Achieving Success through Competency-Based Models and Hierarchical Structures
Competency and Hierarchy in the Future of Work
Competency and Hierarchy in the Future of Work
Thank you for choosing to read my article on competency and hierarchy. In this article, I will explore the intricate relationship between these two concepts and their crucial role in the success of organizations of all sizes. My main argument is that competency naturally leads to hierarchy, and competency-based models are excellent candidates for organizing and operating an organization. By utilizing competency-based models, companies can form highly efficient and well-organized teams. In this article, I will provide various examples and arguments to support my claim.
Allow me to provide you with a brief explanation of these two concepts: “competency” refers to the quality that emerges from possessing a set of knowledge, skills, attitudes, and abilities in a specific field, whereas “hierarchy” refers to the levels of authority and responsibility within an organizational structure.
In life, in general, and in today’s fast-paced work environment, and with the increasing rate of automation, in particular, competency plays a vital role in determining an individual’s success. In this environment, organizations seek employees who are adaptable and possess a wide range of competencies that can be applied to various situations.
At the same time, hierarchy plays a critical role in shaping the way an organization operates. By establishing clear lines of authority, hierarchy helps ensure that tasks are completed efficiently and effectively. It also provides a framework for decision-making and ensures that resources are allocated appropriately.
Social scientists have studied various forms of hierarchies and recognized multiple patterns for the emergence of hierarchy. In different societies and organizations, hierarchy emerges in different forms and for different underlying reasons. However, one successful form of hierarchy is based on competency. There are many examples of this in modern armies and the history of wars. Studies on successful startups also suggest two outcomes: first, hierarchies built on competency lead to better results, and second, they promote organizational integrity and better execution.
Theoretical Foundations
Competency-based models have gained significant popularity in recent years as organizations seek to develop their employees’ skills and abilities, including competency-based hiring, competency-based performance review, competency-based dictionary, etc.
These models are based on the idea that individuals possess a set of competencies that can be developed and improved over time. Competency-based models typically involve identifying the key competencies required for a particular job or role, and then providing training and development opportunities to help individuals develop those competencies.
On the other hand, hierarchy is a fundamental concept in organizational theory that refers to the way in which power and authority are distributed within an organization. Hierarchies can take many different forms, ranging from traditional top-down structures to more decentralized and fluid models.
There are a number of theories that have been developed to explain the role of hierarchy in organizations. One of the most influential is Max Weber’s theory of bureaucracy, which proposes that organizations are most efficient when they are structured around a clearly defined hierarchy of authority. According to Weber, bureaucracies are characterized by a strict division of labor, a clear chain of command, and a set of rules and procedures that govern organizational behavior.
However, more recent theories have challenged the idea that hierarchies are always the most effective way to organize work. For example, some theorists have proposed more decentralized and participatory models, which allow for greater collaboration and input from employees. I have a separate article on this topic and provided an in depth argument over which form is better for which scenarios. For example, startups in the exploration phase can benefit from a flat organization. In contrast, companies focusing on execution can benefit from a deep, multi-layered hierarchy as this structure enforces clear responsibility and accountability.
Competency and Hierarchy in Practice
Competency-based models are widely used in organizations to identify the skills and knowledge that are required for performing or hiring for particular jobs. This helps organizations to ensure that they have the right people in the right positions, and that employees have the skills and knowledge they need to perform their jobs effectively. The alternative is to hire for people’s potential and allow them to gravitate toward their right position, or promote based on seniority and tenure.
One of the most common ways in which competency-based models are used is in job descriptions. By identifying the key competencies required for a particular job, organizations can ensure that they are attracting and hiring the right candidates. Competency-based models can also be used in performance evaluations to help employees understand the specific skills and knowledge that are required for success in their role.
When an individual demonstrates competency in a particular field or domain, they gain respect and recognition. This often leads to the individual being seen as an authority figure in the field, as others trust in their ability to perform tasks and make decisions with confidence and accuracy. Competency is a crucial factor that leads to authority and places a person higher up in the hierarchy. Having a hierarchy structure designed to be formed by competency encourages employees to become competitive and highly competent in what they are doing.
One of the companies that has been successful in adopting competency models is General Electric (GE). GE is well-known for its dedication to developing its employees and its competency-based approach to managing talent. GE’s leadership development initiatives, including the Management Development Course (MDC) and the Corporate Executive Council (CEC), concentrate on developing important competencies, such as strategic thinking, decision-making, and innovation, in current employees. These programs have been critical in keeping employees engaged and committed to the organization over a longer period, as well as in creating a strong hierarchy that promotes competent leaders and cultivates a culture of ongoing learning.
