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Competency – isn’t it obvious?!

If I asked you the question are you competent to perform your job? No doubt all of us would be shouting a resounding YES.

What if I asked you what does ‘being competent’ mean in the context of your role? Would you be able to succinctly define that?

Could it be that everyone’s view is subtly different? Or are there commonalities? Are these the same across an entire firm, do they differ between divisions and regions?

These questions about competency are not new, commercially they define the success of firms. Having the right people, with the right skill set in the right role at the right time is paramount.

Paul Donovan’s latest book Profit & Prejudice – the luddites of the fourth industrial revolution – examines how prejudice can impact the selection of the right people. Whilst not a direct study about competence there are some interesting parallels and stark implications for the misalignment of people, organisational objectives, and ultimately success.

SMCR

For those familiar with SMCR, (as you should all be by now) competency at all levels is expected.

Conduct rule 2 states:

You must act with due care, skill, and diligence

Aka…be competent to perform your role, and taken a step further ensure the competency of those who work for you.

Furthermore, it is now a formal requirement for regulated firms to be able to evidence not only the competency of their employees but also the approach taken to do this. They must assess this competency with the issuance of a certificate for those deemed to fall into the certified person category.

SMCR also makes this an annual process, requiring re-certification. Its essentially raised the bar in term of conduct and competency expectations.

If we were to include a question at the firm level here, then it’s simple ‘how do you define competency within your organisation?’

The FCA

Perhaps we start with the FCA view.

The FCA defines competence as having the skills, knowledge and expertise needed to discharge the responsibilities of an employee’s role.

Let’s call these the competence tri-factor, although I would prefer to swap the term behaviour for expertise. After all, expertise does not always mean acting with integrity. In fact, the chequered past of financial services misconduct often shows the opposite, expertise sometimes leads to an ability to deceive.

Since there is generally no one size fits all approach, the FCA encourages firms to decide which methods to use when assessing employee competence.

What is Competence?

It is not just a question of having the appropriate qualification(s) and reading the Code of Conduct (COCON).

Firms need procedures in place with clear criteria for individuals to be assessed as competent, so all parties involved understand when competence has been reached. And perhaps more importantly when it has not been reached and what to do about it.

Competence should also include achieving a good standard of ethical behaviour.

FCA Handbook

To take this a step further the FCA Handbook states that in determining a person’s competence and capability, the FCA, in accordance with FIT 1.1.2G, will have regard to all relevant matters including but not limited to:

(1) whether the person satisfies the relevant FCA training and competence requirements in relation to the controlled function the person performs or is intended to perform;

(2) whether the person has demonstrated by experience and training that they are suitable, or will be suitable if approved, to perform the controlled function;

(3) whether the person has adequate time to perform the controlled function and meet the responsibilities associated with that function.

In determining a person’s competence and capability to perform an FCA designated senior management function or an FCA certification function, a firm, in accordance with FIT 1.1.2G, should have regard to all relevant matters including but not limited to:

(1) whether the person satisfies any applicable training and competence requirements (in relation to the function that the person performs or is intended to perform);

(2) whether the person has demonstrated by experience and training that they are suitable to perform the function they are intended to perform;

(3) whether the person has adequate time to perform the function in question and meet the responsibilities associated with that function

At first glance, which for many of you it may well be, I don’t imagine you are often found reading the FCA Handbook in depth! It would seem fairly obvious stuff and even dare I say common sense. There are some obvious expectations around knowledge, experience, and behaviours.

But as the saying goes common sense is often not that common.

Fear not, there’s surely a framework to help?

Frameworks to the rescue?

Competency frameworks (when done well) should develop clarity around performance and provide a clear link between individual and organisational expectations.

The danger is that a framework can quickly become over engineered and a masterpiece in concept but poorly implemented. There needs to be a balance and flexibility.

Competence vs Competency?

‘Competency’ and ‘competencies’ are somewhat personal, focusing on knowledge, skills and behaviour, often with reference to benchmarked standards. These standards are those which individuals must have, or seek to have to perform effectively.

To simplify…you could consider the inputs required that create the desired performance outputs. Note here performance output could be defined by KPIs, targets or any other measurable metric.

A competency framework is a structure which should start with the scope, in other words what defines each individual competency and at what level will you apply this.

