Edward awler and David Finegold report on changing skills needs in the workplace

The level of competition in global business demands organisations perform ever better. In the 1990s we are fascinated with downsizing and delayering. And the bureaucratic approach, with its emphasis on hierarchies and clear-cut jobs is under attack. Research shows it is unable to generate the levels of productivity required. Nor does it allow organisations to adapt easily to an increasingly turbulent world.

Our research on the largest United States corporations shows that their organisation is indeed changing. New options include the use of teams, an emphasis on lateral relationships, fewer levels of management, greater employee involvement, greater sharing of business information and rewards tied to corporate and team performance.

The shift demands that people update "competencies". What is new is making people's skills central to the company's strategy and moving away from using the job as the starting point for deciding what skills a worker needs. Increasingly employees are faced with a constantly changing mix of tasks. The challenge is for organisations to learn how to manage the development of individuals in a way that allows them to develop the right skills but is not based on the job they do.

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An increasingly popular approach is to replace job descriptions with defined sets of competencies that identify the technical and organisational skills an individual needs, and how to determine whether an individual possesses them. They must also work as a way of rewarding individuals .

This approach requires people to have many more skills than the traditional bureaucratic model required. People have to be able to work in groups, problem solve, manage themselves and understand their business, as well as learn more than one "job'' because, as team members, they are expected to perform multiple steps in the production processes.

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They then become more valuable and are often paid more. More than 60 per cent of large US corporations now link the pay of at least some of their employees to their skills or competencies. This approach also leads to people being hired as employees rather than to do a job. Employers need to work out how people's skills can fit with the companies' needs.

Governments have a major role to play in speeding the development of this competency-based approach. The creation in 1986 of the National Council for Vocational Qualifications gave the United Kingdom a decade's head start over other industrialised countries. NVQs are outcome or performance-based.

The competency approach offers a potential advantage in an era of rapid technological change. It recognises that people learn in different ways and allows for innovative approaches to skill development such as computer-based simulation. It also should make combining school and the workplace learning easier. But changes in the way the system operates must be made if NVQs are to realise this potential.

Because NVQs have been developed through functional analysis of jobs and because most of the qualifications awarded thus far have been for lower-level occupations there is a risk that the entire competency-approach will be stigmatised as relevant only to frontline workers. The NCVQ has attempted to tackle this problem by developing qualifications at managerial and professional levels and building core skills into all qualifications. But we must ensure the competencies people acquire prepare them for the rapidly changing demands of high-performance organisations and that companies embrace this system for all employees.

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The development of the competency framework has been dominated by NCVQ bureaucrats and consultants and company human resource professionals. It is vital senior executives and line managers are more closely involved so as to make the link between individual competencies and the core organisational competencies that will enhance corporate performance.

The competency systems in most of the organisations we have studied are in the development stage. But there is good reason to believe that in the next few years, considerable progress will be made in improving the systems, particularly if governments are supportive.They are one of the key building blocks that must be in place if organisations are to make significant change in how they are managed.

Edward E. Lawler III and David L. Finegold are at the University of Southern California.