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In today’s ever-changing business environment, the best-run companies tend to be those nimble enough to anticipate and adapt to shifting market conditions. One characteristic helping to drive that success, experts say, is a forward-looking approach to recruiting and growing a high-quality workforce.

"Traditionally, job descriptions have been the device by which management makes hiring and evaluation decisions," says William Rothwell, co-author of Competency-Based Human Resource Management and professor of workforce education and development at Pennsylvania State University. "But that approach is notorious for being activity-oriented rather than results-oriented. On the other hand, a competency-based approach to human resources is more focused on skills, results and on a person’s ability to get the work done."

A competency-based HR management program can improve both productivity and performance by identifying key characteristics of top performers and how those traits differ from average employees. Those characteristics, in turn, can distill into a set of core competency profiles that consistently lead to successful work results.

When applied to an organization’s hiring and performance appraisal needs,the competency-based approach can yield powerful results. For example, in a 2006 Cornell University study of more than 300 small to midsized companies, the introduction of competency-based HR tools increased one-year revenue by up to 15.8 percent while cutting turnover by nearly two-thirds.

Find the "needle in the haystack"

As a basis for interviewing job candidates, a competency-based approach offers several advantages. By asking applicants open-ended questions about how they handled challenging situations, HR recruiters and hiring managers can learn how well the candidates’ competencies match the company desired skill profiles. And, while traditional job descriptions provide a summary of work duties, those activities frequently change — making it dangerous for companies to base hiring decisions on skills they may no longer need.

Another important element of competency-based interviews is "interviewer bias" reduction. On many occasions, Rothwell says, interviewers can form quick opinions on whether or not prospects will remain under consideration. But when an interview is specifically structured to match candidates with the company’s defined series of competencies, it greatly reduces the effect of instinctive judgments.

An assessment of competencies should not be limited to skills and experiences. In fact, many experts agree that it’s also important for companies to develop interview tools that gauge the "organizational fit" of a prospective employee. To do this,the company needs to take a candid look at its own cultural competencies that can make — or break — careers. For instance, in a company where leaders and star performers typically arrive at the office before dawn each day, equally talented "night owls" might not thrive.

"Clearly, it’s important to identify people who have the right competencies to succeed in the organization," says Christopher Collins, lead researcher of the Cornell University study. "But if you expect them to stay for a period of time, you need to consider the cultural aspects of how they’ll fit with the organization."

Identify competencies to manage and develop talent

One of the most valuable aspects of competency-based management is its ability to define measurable productivity differences between average and top-tier workers. In his research on employee performance, Rothwell noted that some stellar employees can be as much as 20 times more productive than average, but fully trained, performers in the same job category or department. If HR professionals can capture the core competencies of that top performers, they can use that information to help design new training and organizational development tools.

"If organizations could do a better job of identifying differences between average and exemplary performers, they might be able to achieve quantum leaps in productivity improvement," Rothwell says. "They may also be able to save money by preserving productivity with fewer people — thus paying less in wages and benefits."

As part of an overall performance management program, employers also can use competency tools to build a stronger sense of worker trust and empowerment. By demonstrating the links between core competencies and achievements that support company goals, managers can help employees develop a roadmap to guide day-to-day decisions. The power of this approach multiplies when leaders do regular check-in sessions — rather than conduct just one annual review — to provide ongoing coaching and support.

"You clearly can’t just say, ’Here, your job is a cashier. Good luck,’" Collins says. "There does need to be more of a regular feedback system,where a manager can talk with that person about how they’re doing against goals, provide corrective direction when needed, but also offer positive reinforcement."

Looking for more ways to gauge how competency-based tools can add value to your business? Consider this sampling of "quality-of-hire" competency indicators that Kevin Wheeler, president of California-based Global Learning Resources, developed:

Goal completion. This means using competency measures to create quantity and quality productivity metrics. For example, if a top salesperson averages 20 contacts with prospective customers each week and closes an average of five sales during that time, that sets a benchmark for others hired into a comparable job.

Capacity. In a call-center operation, an outstanding operator may handle 60 calls an hour while delivering information at an accuracy level of 98 percent. That level of performance can adjust downward for new hires, with the understanding that the bar will rise as experience grows.

Problem-solving skills. Quite often, the hallmark of a great employee is his or her ability to solve problems with minimal direction or assistance. If this skill is a core competency, a company can measure performance by peer or supervisor assessments of how often an employee is a "go-to" person for resolving problems — or how frequently the employee asks basic,repetitious questions.

Openness to change or learning. Because workplace roles — and needs — can change quickly, the most valuable employees are often those who can adapt, pursue new skills and consistently seek to increase their knowledge. Wheeler says companies can measure those competencies by conducting an attitudinal survey after the employee’s first 30 to 90 days and regularly thereafter. He adds that many leading companies seek to evaluate this competency during interviews, because past actions are often an indicator of future success.

By applying these concepts, you can effectively use competency-based management tools to help improve the overall performance of your workforce.