Rather than talk theory lets work through some practical steps to produce a competency framework.

  1. Defining Scope

One of the more common and tangible approaches is to focus first on technical competency

  • A true competency framework should of course also consider behavioural and soft skills, but let’s put them to one side for this discussion
  • The competency framework should form the basis of further work to map actual knowledge/skill levels against required competency levels (training needs analysis) and the design of a comprehensive training programme designed to match with the identified technical competency requirements
  • It is important that the framework is embedded into day to day processes (e.g. in the HR system and the job descriptions) or some of the value will be lost
  • Similarly, ownership also needs to be assigned to keep the framework up to date to reflect changes in roles and job requirements

2. Defining Output

Start with the organisational chart to understand the role functions and job families

  • Remember not to boil the ocean, starting with one business area and scaling out is better than attempting a divisional framework from the off
  • A technical and functional competency framework will be required for each of the specified business areas in scope, providing clear competency requirements for each job /job family within each of those areas

3. Approach & Methodology

Identify and map role profiles to the organisational charts (and in scope jobs)

  • Review existing job descriptions and create a “strawman” map of competencies using the role profile descriptors
  • Conduct a series of interviews with key stakeholders to confirm or amend the original assumptions
  • Produce a final competency map for every role in scope and reconfirm with the relevant stakeholders
  • Agree final competency definitions which reflect the specific needs and business mix
  • Set competency tiers – fundamental, intermediate, and advanced, so there can be advancement but also tracking as employees develop

Fundamental

  • This is the level required for most non-specialist roles and implies a generally good level of understanding or competence
  • At this level people are required either to have a good breadth of knowledge to a modest level or deeper skills in perhaps just a few aspects of the competency
  • They are likely to have some gaps in their knowledge

Intermediate

  • This is a high level of skills/knowledge which is likely to be important to the effective performance of a role
  • It implies a higher than usual level of understanding or competence
  • At this level people are likely to be capable in almost all aspects of the competency, with perhaps deeper skills in one or two specific areas

Advanced

  • This is the highest level of competence and implies a genuinely deep understanding and/or very well developed skillset
  • It is likely to be critical to the performance of a role and be a differentiator in terms of performance
  • Employees will have both a good depth and breadth of skills or knowledge, although some small gaps may still remain

4. Developing Competency

Some technical competencies are skills that require significant experience and training to develop, whilst others are primarily knowledge-based and so maybe gleaned through on the job experience

  • It is unlikely that any new employee will be able to meet all competency requirements on Day 1, but they should be able to demonstrate that with suitable time, experience and training they have the ability to develop competencies to the required level
  • It may also be that some employees have deeper strengths in some aspects which compensate for weaknesses in others
  • The competencies should be defined so that they are common across business area – to make it easier to allow horizontal movement of staff through the organisation
  • For example, project management may be a competency requirement which appears regularly across a number of business areas/roles.  The skill set required is considered to be broadly consistent between all the roles although the application of the skills to a specific task/purpose are likely to be very different between the different business areas
  • Finally, once the competency maps are complete, identify and build learning and career pathways for key job families

Maintaining Competence

Firms must review employee competence and training needs regularly. They must consider changes in the marketplace and products, regulation and legislation. They must also look at the skills, expertise, technical knowledge and behaviour of all employees.

Firms should make sure appropriate training is provided so employees remain competent, and gap fill is undertaken to upskill those who are not yet meeting the competency requirements.

They will also need to monitor and regularly assess the training’s effectiveness to make sure it meets objectives.

Training effectiveness, well that is indeed a topic for another day…

Stay Safe, Be Curious & Keep Learning.  

About this author

Matt Fotherby

Financial Markets, Compliance & Regulations

Matt Fotherby

Matt is our Founder and a passionate trainer.

His interest in education stems from his 10 years as an Account Executive looking after Global Hedge Fund and Asset Management clients. This led Matt to join the coveted Financial Markets Education team at UBS, a unique in-house education team that specialised in running a curriculum of financial market and product classes for both UBS employees and clients. Matt was responsible for building out the client offering; managing programs, creating content and teaching courses.

As financial markets entered a significant period of regulatory change Matt pivoted to take his client experience and market knowledge to focus on Regulations and Compliance topics.

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