Competency models are essential frameworks that help organizations identify, develop and assess the key competencies needed to achieve their strategic goals. By outlining the skills, knowledge, abilities and behaviors required for success, competency models guide how organizations recruit, train and promote employees.

Before developing a competency model, however, organizations must determine what purpose the model will serve. There are a few main reasons why organizations build competency models: to support strategy execution, improve performance outcomes or develop all employees.

To support the organization's strategy. Competency models can help ensure employees have the right skills and abilities to execute the company's strategic objectives. By identifying the competencies needed to achieve strategic goals, organizations can develop, train and promote employees accordingly. If the goal is to achieve the organization strategy, then only jobs related to the strategy may need development.

To improve performance outcomes. Competency models can be used to determine the skills and behaviors that drive desired performance results. By linking competencies to key performance indicators, organizations can develop employees in a way that directly impacts bottom-line outcomes. If the goal is performance improvement, then only jobs related to key performance outcomes may need development.

To develop all employees. Some organizations build competency models with the goal of developing every employee to their fullest potential, regardless of their role. This holistic approach aims to nurture competencies that benefit employees in their current and future roles.

It is important to ask what the reason is for building a competency model, as the answer will determine which jobs require development and which competencies are prioritized. Depending on the goal - strategy, performance or development - different jobs and competencies will be targeted.

As you can see, competency models are most effective when they are purpose-driven and aligned with an organization's goals. By determining the purpose of the model upfront, organizations can design competency models that have a meaningful impact and help them achieve their objectives. With a clearly defined purpose, competency models become a powerful tool for organizational success.