Skills and competencies are the two most common taxonomies for managing talent, including recruiting, development, performance, career pathing, and succession planning. But why do talent professionals choose one over the other, and which one is right for your organization? 

In this post, our expert HR consultants and I-O psychologists look at competencies vs skills and reveal some unexpected insights about which taxonomy is best for managing talent. 

The (elusive) difference between skills and competencies

If you've ever researched the differences between competencies vs skills, you likely discovered there is no consistent definition for these terms. Despite the fact that both tools are widely used by HR professionals, everyone seems to have a unique take. 

To bring more clarity to the question, our HR experts examined several skill and competency taxonomies, including those developed by O-Net, the European Commission, and the Government of Canada Skills and Competencies Taxonomy.

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Based on this research, we developed these working definitions:

Skills are developed capabilities needed to perform a task or job.

Competencies are the knowledge, skills, or abilities defined in terms of observable behaviors needed to perform a task or job.

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As you can see, there is some overlap in that both focus on the capabilities or abilities required to perform a job or task. But once you dive beyond the surface, the differences become clearer. 

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Skills vs competencies: A deeper dive

Skills and competencies both define a requirement for a task or job. When you look a little closer, you'll see that they both include progressive levels of proficiency (from basic to advanced). But you'll also see that competencies provide more detail and structure.

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Here's an example of a competency for "digital literacy."

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Skills, on the other hand, are pared-down versions that label the required capability and provide a scale with variable progression levels that range anywhere from three to eight levels. With no detailed descriptions to define the requirements at different proficiencies, skills assume that the workforce already has an established, shared understanding. 

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Here is an example of the digital literacy skill.

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Skills taxonomies can also include very granular capabilities, such as a level of proficiency in a specific software program.

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In brief, skills are simple, granular tools, while competencies are detailed, multifaceted descriptions of the knowledge, skills, and abilities required for success. Competencies are also unique in that they describe those elements in terms of observable behaviors, which supports a shared understanding of what success on the job looks like. 

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Differences at a glance

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COMPETENCIES

• Includes 5 proficiency levels 
• Includes a definition
• 3-5 behavioral indicators for each level
• Promotes a shared understanding of requirements
• 5-7 competencies per job
• Taxonomy may include 100s of competencies 

SKILLS

• Can include 3-8 proficiency levels
• Does not include a definition
• No behavioral indicators
• Assumes an existing understanding of requirements
• 25-30 skills per job
• Taxonomy may include 1,000s of skills

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What's the best tool for your organization?

A review of the research on skills and competencies does not reveal a clear winner, and the fact that the terminology is so inconsistent across different research sources makes it even more difficult to compare the two taxonomies. 

However, the good news is that the research suggests that both systems, when used correctly and implemented fairly and consistently, are tied to improved performance, productivity, engagement, and organizational results. 

The key is to focus on the utility that each taxonomy provides and decide which type suits your organizational needs better. 

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Here are some factors to consider.

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1. Is your industry or organization fast-paced? 

Given the pace of change, the granularity of skills lends themselves to organizations that are seeing rapid change, either because of internal factors or because their industry is evolving quickly. For example, organizations that rely on digital skills are among those seeing the fastest rates of change. 

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2. What are the business priorities?

Competencies bring more rigor and clarity to the process of identifying talent requirements and aligning them with organizational culture, so prioritizing competencies can make sense if you have a mandate to improve the quality of your new hires, improve the talent pool at the leadership level, or align employee behaviors with the organizational vision and values. 

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3. What's the organizational tolerance for change?

While skills are a fairly universal taxonomy, competencies are less familiar and can take a little more time and effort to disseminate across the organization. If your organization doesn't have a high tolerance for change or if you don't have leadership support for a competency-based management approach, you might want to delay implementation and use skills for the time being.

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4. What does your resourcing look like? 

Do you have the bandwidth to manage the process of applying competencies to jobs and training managers and employees to understand how they work and use them confidently? While software makes it easier than ever to implement competency-based talent management, it still requires more time and effort than a simple skills taxonomy. Cost can also be a factor: 

While many skill taxonomies are free and open-source, competencies tend to be fee-based because they are designed and validated by industrial organizational psychologists. 

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Using skills and competencies together 

While much of the conversation around skills and competencies focuses on choosing one approach or the other, it doesn't have to be an either-or proposition. 

In fact, the most effective talent management programs leverage both. The granularity, flexibility, and simplicity of skills complement the rigor and detail of competencies: when they are used together, the organization benefits from a system that delivers the advantages of both. 

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Let's take the hiring process as an example.

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Describe requirements: In this first phase of the hiring process, you could use competencies for those hard-to-define-and-measure capabilities, such as "innovation" or "communication" and use skills to define more straightforward requirements, such as an intermediate knowledge of Excel or a developing knowledge of Python. 

Create a job post: When constructing the job post, you could include the skill labels and proficiency levels along with the competency names and definitions. (No detailed behavioral indicators required for this phase.) 

Screening process: When screening candidates, you can require tests, such as Indeed Assessments, for example, to determine candidate skill levels. 

Interview: Competencies can be used as the basis for a behavior-based interview to explore the candidate's capabilities in depth and determine whether their soft skills mesh with your organizational culture. 

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Competencies and skills work best together

The decision to use competencies or skills is one that many HR professionals have agonized over, and there's a good reason for that. Even highly reputable research sources use conflicting and confusing terminology to define the two taxonomies. The good news is that when you look beyond the definitions and focus on how they're structured and used to define talent, the differences become much clearer. And what's clearest of all is that it should never be seen as an either-or choice. Competencies and skills actually work best together, so using both to define your talent is a smart move. 

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*Data is based on a flash poll of 300 HR professionals conducted in September, 2023.

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