On the other hand, the impact of hierarchy on competency development and recognition can be significant. In some organizations, hierarchical structures can make it difficult for employees to take on new challenges and develop new skills. This is because there may be a limited number of opportunities for employees to move up the organizational hierarchy, and this can create a bottleneck for career advancement.
In some organizations that have more flexible and decentralized hierarchies, it’s been observed that employees have greater opportunities to develop and showcase their competencies, which can lead to greater job satisfaction, improved performance, and increased employee retention. However, it has been shown to be flawed in some other cases. Let me give you an example to show non-hierarchical organizational structures face their own specific challenges. For instance, Zappos, an online retailer for shoes and clothing, once experimented with a non-hierarchical organizational structure called Holacracy. In 2013, Zappos CEO Tony Hsieh implemented this self-management system to eliminate traditional management roles and empower employees to make decisions based on their competencies. Although this change was well-intentioned, it resulted in confusion and dissatisfaction among some employees, leading to a significant number of them leaving the company. This example highlights the potential difficulties and drawbacks of adopting alternative hierarchical structures without considering the existing competencies and preferences of employees.
Real Life and Examples of Competency-Based Models
Google: A highly regarded example of a company that has embraced a competency-based approach is the tech giant Google. It has implemented a system called Objectives and Key Results (OKRs) to align employee competencies with the company’s strategic goals. This approach emphasizes developing the specific skills required to achieve these goals, which has created an environment of ongoing learning and innovation. While it’s difficult to attribute all of Google’s success to this practice, it has certainly played a significant role in their achievements.
IBM: It has also adopted a competency-based model, and they have a long history of investing in employee development. Their personalized learning platform, “Your Learning,” allows employees to focus on developing the skills and competencies most relevant to their roles and career goals. By prioritizing employee development, it has been able to maintain a highly skilled and adaptable workforce, enabling the company to stay competitive in the rapidly evolving tech industry.
Procter & Gamble: P&G is another example. It uses a “build from within” philosophy, emphasizing the importance of developing employees’ skills and competencies throughout their careers. This approach has led to a strong leadership pipeline and a high level of internal promotions, contributing to the company’s long-term success and stability.
I hope these examples help to showcase the positive impact of competency-based models on organizational performance. These companies have made significant strides in creating better hierarchies and improving their overall performance by prioritizing the development of skills and competencies aligned with their goals.
Compare and Contrast with Alternative Models
To better understand why competency-based models are an excellent choice for most organizations, it’s essential to compare apples to apples, or in our case, hierarchies to hierarchies. Let’s dive into the world of seniority-based and tenure-based hierarchies and see how they stack up against our competency-based models.
Seniority-based hierarchy
In a seniority-based hierarchy, employees are promoted based on the length of their service within the organization. It’s like a reward for loyalty, and it’s been around since the days when knights in shining armor ruled the workplace.
Advantages:
Stability: Since promotions are based on the length of service, employees may feel a sense of security and predictability in their career progression.
Reduced competition: Seniority-based hierarchies can encourage a more relaxed working environment, as employees are not constantly competing with each other for promotions.
Disadvantages:
Lack of meritocracy: Seniority doesn’t always equate to competency or performance. As a result, more competent and deserving employees may be overlooked in favor of those who have simply been with the organization longer. Attracting the most competent employees may not necessarily be a concern for well-established businesses that do not require rapid innovation. For instance, an electric utility that operates nuclear power plants, which only require maintenance to run continuously, may find that a seniority-based hierarchy is a better fit for its organization.
Stagnation: This model might discourage innovation, as employees may not feel the need to improve their skills and knowledge to climb the ladder.
Tenure-based hierarchy
A tenure-based hierarchy is similar to a seniority-based one, but it focuses on the length of time an employee has held a particular position or role. It’s like a game of musical chairs — but without the music and with chairs that take years to circle.
Advantages:
Consistency: Employees who have held a position for a long time are likely to be familiar with the role’s ins and outs, providing a sense of continuity and reliability within the organization.
In-depth knowledge: Long-serving employees may develop a deep understanding of the organization’s culture and processes, making them valuable resources for training and mentoring newer employees.
