Competencies vs. Skills: What's the Difference?

November 3rd, 2020

Introduction

The conversation about skills has exploded in the past year from an almost hypothetical discussion about how to plan for digital transformation to a very real one in which hard decisions have had to be made about what skills were needed to keep businesses intact.

As organizations pivot to different ways of working, it will be even more important that they have a good understanding of the skills and knowledge employees have now, and the skills the organization will need in the future.

As part of our ongoing research on skills, we are focusing our first study on a question we have heard a lot:

What is the difference between skills and competencies, and why does it matter?

What we saw in the literature

To answer that question, we began with a review of the competencies literature. Four themes emerged in response to this question:

  1. Definitional Chaos. There is little agreement about the definitions of “skills” and “competencies.”
  2. Agreement on Goals and Benefits. There is considerable agreement about the goals and benefits of any skills or competencies effort.
  3. Competencies Support Performance Management. In some parts of the literature – mainly written for HR audiences – competencies are clearly linked to how a job is performed.
  4. Skills Leverage Tech. Organizations derive practical value from skills platforms that leverage huge amounts of data.

Definitional chaos

There is very little agreement in the literature about the definitions of “skills” and “competencies.” In some articles, the terms are used interchangeably. In others, skills are listed as one component of competencies – for example, “a competency is a measurable pattern of knowledge, skills, abilities, behaviors, and other characteristics.”1

Often a distinction is made in the granularity of skills vs. competencies, with skills being more granular – although one article suggested the opposite.2 Sometimes competencies are contextualized for a specific job or role (more on this below). The definitions and distinctions vary widely from author to author and audience to audience.

To further confuse the matter, when we compared skills databases to competency models many of the same terms showed up in both places. For example, the U.S. Office of Personnel Management’s MOSAIC Competencies framework and the U.S. Department of Labor-sponsored Career OneStop Skills Matcher tool both list items like, “Accounting,” “Client Engagement/Change Management,” and “Project Management.” OPM calls these items competencies; DOL calls them skills.

The same confusion plays out in the private sector. Some excellent vendors focus on skills; others on competencies – but if you look at their databases and lists of terms, there is considerable overlap.3

Agreement on goals and benefits

Given how inconsistently the terms “skills” and “competencies” are used, there is surprising agreement in the literature on the ultimate goal of a skills or competency effort: Organizations need to be able to identify what they (and their people) can do now and what they must be able to do in the future. They need to be able to use that information to plan and prepare for the future – to align talent with business goals. Job-seekers (internal and external) need to understand what’s expected of them and what they are good at vs. what organizations need them to be good at.4

Both competency models and skills frameworks attempt to facilitate these discovery and planning processes.

There is also agreement on the benefits of skills frameworks and competency models. Organizations can use skills and/or competencies to:

  • Use the same terminology to talk about what employees should be able to do
  • Understand what employees can do vs. what they need to be able to do
  • Fill key positions quickly and effectively
  • Target employee development to close key gaps
  • Help employees understand their gaps and options5

Most of the literature also agrees that there is no standard, universal set of skills or competencies that all organizations need. Organizations need to identify their competitive advantage, then tailor the models they are using to focus on the key skills/competencies that drive that advantage.

Competencies support performance management

In some of the literature, competencies were clearly linked to the performance of specific jobs or roles. In these cases, skills specified what a person can do, whereas competencies specified not only what but how the task or activity should be accomplished.6 They answered questions like, “How does an individual perform this job successfully?” and “How does an individual behave in the workplace to achieve a desired result?”7

This part of the literature is particularly helpful for leaders concerned with performance management, as it provides standards against which to measure behaviors and results. Skills tend to be decoupled from the performance of any specific job, making skills frameworks less relevant to performance management.

Skills leverage tech

Skills databases and competency frameworks are built and managed very differently. Developing a competency framework tends to be a top-down exercise run by a few people in the organization. It often involves intensive human effort to complete observations, job analyses, interviews, surveys, and document reviews.8

By contrast, skills databases tend to be built from the bottom up, using advanced computing power to glean skills information from job postings, resumes, HR repositories, and other data sources.9

Because they leverage technology to pull in and leverage massive amounts of information about employees, skills offerings tend to provide users with tens of thousands of skills options to choose from. This huge menu of options allows users to be far more granular in choosing and describing what they can do. This granularity lends flexibility and transferability, as it is easier to see how a particular skill might apply in different functional areas or organizations.

Thoughts on the topic

Regardless of terminology, we see enormous potential for vendors that help organizations answer the question, “what can we do, and what do we need to be able to do?” using the massive amounts of data now available about employees and their abilities.

Tech solutions have made it possible for many more organizations to start answering this question by automating many of the processes involved. The pace of change in today’s world will only increase the demand for organizations to maintain a very up-to-date understanding of what they can do and what they need to do. Any tech or methods that can shine a light on this question will bring huge value in the near, medium, and long term.

