Capability or Competency, which is important to Business?

“Competency” and “capability” are two terms that pertain to human ability and in everyday business these terms are often used interchangeably; It’s easy to use these terms as synonyms for one another without thinking. The true difference between Capability and Competency is in the impact that each has on business. Therefore, it is crucial to understand these terms clearly to know the real distinction.

What are Capabilities?

Capability" is the term used to define one's inherent capacity to acquire the power and skill necessary for learning and performing tasks within their natural abilities. It is also referred to as implicit abilities, representing skills that have yet to be fully developed.   A person possessing certain capabilities holds the potential to attain a particular skill or ability that can prove valuable for accomplishing a task. The acquired knowledge or expertise broadens a person's skill set or knowledge base. A person's functions are enhanced by their capabilities, which can increase productivity. A person becomes more capable of accomplishing a task with the acquisition of new skills and abilities, which in turn improves their suitability for various work roles.   Capabilities can transform into competence with time and practice. Capabilities are the foundation for being able to accomplish a task and advancing in proficiency through time. Capabilities are employed in a framework to provide results that influence an organization's performance, strategy, and brand identity.  

What is Competency?

“Competence” is the state or quality of an individual’s work. Competency is a measure of how someone performs a set of knowledge, skills, and behavior to successfully carry out a task in the workplace.  A person and their work can be evaluated as competent if the performance is considered “satisfactory” but not “outstanding.” Competence starts as a person’s capabilities. In a sense, competence is proven abilities and improved capabilities. Competence encompasses a mix of elements like knowledge, essential prerequisites (capabilities), skills, abilities, conduct, and attitude. A person can enhance or refine their abilities and skills, benefiting both themselves and the organization or group they are a part of. These enhanced skills and abilities are then put to use in tasks or roles.

Difference between Competence and Capability

Let me illustrate the difference through the following story -  Jack was a very good mechanic, who had been servicing cars for a very long time. His customers trust his skills and knowledge on fixing any issue with their cars. One day, Jaren and his son drive into Jack’s garage as they hear some strange noise coming from their car. Jack inspects the car and tells them there is a small part which is cracked and that’s causing the rattling sound. It must be replaced, and it will take a couple of minutes to fix the issue. Jaren is a bit anxious as it might delay dropping his son off to school. Jack assures him it will take only a few minutes to fix the car as it will be dangerous to drive in the current state. After a few minutes Jack returns with an apologetic look on his face and says that they do not have the spare part in stock. He explains that he has ordered the part and will get it the next morning. Also, he offers to fix the car for free.  From the above story, can we say Jack is competent to fix the car? Yes, he can, he has the skills and knowledge to do the job; At that moment, he was rendered incapable of doing the job due to the missing spare part, even though he was competent. 

Analyzing Performance – Competency VS Capability

When someone says, "He is not capable," they typically mean that he is incapable of performing the task that has been assigned to him. We cannot presume that a deficiency in capability results from a deficiency in individual competence. When individuals are really requested to perform a work, many other variables from their surroundings and the job itself come into play. They are required to perform right then, at the time when their work is due, and we must keep in mind that the stage will have an impact on how well they perform. People must be competent to perform properly, and the stage on which they are performing must likewise be "competent." The performer will only be able to deliver the required performance when both stage and performer are proficient. It is alluringly simple to 'blame' the individual when we are discussing someone else's lack of performance. This usually results in a response that focuses on changing the person. The change could be by providing them with coaching or training, the shift is brought about. Alternatively, they can be motivated with a bigger carrot or stick. Or, at the very least, one might propose replacing that person with a different one who is thought to be more competent. Using a Competency framework, involves assessing performance based on key competencies in an objective and clear manner, which helps decision-makers identify areas for improvement and develop targeted solutions to address performance gaps accurately and efficiently. If the barrier to their performance was in their environment, then ‘fixing’ the individual is not the solution. Instead, we need to fix the environment.

Which is more important at workplace - Competency VS Capability

The usage of capabilities and competences within an organization may be the most significant distinction between them. The CEO is typically where organizational capability begins. The CEO must think about how their business can employ people and cash flow to execute strategy at their best when faced with a new future of work.  When a CEO sets a definite target, they are using competencies to make future plans. There’s a cap on competency, an upper limit to the standard the organization is capable of. Additionally, competency cannot be a strategic driver because it is constrained to specific fields of knowledge and requires a measurable output.   However, if they choose a capability-led strategy, the CEO can create a foundation for operating in an ambiguous future. This is because capabilities are consistent and unaffected by the complexity of the business environment. Additionally, by emphasizing the observable results of each person's job, they are created to fit the ideal workforce.   Organizational capability focuses on the strategic use of certain resources to reach a defined outcome. Those resources are usually a combination of tools, processes, and people. So, while people perform the capabilities, how the organization manages their individual set of skills and knowledge to gain market edge is key. The measure of capability success is usually the less tangible, almost intangible part. That’s where competency comes in to evaluate performance. Managers can use competency to better understand the specific skills required for an employee’s role, as well as the knowledge and behavior that will help them meet future job expectations. One has a strategic significance, but both can be developed. When used to support staff development, competence works best. Tasks like leadership development, recruitment, and resource allocation are wider workforce and company planning activities that are influenced by capabilities.


Capability and Competency are two sides of the same coin. Capability is a group of skills, knowledge and tools that get work done. Competency assesses how well those skills, knowledge and tools are used to get that work done. An organization can’t be successful if its employees aren’t competent, and developing employee competence will be negated by an organization that isn’t held to standard. It’s easy to blame an underperforming employee. But the environment in which they are learning new skills and abilities is probably the root cause. Competitive advantage comes from developing and managing employee capability and competence to achieve organizational capability.   Jessie Joy Sr. Manager - Human Resources and Training
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