Disadvantages:
Limited growth opportunities: Similar to seniority-based hierarchies, tenure-based models might not reward the most competent or high-performing employees, hindering the organization’s overall growth.
Resistance to change: Employees who have held a position for an extended period may become complacent or resistant to change, making it challenging to implement new ideas and strategies.
Now, let’s circle back to our hero — the competency-based hierarchy.
Advantages:
Meritocracy: Competency-based models reward employees based on their skills, knowledge, and performance, fostering a culture of excellence and encouraging continuous improvement.
Adaptability: By focusing on competencies, organizations can better respond to changing market demands and remain competitive in an ever-evolving business landscape.
Disadvantages:
Intense competition: As mentioned earlier, competency-based models can create a highly competitive work environment, which may lead to negative consequences such as high employee turnover or reduced collaboration.
As you can see, competency-based models offer several advantages over traditional seniority-based and tenure-based hierarchies. While there are some disadvantages, the benefits of a competency-based hierarchy often outweigh the drawbacks, making it a “good natural choice” for most organizations.
While traditional seniority-based and tenure-based hierarchies have their merits, the dynamic nature of modern industries demands a more flexible approach that rewards performance and fosters growth. Competency-based models help organizations attract top talent, drive innovation, and maintain a competitive edge.
Critiques and Challenges of Competency and Hierarchy
One of the main criticisms of competency-based models is that they can be too narrow and focused on specific skills and knowledge, rather than taking into account broader factors such as creativity and adaptability. This can result in a “tick-box” approach to training and development, where employees are only taught the skills that are explicitly required for their job, rather than being encouraged to think more broadly about their role in the organization. Due to this limitation, I argue that combining competency-based models with behavioral models is more effective. This approach allows for out-of-the-box thinkers to join organizations, especially those that need constant innovation and restructuring.
Another challenge of competency-based models is that they can be time-consuming and resource-intensive to implement. Developing competency frameworks, identifying the key competencies required for each job, and providing training and development opportunities for employees can all be time-consuming tasks, and this can be a barrier to adoption for some organizations. There are a handful of companies that have adopted a cut-throat culture and regularly replace their employees to ensure that only competent ones remain in the company. Needless to say, this approach has its own drawbacks and is not very sustainable in the long run.
In terms of hierarchy, one of the main challenges is ensuring that there is a clear path for career advancement for all employees, regardless of their position in the organizational hierarchy. In some organizations, rigid hierarchies can make it difficult for employees to progress in their careers, particularly if there are limited opportunities for promotion. Imagine if you define only six levels between a junior employee and a C-suite executives, this structure doesn’t support fast promotions and also can lead to a flat organization.
In addition to these challenges, there are also ethical concerns related to competency and hierarchy. For example, some organizations may use competency-based models to justify pay disparities between employees, or to unfairly exclude certain groups from certain jobs or roles. Although it’s a very cynical view on hierarchy, it has some truth into it. My personal take on this is that if you increase the number of layers and tie compensation to performance, these issues would resolve automatically.
Adaptability and the Role of Technology
In today’s fast-paced world, adaptability is the name of the game. Organizations must be able to respond quickly to shifting market trends, customer needs, and technological advancements. This is where technology comes into play, as it enables organizations to implement and maintain competency-based hierarchies in the face of constant change.
Firstly, technology can facilitate the identification and assessment of competencies within the workforce. Tools such as AI and ML can help orgs analyze large amounts of data related to employee performance, skills, and potential, enabling them to make informed decisions about talent management, workforce planning, and employee development.
Secondly, technology can support employee development by offering customized, on-demand learning opportunities. Through e-learning platforms, virtual classrooms, and microlearning modules, employees can continually develop and hone their competencies, ensuring they remain relevant and valuable to the organization.
Lastly, technology can enhance communication and collaboration within the organization, breaking down traditional hierarchical barriers. This fosters an environment where employees are empowered to showcase their competencies, contribute ideas, and take on new responsibilities, leading to a more dynamic and efficient hierarchy.
The Impact of Remote Work and the Gig Economy
The rise of remote work and the gig economy has fundamentally changed the way organizations operate. As employees are no longer bound by physical locations, competency-based hierarchies must adapt to this new reality.
To succeed in a remote work environment, organizations must ensure that their competency-based hierarchies remain flexible and inclusive. This involves adopting tools that facilitate communication and collaboration across geographical boundaries, as well as providing remote employees with the necessary resources and support to develop their competencies.
