Column by Dr YRK Reddy - HRD Newsletter

CORE COMPETENCE & HR

Core competence has become a favourite term in the HR lexicon. It is often misused irresponsibly to connote its apparent sense than at the individual level its theoretical context at the collective level. The concept of core competence is related to discovering the roots of competitiveness; of successful product development strategies, and diversification Validation was provided by major corporations such as the NEC, Canon, 3-M, and Honda.

C.K. Prahlad and Gary Hamel who conceived core competence describe it as “……collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies”. “………..it is also about the organization of work and the delivery of value”. “……….is communication, involvement, and a deep commitment to working across organizational boundaries. It involves many levels of people and all functions”. “The skills that together constitute core competence must coalesce around individuals”.

Three tests have been suggested to identify core competence in an organization. Firstly, whether such a competence provides potential access to a wide variety of markets; second, whether it makes a significant contribution to the perceived benefit of the customer; and finally, whether it would be difficult for competitors to imitate well and quickly. Most corporations are expected to have about 5-6 fundamental competencies - not a mass of them, that can be deployed throughout the organization. Illustrations have been provided to show how Canon’s core competencies revolved around precision mechanics, fine optics, and micro- electronics. In the case of NEC, it was the ability to combine computing and communication (C&C).

The argument, among others, was to show that Strategic Business Units (SBUs) could be misleading for a corporation that can result in imprisonment of resources and bounded innovation apart from under investment in developing the required competencies and products. The essential feature of this argument of the early 90’s is that large corporations can gain competitive advantage if they identify and conceive their strategy from the viewpoint of core competence than being driven by structures or opportunities alone i.e., understanding the roots than the visible trunk or branches.

An important point to be noted, in countries like India, is that most companies are not mega corporations with large SBUs that can devise their strategies meaningfully, based on core competencies. Somewhat related is the fact that, many successful ones neither stuck to “knitting” as was recommended in the context of the “search for excellence” nor on “focus” as suggested by Michael Porter while propagating strategy as a “position”. Krishna Palepu and Tarun Khanna of Harvard argued, in another context, that in the emerging markets, there indeed is great scope for opportunity-driven strategies. Despite such evidence and arguments core competence has intuitive appeal, at least for neuro-semantic reasons, as it is positive and macho.

In the context of HR discipline, core competencies, if they are accepted as valid, raise several policy issues, of which I will flag five.

First, is a question that was posed to me recently in a South Pacific island – Papua New Gunea - whether core competencies are painfully developed over long periods or whether they can be quickly acquired/created. Unlike the popular examples of mega corporations, there are several in the ICT, pharmaceuticals, and the biotechnology sectors which acquired competencies quickly and ramped them up to world standards in as short a span of time as 6-7 years. Consequently, core competencies, can be quickly created by appropriate HR practices that could support a product market strategy. Such an assumption will let the sunrise industries also to focus on core competencies.

A second area is whether outsourcing or selling some of the assets and the attendant processes will affect core competencies. Similarly, does a merger or an acquisition help or hinder the existing set of competencies? As the impact is contextual, some do and some do not affect the existing set. The HR Manager must be able to understand the impact of such strategic choices on three aspects of core competencies: (a) how does a choice improve or decrease the integrity (cogency) of the rest of the core competencies; (b) does it destroy an existing core competence and (c) does the move result in acquiring a new core competence and how far would that be synergistic to the existing set of core competencies.

The third issue of importance is related to the HR practices in a company that can help in managing core competencies. Such practices may be related to recruitment, job rotation, OJT, promotion and competency development; retention; and activities that enable sharing of information, team development etc. The issue before HR managers is whether they perceive these activities from the perspective of core competencies or from the traditional viewpoint of organizational design and manpower planning. If they accept core competencies as a relevant conception, then the effort of the HR manager should be such that the identified core competencies become central for HR activities. Thus, while acquiring people, the HR manager should keep in mind not merely as to how many engineers one has recruited but as to how they impact in terms of the core competencies.

The fourth, before the HR manager is to understand the linkage of core competencies with learning. The velocity of development in core competencies depends on the ability of the organization to learn. Where the organization suffers from a learning disability, it will have a large number of “core incompetencies” that may outweigh the core competencies. Several large behemoths have collapsed despite possessing core competencies. Such corporations may have providentially acquired competencies, albeit slowly, but did not make them dynamic enough to promote necessary changes that can continue to render the perceived value to the end customer. With the learning disability afflicting such companies, core competencies would have turned themselves into core rigidities with a large areas of incompetencies. Having core competencies at one point is not sufficient – they must be dynamic and be able to acquire new elements while giving up the redundant elements, as a process of self-renewal. Corporations are often posed an important question as to what practices have they given up and what new ones they have acquired, in the last two years.

The fifth issue of relevance to HR managers pertains to knowledge. Core competencies as they were conceived, did not focus on knowledge in any significant manner. Yet, knowledge management is central to acquisition and development of core competencies at a higher pace than competition, to retain resource advantage. The ability of the organization to identify key knowledge relevant to core competencies is the critical first step. The next would be to promote capture of such knowledge and dynamically share the same. A high performing organization, with a clear focus on strategy, will have an integrated model whereby the HR practices, the learning abilities, and knowledge management feed on each other, to create an exponentially growing and dynamic framework of core competencies. Despite the fact that core competencies have arisen from the standpoint of strategy and competitive advantage, they it cannot exist with weak bonding to HR practices. HR can indeed keep core competencies alive and growing and not degenerate as core rigidities and in-competencies.

December, 2003 Issue
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