Last week my colleague Chris blogged about the differences between competencies and skills – over the course of my consulting experience, I developed a simple framework for putting skills and competencies to work.

Think about throwing a spear – the first thing the thrower needs is energy/momentum. The spear will not fly very far unless the thrower invests enough energy in his or her throw. Second, the thrower must have developed the physical coordination to shift his or her weight and pull back the long, weighty spear in preparation to throw. Coordination is a competency that is widely applicable to a number of sports, but critical for throwing the spear. Finally, the thrower must be able to aim the spear. This is a skill specific to throwing the spear, which is markedly different from throwing other objects, such as a ball.

The People Core Assessment© pyramid, illustrates this framework. The base of any successful action in energy and engagement – no task will get done without them. Competencies sit above energy, and tell you whether or not you have the capabilities required to succeed. Finally, the specialized skills required to complete the task form the apex of the pyramid.

From experience in coaching talented cyclists as well, I’ve found support for this same thinking in one of the greatest books: The Cyclists Training Bible by Joe Friel. Mr. Friel suggests similar thinking for building up peak performance through a few selected races over the year. Build core strengths and capacities first, then more specific skills with higher intensity as the race progresses. A common mistake of endurance athletes is to work on the top of the pyramid without having a foundation in place. This is true for our day to day management challenges as well.

When you are confronted with a people management challenge, start at the bottom of the pyramid and figure out if your people are invested in the tasks at hand – do they have the energy and motivation required to carry the project forward? Winners rarely win by accident, people have to want to win. Second, take a good, hard look at the competencies of the people on your team. Do they have the core abilities needed to win? Finally, figure out what specific skills you need to develop in your team and make sure they have those skills, which are the tools you will use to attack the challenges at hand.

Ask anyone which is worse, an unskilled person or an incompetent person and I’d bet money most will answer incompetent. Why? The difference in meaning is subtle, but profound. An unskilled person can be trained. The word incompetent implies that the individual at hand does not have the aptitude to succeed or grow – they lack the basic competencies to get the job done.

I mention this because one of the most common mistakes made in Human Capital Management is confusing skills with competencies. Skills can be learned, certificates can be earned, etc. Competencies take much longer to develop. For example, a skill might be profient in C++ (a programming language), but a competency might be high capacity for problem solving. Problem solving is important for programming in any language, and can be applied to many other challenges in the workplace.

SuccessFactors Research conducted a study of competency management of our own customers, and was able to identify what some winners do in various industries. The implication was pretty clear, companies that effectively manage the competencies of their people have greater potential to do better. But competencies aren’t just about overall company performance – they are highly relevant to individuals. If you can figure out which competencies are the most important for a given position, you can better place and develop people to succeed in that position. Competencies aren’t just leading indicators of success for your company, but also for your people.

Is the rising cost of people threatening your business? The War for Talent has put a crunch on the people supply, driving up the price of talent. In fact people now account for about 70% of operating cost, depending on the industry – and this number is rising! People are the fuel for execution, but managers don’t have to lose sleep over this shortage. They just need to realize that people really are assets, and while they might cost a bit, they have the potential to learn, grow and ultimately contribute more.

It would be great if business could just turn on the tap and have access to great people all the time, but that is just not the environment we are in today. The answer to this problem is pretty clear – develop the resources that you have. The people already in your company probably have a lot of untapped potential. Look around the office, is everyone really engaged and motivated? There are a lot of ways to get more from your people, grow their skills and competencies, align their goals – but it all starts with energy.

If your people are having an energy crisis, you need to deal with it. Without motivation, it won’t matter if people have the best skill set in the industry. Fortunately, manager’s have a lot of tools to increase energy and engagement. The Conference Board did a comprehensive study on engagement and found 8 factors other than pay that motivate and energize people: Personal development opportunities, clear path for advancement, line-of-site between individual contribution and company performance, trust and integrity, nature of the job, pride about the company and relationship with one’s manager. We talk about engagement in detail in our paper Drive Top and Bottom Line Results with People Performance.

