What Are Leadership Competencies?

In many cases, the future success of a business depends on the competency of its leaders. A sustainable plan for long-term success is to create a leadership pipeline. This starts with understanding what leadership competencies are. Three quarters (75.4%) of organizations in the State of Competencies 2024 Report use leadership competencies to hire and develop strong leaders.

While strong leadership is vital for business, many leaders are letting their employees down. Half of employees don’t feel confident in their manager’s ability to lead their team to success over the next two years. When employees lack confidence in their leaders, their focus and motivation dissipate.

In the end, businesses that don’t develop strong leaders will bear the cost of low employee morale. Developing and implementing leadership competencies can help organizations build a strong company culture of success.

What Do We Mean By “Leadership Competencies?"

Competencies describe the knowledge, skills, abilities, and traits—defined in terms of behaviors—that are necessary to succeed in a specific job. Three types of competencies exist: core, leadership, and functional competencies.

Leadership competencies refer to the factors that contribute to the essence of an effective leader. These factors may include how to lead the organization, lead others, and lead oneself. Competencies describe what behaviors leaders should demonstrate to successfully carry out their job.

Why Organizations Need Leadership Competencies

Creating a strong leadership brand is important to attracting, developing, and retaining strong leaders. A leadership brand is “a reputation for developing exceptional managers with a distinct set of talents that are uniquely geared to fulfill customers’ and investors’ expectations.”

Investors are more confident in companies that have strong leadership brands. In turn, the company’s share price will increase. Strong leadership can also promote positive company culture, increased profitability, and a competitive advantage.

Leaders are also the changemakers of an organization. For companies to compete in saturated markets, they need to innovate and change. Sadly, almost three quarters (73%) of HR professionals think their leaders can’t lead change effectively. With the right leadership competencies, organizations can better support their leaders and instill the values and behaviors needed for future success.

Building a Foundation for Competencies

Some leadership competencies are necessary across a variety roles and organizations. But each organization should consider what specific competencies they desire from their leadership team to drive a competitive edge. Defining which leadership competencies are important to your business is critical. Organizations can do this by developing a competency framework.

A competency framework allows you to define the competencies (core, leadership, and functional) that are required in each role within your organization. Every role is unique and will need a specific subset of skills and abilities. After surveying key people, you may learn that each leadership role needs a different set of leadership competencies. Every role in an organization shares the same core competencies, but leadership and functional competencies should be particular to each role.

Setting Accurate Expectations

By using multi-level competencies, you can decide the level of proficiency needed for each role. For example, entry-level employees often need to demonstrate a lower level of competency than their manager. (Figure 1)

Researchers found that higher levels of management required greater leadership skills. The test shows the importance of setting the right proficiency level to leadership roles. This allows organizations to hire and promote candidates who are ready for the responsibilities of the role.

Best Practice Tips

When developing your own leadership competencies, be sure to consider:

• What strategies and trends will affect business needs in the future? What sorts of behaviors will be needed to drive these changes?
• Who are the experts in your organization on leadership competencies? How can various levels within the organization contribute to your understanding of what leaders should be capable of?
• What are your organizational values? What behaviors do leaders need to demonstrate to ensure the company is living up to these values?

Developing the Next Generation of Leaders

Competencies help organizations refine their recruitment processes to find the best candidate for a position. Some organizations prioritize education and experience when hiring, but this doesn’t always guarantee the best candidate.

A competency assessment is a systematic approach that helps organizations make more informed decisions. Competency assessments help hiring managers objectively determine how well a candidate fits the job.

In succession planning, leadership competencies are essential. Through a competency assessment, the organization can determine the most qualified employees to promote. When they are missing requirements, the company can make a plan to help employees gain the skills and abilities needed for a promotion.

“In 2024, Adaptability stands as a critical leadership competency, given the rapidly changing business landscape. Leaders who embrace Adaptability can navigate uncertainties, capitalize on emerging opportunities, and guide their teams through transformational shifts.” – Christy Valledor, Assistant Vice President of Talent Development at HawaiiUSA Federal Credit Union

Leadership Competencies for Future Business Success

HRSG has helped companies like McKinstry develop leadership competencies to improve company culture and business resilience. HRSG’s software Quinto gives users access to thousands of competencies. It also proves AI suggestions for your job profiles based on current labor market trends. Talk to us to learn how we can help you develop better talent management strategies.