6 min readManagement Team and Succession
Competency matrix: how to build one and why the business needs it
A competency matrix shows who in the team can do what and at what level. A step-by-step guide to building one, with an example table and a level scale — and why it matters to the business, not just HR.
I have already written about what a competency matrix is and how it relates to the talent pipeline in the article "The competency matrix: a simple tool for developing a team". This one is the practical part: how to build it step by step, what a finished table looks like and why it matters not only to HR but to the business.
What a competency matrix is
A competency matrix (also called a skills matrix) is a table where:
- rows are employees;
- columns are the competencies the role requires;
- cells show the level at which the person has the competency and the level their position requires.
It is often confused with a competency model. The model describes what the company considers important and what each level looks like. The matrix shows who is at which level right now. Model first, matrix second.
Why the business needs a competency matrix
HR sees the matrix as an assessment tool. Owners and managers see answers to very financial questions:
- Where the company depends on one person. If only one employee has a competency at the required level, their departure will stop the process.
- What to spend the training budget on. Not "everyone to a training", but closing specific gaps for specific people.
- Whom to promote. Promotion decisions rely on criteria, not on who is louder or has been there longer.
- Whom to look for on the market. The vacancy profile is built from the competencies the team lacks.
- Who will replace key people. The matrix is the basis of the talent pipeline and the succession plan.
How to build a competency matrix: 7 steps
1. Define the goal and scope
Do not start with the whole company. Take one unit or one key role where the cost of a mistake is highest: sales, production, line managers. And answer straight away why you need the matrix: training, succession, a pay review or preparing for growth.
2. Describe the roles
For each role, briefly: what result it exists for and what it is responsible for. If there are no job descriptions or they are outdated, start with them — otherwise it is unclear what to assess.
3. Choose 5–8 competencies per role
There are usually three groups:
- professional — knowledge and skills without which the work is impossible (product knowledge, working in 1C, safety rules);
- managerial — for managers (planning, setting tasks, developing the team);
- corporate — common to everyone (customer focus, ownership of results).
More than eight per role and the assessment becomes a formality.
4. Set a level scale with behavioural descriptions
Numbers without descriptions mean something different to everyone. An example scale:
| Level | What it means |
|---|---|
| 0 | No command of the skill |
| 1 | Knows the theory, performs with help and under supervision |
| 2 | Performs independently in standard situations |
| 3 | Handles non-standard situations, can teach others |
| 4 | Expert: improves the process, sets the standard for the company |
For each competency it is worth describing what the levels look like in behaviour: what exactly a person does at level 2 versus level 3.
5. Set a target level for each role
Not everyone needs level 4. A sales rep needs level 3 in negotiation and level 2 in CRM; a supervisor needs level 3 in developing the team. The target level is what the position requires, not what would be nice to have.
6. Assess employees
It is better to combine several sources: self-assessment, the manager's assessment and facts — work results, tests, observation. A gap between self-assessment and the manager's assessment is a reason for a conversation, not an argument.
7. Analyse the gaps and turn them into a plan
The value of the matrix lies not in the table but in the decisions after it: individual development plans, targeted training, mentoring, succession candidates, hiring profiles. It is worth updating every six months to a year.
Competency matrix example
Sales department, "sales representative" role, target level in brackets:
| Employee | Product knowledge (3) | Negotiation (3) | CRM (2) | Route planning (2) | Receivables (2) |
|---|---|---|---|---|---|
| Employee A | 3 | 3 | 1 | 2 | 2 |
| Employee B | 2 | 4 | 2 | 1 | 1 |
| Employee C | 4 | 3 | 3 | 3 | 2 |
What you can see straight away:
- Employee C is at or above target on every competency — a candidate for the supervisor talent pool and a potential mentor.
- Employee B is a strong negotiator but weak in planning and receivables: targeted training on two topics, not a general sales training.
- CRM is below target for one person out of three, and so is product knowledge for one: a short internal training will close both gaps.
Common mistakes
- Copying someone else's competency model without linking it to your company's goals.
- Taking 15–20 competencies per role.
- Leaving the scale without descriptions: "3 out of 5" means something different to every manager.
- Assessing once and filing it away.
- Linking results to pay from the very first assessment — people get defensive and the assessment loses its honesty.
From practice
At an aluminium plant exporting to 22 countries (1,400+ employees on site), growing production and international certification requirements ran into a shortage of engineers and technical specialists. The appraisal, competency and training systems were not keeping up with the scale. We built an appraisal, competency, training and mentoring system with a retraining plan through 2029 and developed 180 job descriptions, regulations and procedures. Over the project more than 2,000 employees were trained, turnover was held at 2%, and the company passed international audits and certification.
The matrix there was not a separate document "for HR" but part of the answer to a business question: where to find people with the right skills when the market does not have enough of them.
Frequently asked questions
How many competencies should a matrix have?
5–8 per role. There may be more across the company, but each employee is assessed only on those their position requires.
How often should a competency matrix be updated?
Every six months to a year, and also when someone changes roles, after training, and when the strategy or technology changes.
Where to keep the matrix: Excel or a dedicated system?
For one or two departments, Excel or Google Sheets is enough. When there are hundreds of employees and the matrix is linked to training and succession, an HR system or a module in your accounting system is more convenient.
How is a competency matrix different from a competency model?
The model describes which competencies matter and what each level looks like. The matrix shows the level of each specific employee.
Can pay be based on a competency matrix?
Yes, for example through grades and banding, but not from the first assessment. First the matrix has to work as a development tool and people have to trust that the assessment is fair; only then is it linked to pay.
If you need a competency model, a management assessment and a talent pipeline, see how I work on the management team and talent pipeline.