10/24/2012 01:45 pm ET Updated Dec 24, 2012

About Leadership: Competencies and Skills

We all know what skills are. They are, effectively, expert knowledge that a person acquires through learning and practice. An employee may have all the skills required to open a new pizza restaurant in our chain. He knows how to secure the real estate, get the equipment and furniture ordered, hire the key staff, secure the appropriate training so it meets our chain standards, and check on the quality both in the first week and later after opening.

But does he have the competencies required to do this? Having hired the key staff, can he quickly build them into a team? Is he astute enough to understand the relationships that need to be built with other local merchants? Will he be able to motivate the new store manager to achieve exceptional performance? How does he react to change in the business environment? And beyond all that, does he have the competencies to think through what our future strategy is on opening new stores? If he has ideas, will people listen to him? If he is put in charge of a bold new venture, (say, expanding the pizza chain network to Uzbekistan) will he be able to build the team to carry it out successfully? Even if he can build that team, will they align behind him or will they go in several different directions.

Skills and competencies are two very different things, and it is the astute corporation that recognizes this and thinks deeply about it. When we hire new graduates or junior employees, when we train them and promote them through the lower grades (assuming we have grades, see Grades) we are mainly doing so based on how well they acquire and practice the skills they need for the job.

At the same time we appreciate that the skills required to be really excellent at one level may be much less important at the next level. Investment banking Analysts, the entry level position, must be really good these days at using spreadsheet programs like Excel. They often have to produce complex models for deals in a short time under enormous pressure, and if there are errors these can be very costly to the firm.

But go up one level, to Associate, and there is already some direct dealing with clients, not through your boss but on your own. Now the skill is checking the analyst's spreadsheet, being sure the assumptions are correct, suggesting variations to see what the sensitivities are.

At the Vice President level, which is the next level up for investment bankers, much more time is spent with your own clients, and your relationships with other members of the firm, bringing together the different sorts of expertise required to win a client or do a deal successfully come to the fore.

Here as in most examples, as a person progresses, she develops and expands her skills, but also starts to need new competencies. We may think of competencies as fitness. Indeed, they are fitness for purpose. Unless we have this fitness we will not practice our skills effectively. I think this is pretty clear to all of us in the pizza restaurant example: We have probably all seen someone who had every skill required to do a job like this down perfectly, but still made a total mess of it because he lacked the required competencies.

A possible set of competencies used in BP in the 1990's is shown in the 3 x 3 grid below. There is nothing about these that should be viewed as prescriptive. Each company can figure out its own, and should do so. Indeed, the process of coming to these involved a lot of interviews with leaders of the Company at several levels, to see what they considered to be important, both to success of the Company, and to being successful in the Company, alignment of these two being crucial.

  • Respected Player = Acts Wisely & Decisively = Leads Change
  • Strategic Influencer = Builds Best Teams = Shapes Performance
  • Strategic Conceptualizer = Environmentally Astute = Ensures Alignment
While maintaining that each company will have its own competency framework, I would suggest that, for senior leadership, it must include something about strategic ability, something about team building, awareness of what is going on around you external to the company, and ability to execute. I was struck some years ago by an analysis done by Forbes Magazine on 'Why CEOs Fail', which concluded that it is not often due to a failure of strategy but more to failure of execution. So core competencies for leadership are about strategic thinking, ability to influence and to execute.

It is pretty easy to teach skills and to evaluate how well these skills have been learned. It is much harder to develop competencies and to evaluate how well these are practiced. Some leaders seem to operate on the assumption that skills are taught but you have to be born competent -- either you got what it takes or you don't. I disagree. I know that my own competencies have developed a lot over my management career, some through courses I have taken, some through being observant, a lot through receiving feedback and acting on that feedback. Competency development for an up and coming staff is why we think carefully about the assignments they are given, and with whom they will be working on these assignments.

Not everyone can be raised to the highest level of skills in a particular area, nor can everyone be developed to the highest level of competency required to lead a major corporation. But it is in the interest of the corporation to develop everyone to the highest level at which they can contribute. Failure to invest in doing this is the biggest area of waste that most companies have.

About Leadership:
About Leadership is a series of 52 columns on corporate leadership -- essential skills, leading teams, managing your career, the strategic and business practices to make a company and its leader distinctive from competitors. These columns will be of interest to people leading small and medium sized companies today, many of whom have not had much formal training in management skills and techniques; for the many people in big companies who aspire to senior management; and for anyone who thinks: Give me a hint, how can I do this better?