As competency analysis has become a concept highly touted in business, it has become increasingly misunderstood. Contrary to many articles on the subject, competency analysis does not focus on creating core competencies; it concentrates on identifying the core competencies already in play and minimizing those functions that are not.


Competency analysis is simply defined as an analysis of the competencies of a given company, essentially asking, What does this company do better than most? In order for an action to qualify as a competency, it should be identified as something the company does better than most (effectiveness), but also more efficiently than most (efficiency).

These actions that a company performs better than most are referred to as core competencies. Core competencies have three characteristics that distinguish them from noncore competencies. First, a core competency must be relevant; this means that it must contribute to what makes the company’s product unique and thus marketable. Second, core competencies are difficult to imitate; this is how a company can offer that unique product and generate profit from that product. Last, it should have a broad application; a core competency does not focus on smaller, niche markets, but rather it is what makes a company shine.


Competency analysis is a powerful tool used to gauge the knowledge, skills and process capabilities required for a company to be able to offer its products or services. While competency analysis is generally used in production environments, this type of analysis can form a basis for various practices within the company and can be completed at a product, project or company level.

Identifying Enablers

In order to perform a competency analysis, begin by listing what actions are required to produce whatever products/services the company offers. This produces a general step-by-step list as to how a product is made. The items on this list are then broken down into the steps that form each action, creating something of a map. Think of this as what “enables” the competency.

Identifying Areas for Development

Once the map of how the process functions is completed, begin creating a second map of how the process should run. This step is akin to a need-gap analysis in that it allows the analyst to measure, analyze and predict the future capabilities of the process and to identify how the effectiveness or efficiency of a process can be maintained. This can be seen as identifying “areas for development” and suggestions for how to do that.

Monitoring Performance

The company is now ready to establish the process standards required to reach the prescribed competencies and to implement any changes. Going forward, competency performance is tracked and compared to the maps the company has created. This is monitoring actual performance compared to desired performance.


Competency analysis has many benefits. It clarifies employee expectations and works to identify and eliminate waste actions, thereby improving efficiency. It identifies areas for development before major issues arise as well.