What a competency framework contains
Four parts, and any framework missing one of them does not work in practice. Core competencies that apply to everyone in the function. Role-specific technical competencies. Behavioural indicators, which is the observable evidence rather than the adjective. And proficiency levels, usually one to five, that describe the difference between doing something with support and doing it independently.
The part everybody skips is the behavioural indicators, which is exactly the part that makes it usable. Writing communication as a competency achieves nothing. Writing can present a variance analysis to a non-finance department head who then acts on it without further explanation is something two managers can actually agree or disagree about.
| Component | What it has to do to be worth having | |
|---|---|---|
| Core competencies | What everyone in the function needs | Four or five at most. If the list runs past that, it is a values statement rather than a framework. |
| Technical competencies | Role-specific capability | Named to your actual work: consolidations, revenue recognition, the ERP you run. Generic entries here are wasted words. |
| Behavioural indicators | Observable evidence | Something two managers could independently agree on. This is the part that decides whether the framework is usable. |
| Proficiency levels | Usually one to five | Describes the gap between doing something with support and owning it. The gap is what people are promoted across. |
Building one for a finance function
Start from the capability demand rather than from a template. What CFOs tell me they are actually short of falls into four areas: technical accounting depth such as IFRS and consolidations, data analytics that produces insight, tech literacy for efficiency, and strategic and commercial thinking.[1] Those four are a better spine for a finance framework than anything generic, because they reflect what the market is genuinely paying for.
Then be explicit about what changes between levels, because that is the only part people will read. The clearest transition in a finance team is the move from doing to leading: overseeing tasks and developing the next layer of leadership, managing managers rather than individual contributors, and delegating more in order to focus on strategy, coaching and setting direction.[2] If your framework does not capture that shift, it will not help anybody get promoted correctly.
If you are defining the top of the framework specifically, the experience a finance director seat actually demands is set out here here.
Where frameworks go wrong
The failure mode is length. A forty-page framework is an artefact, not a tool, and in a ten-person finance team it will be opened once. Keep it to a page per level and accept that it will not cover every edge case.
The second failure mode is treating it as a substitute for judgement in hiring. A framework tells you what to test for. It cannot tell you whether this person will work in your business. I had a conversation with a CFO about a Head of Finance hire who left within nine months, with strong qualifications and no doubt about the technical ability; they could not win the CEO's trust or build rapport with Operations.[3] No competency matrix predicts that.
One honest caveat for early-stage businesses. If your finance function is one person or two, you do not need a competency framework, you need a clear brief for the role. The way I work with founders is to sit down before the job description is written and craft a brief that tells the real story of the business, the actual environment and the problems the person will walk into on day one, focused on what they need to build.[4] That is more useful than a framework until you have levels for a framework to describe.
If you are working out what the levels in your finance team should even be, here is how the structure evolves by stage here.
Common questions
What is a competency framework?
A competency framework sets out what people at each level of a function need to be able to do, and what proficiency looks like at each step. It normally contains core competencies that apply to everyone, role-specific technical competencies, behavioural indicators that describe observable evidence rather than adjectives, and proficiency levels. Its purpose is to make hiring, promotion and development decisions defensible rather than subjective.
How is a competency framework different from a skills matrix?
A skills matrix maps who currently holds which skills across a team, so it is a picture of coverage and gaps right now. A competency framework defines the standard: what someone at a given level should be able to do and how you would recognise it. They complement each other, but a matrix without a framework has no benchmark to measure against, and a framework without a matrix never gets applied to actual people.
What should a finance competency framework cover?
Build the spine from what the market actually demands: technical accounting depth such as IFRS and consolidations, data analytics that produces insight, tech literacy for efficiency, and strategic and commercial thinking. Then make the transitions between levels explicit, particularly the move from doing the technical work to managing managers, delegating, and focusing on strategy, coaching and setting direction. That transition is the one most people are promoted across and most frameworks describe badly.
Does a small finance team need a competency framework?
Usually not. If the function is one or two people, what you need is a clear brief for the role rather than a framework: the real environment, the problems the person will walk into on day one and what they need to build. Frameworks earn their place once you have genuine levels for them to describe. And even then, keep it to about a page per level, because a forty-page framework in a ten-person team gets opened once.
References
- Tom Hunter on capability demand in the Australian finance market: CFOs consistently ask for technical accounting depth such as IFRS and consolidations, data analytics for insight, tech literacy for efficiency, and strategic and commercial thinking.
- Tom Hunter on the Financial Controller step up: overseeing tasks and developing the next layer of leadership, managing managers rather than individual contributors, and delegating more in order to focus on strategy, coaching and setting direction.
- Tom Hunter, recounting a conversation with a CFO about a Head of Finance hire who left within nine months despite strong qualifications, because they could not win the CEO's trust or build rapport with Operations.
- Tom Hunter on how he works with founders: sitting down before the job description is written and crafting a brief that tells the real story of the business, including the actual environment and problems the person will walk into on day one, focused on what they need to build.