It’s okay to have a capitalist view of people performance. Supply and demand are just as important in the realm of talent as they are in the commodities market. In fact, we will be hosting a webinar on August 13^th with best-selling author and venture capitalist, Rich Moran. Erik and Rich will discuss what makes a great hire and how to keep them. The cost of capital is on the rise and we now live in a world where it’s not about hiring across the street. It is paramount to have the right people in the right place to make sure your company is capital efficient.

Companies embrace the idea of Succession Planning and Talent Management with great enthusiasm, but rarely put the mechanisms and tools in place to effectively follow through on their initiatives. SuccessFactors Research recently conducted a survey of Succession and Talent Management capabilities across the U.K. and Ireland, and found that this is indeed the case. Companies have initiatives in place, but do not back them up with effective processes and support.

For example,  76% of all companies in the survey were found to have some kind of succession plan in place, yet 40% of companies lacked any process or capability to identify future talent. You simply cannot identify successors effectively, if you do not have a regular process in place  to identify talent within your company. Talent reviews should be the starting point, not the end point of the talent management process. Managers should have plenty of tools to help identify talent. 360 reviews, performance reviews, and competency assessments can all be used to make reasonable assumptions about the potential of an individual.

Losing your best talent can be disastrous during these tough economic times – making Succession Planning a top priority for organisations wanting to build growth and be successful. Organisations routinely encounter turnover across a variety of key positions which often results in significant disruptions if no replacement is readily available. You need to know what you have, at all levels in the organisation, before you can start to think about successors.

SuccessFactors is presenting a  webinar focused on effective succession planning in the U.K. and EMEA, Effective Succession Planning: It’s not just for your CEO, on Tuesday, July 22nd, register here. You can learn more about the tools available to managers, and bring your own questions to our team. You can also read more about the state of Succession planning and talent management in the U.K. and Ireland in the related SuccessFactors Research Data Brief.

Not long ago SuccessFactors Research and thought leader Amy Lyman hosted the webinar The Business Benefits of Being a Great Place to Work. People who love their jobs work harder and do better. It follows then that creating a “great place to work” should be a top priority for all businesses. Of course, this is easier said than done, or is it? If managers focus on transparency, honesty, diversity and fairness they are on their way to creating a great place to work. Every business is different, so making the leap from a good place to work to a great place to work will involve different factors for each workplace. Ms. Lyman discusses these factors and how they help businesses excel in the webinar she did with us.

Every year the Great Place to Work Institute’s 100 Best Companies to Work for survey is published in Fortune magazine. In fact, SuccessFactors has twice been ranked highly in the small business category. How do we do it? Well, we are very transparent about what drives our success, and have a blog dedicated to employees telling their success stories here at SuccessFactors – the HappyFactors blog.

The response to our joint webinar with Ms. Lyman was electric, and she received many follow up questions from our guests after the conclusion of the webinar. She was kind enough to answer these questions in detail, which are now available for download – SuccessFactors Research Webinar Extra: Amy Lyman . She tackles some tough questions like, how do you start to build trust when employees have lost their trust in upper management, and can you recommend some processes to uncover what’s working in a company in terms of building a strong culture?

Ms. Lyman will be joining us again August 19^th for a webinar focusing on Europe and EMEA. Just as the challenges are different for every business, they are different in various geographies as well. Check our events page for the registration link, which should be available shortly.

The title of this blog entry is taken from a song on one of my favorite David Bowie albums, “Scary Monster & Super Creeps”. If you own this album, there is a good chance you are a member of my generation (X). In my experience, knowledge of pop music and television shows is one of the single greatest differences between generations (at least in the United States). For example, most guys in my older brothers’ generation know the opening guitar riff from the song “Rock n Roll” by Led Zeppelin:

“hey hey momma say the way you move, gonna make you sweat gonna make you groove” – da na na nuh nuh nuh nuh, nuh nuh nuh nuch nuh nuh, da na nuh da na nuh nuh nuch nuh waaaaaaaaaaa!

In contrast, many guys in my younger nephew’s generation know the riff from Seven Nation Army by the White Stripes:

duhn, duh duhn duhn duhnnn duh, duh duhn duhn duhnnn duh duh duh duh!

