HR Guide to the Internet:
Compensation: Integrating Competencies Into HR Programs





·  Drives change strategy

·  Defines or refines organizational needs vision statement

·  Provides model context in mission or vision statement




Collect competency data

·  Decide on an occupational group, or work unit

·  Select a data collection method and plan your approach

Use the data to build a competency model

·  Organize data collected

·  Identify main themes or patterns

·  Select 6-9 of the most important themes or competencies

·  Describe behavioral indicators for each competency


·     Contains competency titles with definitions (6-9)

·     Provides behavioral statements for each competency

·     Lists needed knowledge and skills




·  Utilize the same competencies as defined for the organization by business strategy

·  Should respond to the business needs identified in stage one

·  Include performance appraisal, training, development, recruitment, selection, compensation, and succession planning

Figure 1: Work Planning for Developing a Competency System






Developing a competency-based human resource system involves four main areas of work:


C                   Planning and defining essential goals and business objectives

C                   Data Collection

C                   Competency model building

C                   Application of the competency model through development of human resource tools such as performance appraisals, interview guides and job profiles


This section covers planning and defining essential goals and business objectives as outlined in Figure 1, on the preceding page of this section.  This figure serves as a guide to the different areas of work and shows the relationships between them. The highlighted section outlines the area discussed below. Following sections will cover the details of the next areas of work shown in the gray areas of the figure.


Planning and Defining Essential Goals and Business Objectives


Asking and answering these questions will help identify the direction and purpose of an organization:


C                   What does the agency produce?

C                   Where are we now?

C                   What strengths and weaknesses does the agency have?

C                   What trends will influence the agency in the future?

C                   Where do we want to head?

C                   How do we get there?

C                   How do we know when we succeed?


These questions and answers will lead to the development of a business strategy. This should include a vision for the organization, mission, program goals, objectives, and a method to evaluate progress.


A vision describes the role an organization will have in a business environment.  It provides a focus for activities.  Managers can use it to communicate each employee’s role in the overall picture.  An organization’s vision provides a guide for


the future, a basis for decisions, a source of motivation and a statement of beliefs and values.  A vision often states how an organization sees itself or describes future goals and objectives.  Along with mission and values statements, a vision statement defines why the organization exists and where it is going.


The vision of the Department of Labor and Industry is to continually improve service to the Public and job satisfaction for employees by focusing on:


            Customer needs and satisfaction

            Creating an environment for continual improvement

            Empowering staff individually and in teams to make decisions that affect them

            Increasing good teamwork and participation



Figure 2: Sample Vision Statement; Department of Labor and Industry


A mission states the fundamental purpose of an organization and what it hopes to achieve in the future.  Often leaders get the entire organization involved in writing a mission statement to give everyone a chance to express organizational objectives in a way that inspires commitment and innovation.  Best practices suggest that a good mission statement will:1


C                   Identify the basic purpose of the organization

C                   Support an ongoing commitment

C                   Motivate those connected to the organization

C                   Use active verbs to describe what the organization does

C                   Be proactive

C                   Be free from jargon


The Purpose of the Department of labor and Industry is to promote the well being of Montana's workers, employers and citizens, and to uphold their rights and responsibilities.


C                   Be short enough for anyone connected to the organization to readily repeat


Figure 3: Sample Mission; Department of Labor and Industry


Goals and objectives define the path or direction an organization will take to accomplish its mission.  As part of a business strategy, they guide how an organization will pursue its purpose and accomplish its mission.  An effective statement of goals and objectives should:2


C                   Be clear and concise

C                   Visualize the desired result

C                   Build accountability into goals

C                   Use time limitations

C                   Make goals achievable

C                   Write goals in a positive format



Department of Labor and Industry: Performance Assessment Goals (1996)


1.  Design a tool that has relevance to both employees and supervisors.

2.  Invoke a process that is fundamentally constructive in nature.

3.  Implement an appraisal process than involves 360-degree communication on a regular and ongoing basis.



Figure 4: Sample Goals; Department of Labor and Industry; Competency Bases Human Resource System slides.


Most agencies have already developed a business strategy.  However, elements of a strategy will change with organizational demands, and need updating.  As an agency moves toward competency-based human resources, review of these basic

systems will help make success more likely.  If an agency would like help with this developmental phase, the Professional Development Center provides training and facilitators to assist managers and employees.


