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A competency-based approach to managing people focuses on the skills and talents needed to be able to perform a particular task to a certain standard. The assessment of competencies is useful for various aspects of the management of human resources: setting standards of performance that can be expected from employees and appraising them against such standards; assessing the training and development needs of individual employees; and identifying the skills, abilities, and characteristics needed when recruiting and selecting new employees. The issue of a competency-based approach has become popular in the management literature, but the problem is that different writers define the term in their own distinct ways. And, to complicate matters further, some authors argue there are differences between the meanings of competence and competency, or competences and competencies. The important point is not to get worried about the language, but to recognize that the general approach taken by most commentators is to break competency down into two categories: behaviour based or work based. Behaviour-based competencies are personal characteristics/attributes that contribute to effective job performance (e.g. interpersonal skills, attitudes, motivation). Work-based competencies are specific skills and abilities required to perform the job to a specific standard (e.g. the use of spreadsheet software, fluency in spoken Japanese, management of a budget). A focus on competency not only allows for the development of employees, it also provides a new means of rewarding people; thus there has been a growing interest in systems of competence-based pay.

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