But once you get past music and TV, generations tend to be far more similar than many “generational experts” would have us believe. By generational expert, I mean anyone who makes money selling books, workshops, or programs based on telling you how to manage different generations. Simply put, I don’t believe the hype that the work goals and expectations of the baby boom generation are somehow qualitatively different from generation X, generation Y, generation Z, millenials, or generation “insert the name of whatever book is next marketed on this topic”. This point was made quite nicely in a research book recently written by Dr. Jennifer Deal:

“Fundamentally people want the same things, no matter what generation they are from. You can work with or manage people from all generations effectively without becoming a contortionist”. From Retiring the generation gap: how employees young & old can find common ground, published by Jossey Bass, 2007.

I would argue that many supposed differences between the employee attitudes of generation Y and those of the baby boom generation can be boiled down to two basic factors.

Supply and demand: There are fewer skilled workers in today’s economy than there were in the 1970’s. If you graduated from college in 1978 you were competing against a lot of other people for fewer jobs so you had to put up with some pretty demanding requests from employers. The tables have turned for people graduating in 2008. Now the demanding requests are flowing the other way. Generation Y employees expect more from employers because they are more likely to get it.

People who are young act differently from people who are old. Here is a newsflash, people in their 20’s who are early in their careers, unmarried, without children, etc. just might be a bit more idealistic and optimistic than their older coworkers who have suffered more of life’s “slings and arrows of outrageous fortune”. Talking about generational differences without controlling for how people’s interests and needs change as we grow older is like talking about differences in fashion without taking into account the temperature where people live. Saying younger people have unrealistic expectations about work because they are more idealistic than older people is like saying people in Florida are more risqué because they wear skimpier clothes in the winter than people living in Minnesota. Its not about generational differences, its about differences between being young or old.

When putting together talent management strategies, don’t lump employees into broad generational groups and treat them as though they all want the same things from work based on some book you read. Ask them! You’ll probably learn that what employees want is remarkably similar regardless of their age: a challenging job where they feel appreciated and respected, have a reasonable sense of security and career growth, and believe they are making a difference in the world that they can be proud of. While there are some interesting generational differences in terms of people’s collective experiences, memories, and communication styles, when it comes to the basic things that make a job rewarding employees tend to be more similar than different regardless of the year they were born. But since I’m a member of Generation X you might just chalk my negative attitude toward generational differences as a result of the “fact” that people from my generation have a cynical, mistrusting attitude toward authority.

SuccessFactors Research is pleased to post this guest blog from our friend and Thought Leader Dr. Steven Hunt.

It is always surprising when people resist the idea that pay and performance are related. It is so logical – reward your best, and make sure that slackers aren’t hanging around being rewarded.

Why would a rock star keep performing if he or she were only paid as much as the guy who surfs the web all day instead of contributing? Ignoring pay for performance is a sure fire recipe for low morale and low performance.

Even Communist Cuba gets it! After decades of trying to run an economy where a doctor is paid about the same as the paper boy, they are acknowledging the obvious – if you want great people to do a great a job, they have to be recognized.

Vice-Minister for Labour Carlos Mateu says it best himself, “It’s harmful to give a worker less than he deserves, it’s also harmful to give him what he doesn’t deserve.”

While SuccessFactors Research does not endorse any government or political philosophy, we do endorse people performance, and recognizing great individuals – Viva pay for performance!

I’m happy to present this guest blog from our Thought Leader partner and my friend Dr. Jac Fitz-enz.

Predicting the future is a big business. Economists, financiers, demographers, pollsters and pundits are paid big money for their insights into what might happen next in their respective areas of expertise. If we can catch glimpses of the future of something as complex as the economy, why can’t we look into the future to predict our human capital needs? I started researching human capital metrics in the 1970s, when almost no businesses were really crunching the numbers on their people. Today, I am working hard to push the frontier of predictive analytics. Last year I kicked off a predictive analytics initiative, and partnered with SuccessFactors Research to find out what works.

In business, gathering and analyzing data is only a beginning. Managers want metrics that are actionable, metrics that support business decisions. They want a glimpse of their future. To answer that call, we have developed HCM: 21, a better way to collect, integrate, process, analyze and predict business results. It links external forces and internal factors, plans with it, processes it, analyzes it and predicts it within a single, integrated system much like FedEx does with small packages. The value add is compelling business intelligence about our most mission critical resource: human capital.