An organization's business strategy defines the specific route it will take in realizing its vision. Along the way the strategy will require certain organizational capabilities. These are the abilities displayed by the organization as a whole that make it unique. Linking business strategy to people's competence builds the needed organizational capabilities. Human resource processes need to connect employees' competencies to the overall organizational direction. (Figure 5)

Figure 5: Integrating Human Resource Practices Vertically Within the Organization and Horizontally with Each Other; adapted from Tomorrow=s HR Management,  p. 20 4


The organization's business strategy will drive the competency model. All employees must clearly understand it.  Successful human resource management efforts require a clear understanding of the link between the business needs of an organization and the strategy to meet these needs.  Many organizations use competency models as a means to link employee performance with the mission and goals of the organization.  The competencies that form a competency model describe successful performance for a particular position in an organization that contributes to overall success.  An organization can use competency models to:


C                   Improve customer service, productivity, training and selection of employees

C                   Provide a means of measuring success and reviewing organizational effectiveness, which can adapt to compensation

C                   Promote effective work planning

C                   Manage change

C                   Understand and define superior performance

C                   Gather data and modify training programs

C                   Give employees regular performance appraisals

C                   Provide a strong support system for managers


An organization must know the relationship between business strategy and building a competency model.  It must also commit to supporting the project.  The time and expense of building a model need to be considered in making the decision to start a project.


Any major change in human resource management methods must tie into the vision and mission of the agency.  Communication of the vision and mission to employees must clearly link the work they do and the purpose and direction of the organization. The time and effort an agency spends on this planning effort provide the connection between agency performance and the people who make success a reality.





                                              READINESS ASSESSMENT


Determining agency readiness for the changes that occur when starting a competency-based human resource system is an important first step in planning and organizing a project.  Most research shows certain success factors important in assessing an organization's readiness for a competency-based system.  The following indicators will help an organization assess readiness to pursue change in human resource management:


C                   A need for change recognized by both management and employees including unions or employee organizations

C                   Clearly-stated vision, mission, goals and objectives, and a business strategy to achieve them

C                   Good communication channels, and employee access to information

C                   A high-trust environment

C                   Appreciation of individual employee contributions by management

C                   Agency wide emphasis on performance and customer service


An agency that lacks one or more of these indicators can still pursue a competency-based system.  It means introducing the system as part of a larger change process that includes improvement of the areas identified as weak.  No single Aformula" for success exists.  However, understanding the probable indicators may help to clarify a particular agency's level of readiness. This will give a sense of overall agency readiness that will help rather than hinder the effort to move to competency-based human resources.  For example, if the first three areas (management and employees recognize a need for change; clear goals, objectives and business strategy are in place; and good communication channels exist) are present, but the remaining indicators need work, others could be asked for ideas about the weak areas before starting system design. Information can come from employee groups, union representatives, or line supervisors.  Senior managers can develop or identify commitment and support for a competency project.


Agency managers and human resource officers need to keep these areas in mind when planning a competency-based human resource system.  More than likely, through the readiness assessment process, an agency can identify some strengths, or anchors, for a competency-based system.  Basing change on these strengths and continuing to work on weak areas will tailor the change efforts to the needs of the agency. 


In determining agency readiness, the human resource manager should review agency human resource systems and processes.  Research shows that successful organizations have certain common characteristics included in the following list of items:


C                   Jobs evaluated using a formal system such as the Benchmark Factoring Methodology

C                   Well managed and maintained human resource systems

C                   A strong support system for managers (including formal training or leadership development opportunities, formal and informal communication between managers at all levels, agreement among managers on agency goals and objectives, and availability of resources)

C                   A good performance management system in place that includes regular reviews of organizational effectiveness, effective work planning, and regular employee performance appraisals

C                   Effective employee development and training programs


Ideally, all of the factors listed above would exist in an agency before beginning a project.  However, most agencies will identify both strengths and weaknesses through the assessment process.  Designing competency systems or the managing larger-scale change processes should include plans for improving identified weaknesses.