What caught our attention:

Of the literature we reviewed, several sources stood out to us. Each contained information that we found useful and/or intriguing. Although much of the competencies literature was written 5-10 years ago, it is particularly helpful to review in light of the question, “what’s the difference between skills and competencies?” Interestingly, many of the more recent articles on competencies were primarily written by vendors trying to clarify how their competency offerings fit in the skills marketplace.10 We learned from these perspectives and encourage you to do the same.

Policy, Data, Oversight: Assessment & Selection – Competencies

United States Office of Personnel Management  |  opm.gov, 2020

“Competencies specify the "how" of performing job tasks, or what the person needs to do the job successfully.”

 Highlights:

  • OPM’s Multipurpose Occupational Systems Analysis Inventory (MOSAIC) methodology for collecting occupational information has been used to build one of the most comprehensive competency databases available, covering over 200 U.S. federal government occupations.
  • The MOSAIC information has been used to develop competency models for a range of occupations, including cybersecurity, grants management, IT program management, and executive leadership.
  • All MOSAIC information is available in downloadable Excel spreadsheets or PDFs for public use.

How Ericsson aligned its people with its transformation strategy

Simon London and Bina Chaurasia  |  McKinsey & Company, Jan 2016

“[W]e literally took every single function in the company and all of its roles, mapped out the stages of each job, and laid out the competence needed for each one. That took a couple years.”

 Highlights:

  • A major shift in strategy led telecom giant Ericsson to change skills, technology, and processes on a global scale.
  • This shift also required an overhaul of the HR team, strategy, and processes.
  • The company completed a massive, years-long competency modeling exercise but reports that now every position in the company is mapped out.

The essential components of a successful L&D strategy

Jacqueline Brassey, Lisa Christensen, and Nick van Dam  |  McKinsey & Company, February 2019

“At the heart of this process is a comprehensive competency or capability model based on the organization’s strategic direction.”

Highlights:

  • This article puts competency management in the context of L&D’s responsibility to develop employees in line with organizational strategy and goals.
  • Once a strategic direction is set for the organization, it is critical to verify whether employees are equipped to deliver on that strategy.
  • To make this verification, this article recommends taking a deliberate, systematic approach to capability assessment, starting with a comprehensive competency model.

What’s the Difference Between Skills and Competencies?

Sarah Beckett  |  HRSG, March 2018

“In some ways, a skill and a competency are similar. On a basic level, they both identify an ability that an individual has acquired through training and experience.”

Highlights:

    • Skills define “what” an individual can do. Competencies define “how” they perform a job successfully.
    • Competencies = Skills + Knowledge + Abilities
    • Competencies improve HR processes by introducing consistency, visibility, structure, progression and coordination.
    • Competency management software solutions can ease much of the burden of using competencies to define job success.

Additional readings

  1. “Competency Frameworks: Core Competencies & Soft Skills,” Randstad, 2019.
  2. "Hard Skills vs. Soft Skills," Indeed, 2020.
  3. "Return on Leadership – Competencies that Generate Growth," Egon Zehnder International and McKinsey & Company, 2011.
  4. O*Net Resource Center, O*Net, 2010.
  5. "Competency Management at Its Most Competent," Deloitte and DDI, 2015.
Heather Gilmartin Adams

Footnotes

  1. “Policy, Data, Oversight: Assessment & Selection – Competencies,” United States Office of Personnel Management (OPM).
  2. “What’s the Difference Between Skills and Competencies?” HRSG, Beckett, S., 2018.
  3. “The Development of the Hogan Competency Model,” Hogan Assessment Systems, 2009; “Emsi Skills Data,” Emsi Skills.
  4. “The essential components of a successful L&D strategy,” McKinsey & Company, Brassey, J., Christensen, L., and van Dam, N., 2019; “Competency Management at Its Most Competent,” Deloitte and DDI, 2015.
  5. “What is Competency Management?” Valamis; “Policy, Data, Oversight: Assessment & Selection – Competencies,” OPM; “The Foundation of the Workday Skills Cloud,” Workday, Stratton, J., 2020; “Building a Common Language for Skills,” Degreed, Sweiry, O., 2019.
  6. “Policy, Data, Oversight: Assessment & Selection – Competencies,” OPM.
  7. “What’s the Difference Between Skills and Competencies?” HRSG, Beckett, S., 2018.
  8. “The Pros and Cons of Six Different Competency Models,” Avilar, 2018.
  9. “The Foundation of the Workday Skills Cloud,” Workday, 2020.
  10. “Why Use Competencies? Here are 7 Powerful Reasons,” Avilar, Jaynes, J., 2016; “What Is Competency Management and Why Do I Need It?” Kahuna, White, T., undated.