Most great advances in the information era have not revolved around new products. They have been about the distribution of something. Consider Avon in cosmetics, FedEx in package delivery, Amazon in books and USA Today in newspapers. In every case upon introduction adoption of the better method was condemned by naysayers. Innovation today is about efficient movement of data and products.

Just as other breakthroughs have been built on integration, HCM: 21 incorporates human capital information from many sources. But it is not about information technology in the sense of computers any more than Gutenberg was about paper and ink. Movable type launched the efficient distribution of information, which made possible widespread education and facilitated trade. HCM: 21 is the first successful method for combining mission critical, human capital data to manage risk and predict return on investments all within a single, comprehensive system.

You can find a preview of the HCM: 21 system in the whitepaper I wrote with Erik from SuccessFactors Research, Managing Tomorrow, Today. It is not a crystal ball for the future, but rather a blueprint for putting your data to work, not just to solve the problems you are facing right now, but to ready yourself for tomorrow. How integrated, actionable and relevant is your human data? Don’t get stuck looking backward and reacting, make sure your data is good enough to look forward to tomorrow.

It’s an old adage that you have to try and fail before you succeed, in fact entrepreneurs practically live by this code. But what about established organizations? A lot of businesses don’t feel this way, even though they should. The sooner an employee fails, the sooner the individual can move onto to the next task, and the sooner the company can act.

People can learn from failure – there is an upside to chances taken, but if a person knows they will fail, the sooner they do it the better. Take the case of a sales rep constantly dragging on with an opportunity that never will materialize – better to get to fail and move on, to free up time for other accounts.

When it comes to managing employees not only does it take some investment to get people fully productive as we’ve researched with Dr. Hallowell at PDI, but there is also a significant cost to keeping disengaged employees. Necessary separation is important to manage.

“I feel so good–I’m almost happy” – Al Bundy. It’s not just about the bottom line, people should work where they can be engaged in their jobs. One company, Zappos, really gets it. After the first week of work, they offer their new hires 1000 dollars to quit. They figure, if a person takes the money, he or she isn’t really engaged and didn’t belong there in the first place. This is what understanding human capital is all about, finding ways to maximize those factors, like engagement, that really impact performance over the course of an individual’s career.

Today, new hires have an average tenure of about 3.5 years, which is not a lot of time to get them up to the plate and hitting home runs. Don’t worry if your rookies make some mistakes – each mistake can provide valuable insight into setting the right course for your new hire, and accelerate successes . Opportunity is born from failure. Entrepreneurs get it. Zappos gets it. So could you.

Erik’s note: We’re happy to present another guest post by Chris Lozaga a Research Analyst in SuccessFactors Global Research team

We talk a lot about the future of work, borderless collaboration, as the war for talent drives businesses to look globally for the best people to get the job done. It is already happening. SuccessFactors Research has a unique window from which to draw insight – the data from our over 3 million active users. We recently studied 41 U.S. based companies that use our compensation module, and looked at how they pay their international talent (people on the payroll in a foreign currency). In an aggregate and anonymous way, we crunched the numbers on pay increases given to 239,000 individuals across these organizations and made some interesting observations.

First, companies are much more aggressive in pay for performance with their U.S. based workers. We found this out by comparing the standard deviation (spread) in pay raises, by percent of salary. This was not particularly surprising, given that the U.S. has very liberal attitudes regarding free markets and compensation. The insight that might surprise many came when we looked at the actual average raise given – the percentage was much higher in India and China than in the U.S. (see below). While there is less variability in these regions, they average pay increase is much bigger. Companies are paying to acquire, motivate and retain this talent.

The war for talent is real. Retention is a major problem in rapidly growing countries like China and India, and companies appear to be paying to keep their international people. Money chases talent.

Winning the war for talent is critical to success. Talent is now the ultimate differentiator for companies – people are responsible for executing the company strategy, generating the new ideas and IP that drives growth. This snapshot of companies and their 239,000 employees shows that U.S. based companies are aggressively implementing pay for performance inside the U.S., but less aggressively for their overseas people. Companies put their money where their talent is.

More details on our findings in International Pay can be found in this downloadable data brief: SuccessFactors Research Data Brief: International Pay for Performance.