A variety of ways to assess and understand the climate and organizational readiness of an agency exist.  One common method uses agency surveys or polls. These surveys often cover such topics as:


C                   Mission, goals and objectives or business strategy

C                   Organizational structure and accountability

C                   People and interpersonal relationships

C                   Reward systems and performance

C                   Technology

C                   Processes of communication, decision-making, conflict management and role clarification

C                   Leadership

C                   Commitment to agency values and agency climate or culture


Most competency system pilot projects conducted by the State Personnel Division used the Competency Project Employee Climate Survey, included as Addendum A. The survey addresses areas related to agency climate such as training and development needs, and the results give valuable information about how employees see their work environment.  They provide insight into the strengths and management environment of an agency and a focus for agency energy. Current best human resource practices suggest using a survey at the beginning of any change to a competency-based system.  This type of survey gives the agency candid, current and useful baseline information for measuring success.


If an agency wants to develop a customized survey, Addendum B provides a sample of survey questions listed by topic. These questions address a variety of organizational readiness issues or indicators. Most survey instruments include these or similar questions.  While not a readiness survey itself, this addendum can give guidance when writing survey questions.  The specific audience and topics will affect which questions or types of questions included.  Agencies should change the wording of these to fit their individual circumstances.


Basic suggestions for constructing a customized survey:


C                   Focus very precisely. Every item should zero in directly on one specific issue.

C                   Keep each item brief.  The longer the question, the greater the task for the respondent and thus the greater the chance for bias.

C                   Strive for clarity. Every respondent must know exactly what is being asked.

C                   Use simple sentences.  Two or more simple sentences are far preferable to one compound sentence.

C                   Group questions that use the same scale.  This will make the survey less confusing and make the task of the respondent easier.

C                   Ensure the question focuses directly on the issue or topic measured.4


Many sources, such as human resource journals, books, consulting firms and the Internet, provide information about different types of surveys.  Listed below are specific sources of employee surveys that address agency climate and internal systems related to agency readiness.   An agency human resource office can help develop or modify a survey. The State Personnel Division can provide this for agencies that lack a human resource office.


Conducting a survey requires that employees spend valuable work time completing it.  Managers must commit to using employees' responses as a contribution toward improving work environments and internal systems and processes.


                                       Survey and Information Resources


American Compensation Association, 14040 N. Northsight Blvd., Scottsdale, AZ 85260


American Society for Training & Development, 1640 King Street, P.O. Box 143, Alexandria, VA, 22312-2043


Linkage, Inc., 110 Hartwell Ave., Lexington, MA 02173


Professional Development Center, State Personnel Division, Department of Administration, Mitchell Building, Helena, MT 59620




Orientation sessions introduce employees to competencies and to competency-based human resource systems. The sessions explain how a competency-based system will improve an organization.   They also generate the buy-in and support needed to succeed.  This section describes several tools available to help with orientation as the agency begins to develop its own system.


Background Information and Updates


Video Presentation


Montana's Human Resource Competency Project video explains the concept of competencies and why Montana has chosen to create a competency-based system.  Each agency has a copy of this video.  It is a good introductory tool, especially when combined with a question and answer session.   The State Personnel Division has copies of the video.




“” This website includes Frequently Asked Questions (FAQs) about a competency-based human resource system, project plans, and a report to the project steering committee.  Other resources found at the website include electronic versions of “Frontiers" and the “Montana's Human Resource Competency Project" newsletter.




Frontiers reports on Montana's competency project.  It includes articles explaining competencies and discussions of pilot projects that help develop the competency system. Other sections compare and contrast the current pay system to a future competency pay system.  This can provide general background information.


Presentation Outline and Slides


This section includes a presentation introducing the concept of competencies. Titled Competency-based Human Resource Systems/Orientation Session, the presentation provides an overview of competencies, State Personnel Division's project, and the use of competencies in compensation. 


Developed to run on PowerPoint software, the presentation consists of slides run from a computer through a projector.  Agencies without access to a computer projector can use the full-size, photocopy-ready handouts in the separate sleeve to create overheads.   Handouts, with copies of the slides and space for notes are provided for participants. Copies of these slides with talking points follow.   


The Department of Labor and Industry Personnel Bureau designed its own PowerPoint presentation, included as Addendum C.  It incorporates Labor's mission, vision and objectives.  Departments should consider following this example to customize the general presentation to fit their specific needs.












