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Competencies Competency-based Management

The Business Case for Competencies

By HRSG Team on August, 23 2022

Article table of contents (jump to section):

  1. Competencies have unique attributes
  2. Competencies deliver measurable ROI
  3. Competencies make good business sense

Competencies have become the most widely adopted approach to talent management, with nearly three out of four organizations (73%) now using competencies to drive talent management processes. But is this popularity justified? And should your organization adopt competencies as the preferred way of managing talent?

In this blog post, we’ll examine the advantages of competency-based management and look at the impact it has on the business metrics that matter most.


Competencies have unique attributes

There are many options for managing organizational talent. Some HR professionals use skills. Some use capabilities. Others use strengths, personality types, and preferences (the Myers-Briggs Type Indicator) or the nine-box grid. But most use competencies as their primary means of assessing and developing the talent their organizations need to succeed.

The reason competencies are used more frequently than other approaches is because they possess several unique attributes that make them easier to use and more impactful.

Tangible definitions

Competencies define talent in ways that can be objectively observed and measured in the workplace. While this may seem like a basic requirement of any talent management tool, it’s surprisingly rare. On-the-job behaviors are often described in ways that are so superficial, it leaves too much to the imagination, intuition, or biases of the individual.

For example, an employee might need to demonstrate “client focus” on the job. But what does that look like? Competencies describe it using statements known as “behavioral indicators” (or BIs), which define specific behaviors that successful candidates should demonstrate. In the case of client focus, for example, an employee might “enhance client service delivery systems and processes,” or “look for ways to add value beyond clients' immediate requests.” These BIs give talent professionals, managers, and employees alike clear definitions to work with.

Progressive levels

On-the-job success looks different depending on whether you’re an entry-level employee, a senior leader, or somewhere in between. Competencies take that into consideration, defining success with up to five progressive levels of proficiency, from basic to advanced.

These progressive levels make it easier for talent professionals to support development activities, career pathing, and career progression by helping employees see the steps they need to take and the proficiencies they need to gain in order to improve in a specific performance area or qualify for a promotion or a new role.

Granular detail

Every competency is made up of multiple BIs, each of which defines what on-the-job success looks like. Because competencies can be broken down in this way, they can be used to create highly customized development programs that target specific behaviors.

For example, in CompetencyCore (a platform that supports competency-based assessment, development, and career pathing), each BI is mapped to a selection of formal and informal learning resources. This enables employees to focus their development activities where they will see the greatest return on their investment of time and effort.


Competencies deliver measurable ROI

The attributes that make competencies easy to use also make them effective. Competency-based management allows talent professionals to identify, attract, retain, develop, and deploy the talent the organization needs to achieve its goals. As a result, when companies adopt a competency-based approach to talent management, it has a positive impact on the outcomes for not only talent, but the business itself.

Here are some of key areas where competencies can have the greatest impact.

Talent retention

Organizations that use competencies have an overall voluntary turnover rate that is 17% lower than organizations that do not use competencies. Even more impressive, competency-driven organizations have a 40% lower turnover among their high performers.

Employee performance

Organizations that use competencies see a 19% improvement in employee performance and 26% higher revenue generated per employee.

Talent attraction

Organizations that use competencies have an 87% greater ability to hire the best people.

Business agility

Organizations that use competencies have a 92% greater ability to respond to changing economic conditions, a 144% greater ability to plan for future workforce needs, and a 156% greater ability to develop great leaders.

Business performance

Organizations with fully developed competency management systems are 41% more likely to have increased market penetration and 55% more likely to have increased revenue. They are also 45% more likely to have increased customer retention and 41% more likely to have increased customer satisfaction.


Competencies make good business sense

With greater utility and impact than other talent management approaches, competencies can help HR professionals align talent management activities in support of the company’s strategy as well as the best interests of its employees.

To expand your knowledge of competencies and learn about how they can be applied to the talent lifecycle, download The HRSG Competency Toolkit: A Complete Guide to Competency Content, Technology, and Talent Management.


Source for talent retention, employee performance, talent attraction and business agility data: Sherman Garr, S., Integrated Talent Management: A Roadmap for Success. Bersin and Associates, 2012.

Source for business performance data: Brandon Hall Group, Competency Planning and Management Study, 2012.