The gig economy, characterized by an increasing number of workers taking on freelance, contract, or short-term roles, also has significant implications for competency-based hierarchies. Organizations must be prepared to incorporate gig workers into their existing hierarchies, recognizing and leveraging their unique competencies to drive business success. Imagine the extreme that we all become freelancers, how would companies form hierarchies?
This may involve developing new frameworks that cater to gig workers or implementing agile project management methodologies that allow for seamless integration of gig workers into project teams. It is essential to strike a balance between maintaining a stable core of full-time employees and leveraging gig workers to stay agile and competitive in the market.
Future of Competency and Hierarchy
As the pace of technological change continues to accelerate, these models are becoming increasingly important for organizations to stay relevant and competitive. To keep up with changing demands, employees will need to possess a diverse range of competencies that can be applied to different situations. Take, for instance, the early years of the car manufacturing industry in the US, where employees were often young males without any prior qualifications. While they would learn on the job, today’s modern manufacturing industry requires hundreds of hours of training for prospective employees to become highly competent and productive on the job.
At the same time, we are likely to see a continued shift away from traditional hierarchical structures towards more decentralized and fluid models. This will allow for greater collaboration and input from employees, and will help organizations to respond more quickly to changing demands. In a traditional organization, scaling decentralized mini-hierarchies would be very difficult. However, technology allows for the creation of decentralized teams within a larger hierarchy, even in a very large company.
For example, Google is known for its innovative approach to talent management, which combines both competency-based and decentralized hierarchical elements. Google’s “20% time” policy allows employees to spend one day per week working on projects outside their primary job responsibilities, encouraging the development of new skills and fostering a culture of innovation. This policy has led to the creation of several successful products, such as Gmail and Google Maps. In addition, Google maintains a relatively flat organizational structure, with few layers of management, which facilitates collaboration and communication across teams. This approach to competency and hierarchy has contributed to Google’s continued success as a leading technology company although I would argue Google pays a hefty price for keeping its organization flat, but in the highly leveraged world of technology, it’s worth to keep your organization flat for the sake of supporting innovation.
In addition, we are likely to see a greater emphasis on developing competencies related to areas such as emotional intelligence, creativity, and innovation. These competencies will be increasingly important as organizations seek to differentiate themselves in an increasingly competitive landscape. I would argue that in the past, companies preferred to discover people with high EQ and creativity; however, in the modern day, companies are spending billions of dollars to improve these competencies in their existing competent employees.
Another important trend that is likely to shape the future of competency and hierarchy is the growing focus on diversity, equity, and inclusion. As organizations seek to create more inclusive work environments, they will need to ensure that their competency frameworks and hierarchy are designed in a way that does not unfairly exclude certain groups. Many people believe that a laser-focused obsession with competency can be short-sighted. This approach may overlook sustainability and the long-term impacts on inequality. Some people hold the opposite view, but the literature on this topic is not very conclusive, and the jury is still out.
Conclusion
In this analysis, I’ve explored the world of competency and hierarchy, arguing that competency-based models are a natural fit for most organizations seeking to establish a successful hierarchy. Throughout the article, I’ve tried to present examples, examine alternative models, and delve into how technology and adaptability contribute to creating a dynamic and inclusive work environment.
While I acknowledge the challenges and criticisms of implementing competency-based models, I’ve offered suggestions to address these concerns, such as blending them with behavioral models and utilizing technology to build decentralized teams within a larger hierarchy. It’s essential for organizations to maintain a long-term perspective, ensuring their decisions promote sustainability and equality when shaping their hierarchical structures.
Looking ahead, I predict that competency and hierarchy will continue to evolve in tandem, staying up to date with technological advancements and emphasizing the development of key competencies such as emotional intelligence, creativity, and innovation. By adopting competency-based models and customizing them to their specific needs, organizations can cultivate a culture of continuous learning, growth, and adaptability, positioning them for long-term success.
References
The Great Debate: Flat Organizations vs. Hierarchical Organizations (link)
The Link between Authority and Responsibility: An In-Depth Exploration (link)
Why Managers Aren’t Necessarily Leaders: The Importance of Knowing the Difference (link)
Group Dynamics: Understanding the Complexities of Group Behaviors (link)
How to Use Pareto Distribution in Management: Optimizing Resources for Success (link)
Becoming a Thought Leader: A Technical Approach to Personal Branding (link)
Why Thinking Long Term Matters for Your Career (link)
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