State of Montana


Human Resource Competency Project


Sample Employee Climate Survey


The following survey may be reproduced and used as written.  Data from this survey can be compared with data from other agencies using the same survey and with data from most pilot projects for a clearer picture of the climate of an individual agency.  Please note that the address of the particular agency surveyed should be placed where indicated.



Human Resource Competency Project


State of Montana





































 HR Competency Project Survey



This survey is intended as a tool in planning, needs assessment and in measuring effectiveness of competency-based human resource projects.  Your responses to the survey questions will be combined with your peers’ responses and will serve as an essential source of information for developing and testing components of a new human resource system.


Your perceptions and opinions are critical to this process.  We appreciate your cooperation in providing candid, honest answers to these questions.  The survey results will be reviewed, summarized and processed by staff at (agency).  As such, your responses are anonymous and confidential.




<   Please provide a response to each question.

<   For each question, fill in the space corresponding to the answer that best matches your opinion or knowledge

<   If, for any question, you have no opinion or do not know, fill in the space corresponding to “don’t know”.

<   You are encouraged to provide written comments in the space provided.  Individual comments will not be shared but will be summarized.

<   Mail completed survey to: (address)

                                                       Thank you for your time and cooperation!


Text Box: Almost Never
or Never




Almost Always
  or Always

Don’t Know

Job Title _______________         Non-Supervisory             G


Agency _______________          Supervisor/Manager        G




  1.   I can clearly explain to others the direction (vision, values, mission) of my agency.

  2.   My work group’s goals are consistent with my agency’s goals.

  3.   I can see a clear link between my work and my agency’s goals.

  4.   My agency is experiencing significant change which is necessary to meet our changing needs.

  5.   My agency is experiencing significant change which creates a stressful work environment.


Learning and Development

  6.   My manager promotes my participation in continuous learning.

  7.   I get feedback and support from my supervisor to help me improve.

  8.   I have the opportunity to learn and do new things in my job.

  9.   In my work unit, we receive ongoing group feedback that helps me improve my performance.

10.   We receive timely feedback on our suggestions for improvement.

11.   I receive regular performance evaluations.

12.   My last performance evaluation helped me to improve my job performance.

13.   My supervisor and I view my career management as a shared responsibility.


Customer Relations

14.   In my work group, we actively seek out customer feedback.

15.   In my work group, we use customer feedback to improve our work procedures.

16.   In my work group, we define specific goals for meeting the needs of our customers.


 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G


 G     G    G   G    G       G




 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G


 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G



 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G






17.   My co-workers and I maintain good communications.

18.   I feel comfortable speaking with my supervisor.  My supervisor listens and is accessible.

19.   The communications in my work unit foster a positive, productive work environment.


Job Satisfaction

20.   I am satisfied with the challenges my job provides.

21.   I am given enough time to do what is expected of me on my job.

22.   My work gives me a feeling of personal accomplishment.

23.   I am able to exercise an appropriate amount of control in my job.  If not, why not?






24.   I know when I will receive my next pay increase and understand the basis for which salary decisions are made.

25.   I believe that how I do my job can have a significant effect on my salary.

26.   The way in which my compensation is determined is fair and reasonable.







 G     G    G   G    G       G

 G     G    G   G    G       G


 G     G    G   G    G       G




 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G

 G     G    G   G    G       G






 G     G    G   G    G       G


 G     G    G   G    G       G

 G     G    G   G    G       G


Your Comments:






Examples of Survey Questions


These statements are examples only.  Survey elements can take the form of questions or statements that require non-standardized or fixed type responses, as shown. While not all inclusive, these will illustrate the kinds of survey items that may give good feedback in readiness assessments. Examples are organized by survey topic area.


Mission, goals and objectives or business strategy


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


C      I can easily explain our agency's mission.

C      I understand how the work I do affects my agency's mission.

C      I understand the strategy (mission, goals, objectives) of this organization.

C      There is a high degree of commitment to this organization's mission and objectives.        

