing the contribution that an employee makes to the added value of a firm. The competence approach has several advantages. It considers people as individuals, each contributing a greater or lesser amount of competence. It argues that competence is a meaningful contribution measure and hence contribution can be used to effect change. And it shows that competence is a key input to strategy. The firm can determine the competence needed in its business plan and then plan to acquire it.