C      The people in this organization are able to explain and support the agency.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


The following examples require a free response or comment box:


CTo what degree do you feel your agency has been successful in accomplishing goals:

CThe strategy of this organization could be improved by:


Organizational structure and accountability


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


COur present structure facilitates work, information flow and decision making.

CThere is a clear understanding of who does what within this organization.      

CAccountability for final products is clear.

COur rules and policies help us get the job done.

CThe organizational structure in this agency helps people to do their work more effectively.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


People and Interpersonal Relationships


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


CWe use problems and mistakes as learning opportunities.

CRelationships in our organization are characterized as partnerships.

CPeople in this agency understand their jobs and how they contribute to the overall organizational effort.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


The following examples require a free response or comment box:


CThe following things need to be done to improve the fit between the kind of people we now have and the kind we ought to have:   

CSpecific things that need to be done to improve the relationships among the people in the organization are:


Reward systems and performance


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:



CI can see a clear link between my work performance and my work unit results; I do make a difference.

CMy manager has communicated performance objectives with me.

CPerformance standards for individuals in this agency are clear to all concerned.

CIt is easy to find out how you are doing in this agency.              

CI am satisfied with the performance management system in this organization.

CThe present performance management system motivates people to achieve better results.  

CClear individual objectives and performance criteria are established for positions in this organization.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


The following examples require a free response or comment box:


CThe performance management system in this organization could be improved by:




The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


CThis organization has sufficient equipment (computers, word processors, calculators, etc.) to accomplish its mission.

CThis organization makes full use of the equipment it has.

CThe personnel in this organization have sufficient knowledge to operate and maintain the equipment it has.

COur management information system supports our organization.

CIf our agency does not have the technological support that it needs we can obtain it from another source on a timely basis.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


Processes of communication, decision-making, conflict management and role clarification


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


CInformation flows easily across boundaries in this organization.

CThis organization has good overall communication channels.

CConflict is dealt with openly and managed constructively in this agency.

CDecisions are made at the most appropriate level in this organization.

CPeople in this organization understand which decisions they can make and which ones must involve others.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


The following examples require a free response or comment box:


CThe processes of communication, decision making, conflict management and individual role clarification could be improved by:

CThe way we are divided up to do things and the procedures we follow to do them could be improved by:




The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


CThe leadership of this organization provides me with sufficient clear guidance on tasks we must accomplish.

CThe leadership of this organization focuses on the future.

CThe leadership of this organization shows that it trusts me to do my job well.

CThe leaders in this organization are genuinely people oriented.


1 = strongly agree

2 = agree

3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)


The following examples require a free response or comment box:


CThe leadership of this organization could be improved by:


Commitment to agency values and agency climate or culture


The following are examples of fixed response statements that require a fixed response scale such as the one provided below:


CThere is a high degree of personal commitment to this organization.

CThis organization is seen as a good place to work because it treats its people right.

CI would recommend this agency as a good place to work.

CMy manager encourages an environment where individual differences are valued.

CThe people I work with cooperate to get the job done.


1 = strongly agree

2 = agree

                    3 = disagree

4 = strongly disagree

5 = do not know (not a neutral response)








1Janel M. Radtke (1998), Strategic Communications for Nonprofit Organizations: Seven Steps to Creating a Successful Plan, John Wiley and Sons, Inc., (to order this publication call 800-225-5945)


2 Investment in Excellence for the 90's (1992), The Pacific Institute, Waterfront Place, 800, 1011 Western Avenue, Seattle, WA 98104 (this publication is part of a four-day seminar presented by the Professional Development Center, Investment in Excellence)


3 David Ulrich, Michael R. Lousy and Gerry Lake (1997), Tomorrow's HR Management, New York, John Wiley and Sons, pp. 7-17


4 AME Toolbook, Volume II, Linkage Inc., p. 28




Competency-Based Human Resource Systems

Orientation Session


This addendum includes black and white, photocopy-ready slides for creating overheads, handouts and suggested talking points for this presentation.  Staff at the State Personnel Division can answer any questions regarding this material and provide guidance for using it in orientation sessions.  This presentation is also available on PowerPoint.



This section contains an example of a customized PowerPoint orientation program from the Department of Labor and Industry.  The original program includes a range of animations and special effects available through the PowerPoint software.  This example may provide ideas for customizing a presentation to an individual agency.


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