Capability, Competency & Skills:
What’s the Difference and Why It Matters
How to build a clear, evidence-based foundation for workforce capability, performance and development.
Why These Three Terms Matter More Than Ever
Organisations use the words capability, competency and skills interchangeably — yet they describe different layers of workforce readiness.
Confusing them leads to:
- unclear roles
- inconsistent assessment
- ineffective performance reviews
- mismatched training
- weak succession decisions
- compliance failures in clinical and technical settings
In capability-driven organisations — healthcare, engineering, manufacturing, utilities, technology, government — clarity on the three concepts is essential.
This guide provides a clear, structured explanation of:
- what capability is
- what competency is
- what skills are
- how they fit together
- where each should be used
- how they support assessment, development, performance and succession
You’ll also find diagram models and practical examples, so you can align your job architecture, capability frameworks, competency models and skills mapping.
The Relationship Between Them: A Unified Model
Before we explore how these concepts apply to job architecture, it helps to see the structural relationship between capability, competency and skills.
Figure 1. The three-layer model showing how capability, competency and skills relate.
Clear Definitions
Capability
Capability = the potential to perform in a role, based on what a person brings to the role, including:
- qualifications
- certifications
- licences
- experience
- professional memberships
- specific exposures or contexts worked in
Capability is inferred skill + role readiness, typically validated externally (accreditation, licensing, credentialing).
Key point: Capability expresses whether someone is ready for the role, not how well they are performing in it.
Examples of Capability Requirements
- Registered Nurse with current licence
- Electrician with HV switching certification
- Engineer with 5+ years plant operations experience
- Project manager with PRINCE2 certification
- IT analyst with Azure Administrator qualification
Competency
Competency = the behaviours, knowledge and skills demonstrated in context while performing the job.
A competency has three parts:
- Knowledge — what the person must understand
- Skill — what they must be able to do
- Behavior / application — how they perform it in real work situations
Key Point: Competency is observable, assessable, and proficiency-based.
Examples of Competency
- Applies infection control procedures reliably
- Conducts root cause analysis using structured tools
- Communicates effectively with patients/families
- Uses safe work procedures under varying conditions
- Troubleshoots system issues methodically
Competency is the basis for:
- clinical competency
- technical competency
- functional competency
- behavioral / core competency
- managerial competency
Skills
Skills = the specific task-level abilities that contribute to competence.
Skills are:
- granular
- atomic
- task-oriented
- often taught through training
- verified through demonstration or testing
Key Point: Skills feed into competencies but are not the same as competency.
Examples of Skills
- Starting an IV line
- Using a torque wrench
- Writing SQL queries
- Calibrating an instrument
- Using SBAR communication
- Creating pivot tables
How They Align to Job Architecture (Role-Centric Model)
This model shows how capability requirements, competency frameworks and skills mapping contribute to defining a role.
Figure 2. How capability, competency and skills connect to job architecture.
Practical Example: One Role, Three Layers
Example Role: Maintenance Technician – Mechanical
1. Capability Requirements
- Trade Certificate (Mechanical)
- Confined Space Certification
- 3 years industrial maintenance experience
- Familiarity with CMMS systems
2. Competencies (with indicators/criteria)
- Equipment Diagnostics
- Health & Safety in the workplace
- Communication & Collaboration
- Maintenance Planning
- Corrective Maintenance
3. Skills (with method/steps)
- Aligning a pump
- Reading P&ID diagrams
- Using vibration analysis tools
- Lockout/tagout procedures
- Completing maintenance documentation
This demonstrates how the three layers fit and support each other.
Capability → Competency → Skills Flow
Once the layers are defined, the next step is understanding how skills build competency, and how competency contributes to overall capability.
Figure 3. Flow from task-level skills to competence and capability development.
When to Use Each One (Practical Application)
Capability is used for
- Job design
- Job architecture
- Recruitment & selection
- Credentialling
- Regulatory compliance
- Role readiness checks
- Workforce mobility decisions
Competency is used for:
- Performance review
- Development planning
- Clinical & technical assessment
- 360 feedback (behavioural)
- Quality assurance
- Measuring proficiency
- Training needs analysis
- Succession readiness
Skills are used for:
- Learning design
- Onboarding & task training
- Practical assessments
- Knowledge testing
- Operational training plans
- Skills matrices
- Task-level audits
Hands-on technical development
Why the Distinction Matters Organizationally
✔ Improves role clarity – People understand what is required to be ready for a role vs. how good they must be in it.
✔ Strengthens job architecture – Capability requirements and competency expectations can be separated cleanly.
✔ Improves performance evaluation – Behavioral and competency indicators reduce bias.
✔ Supports development planning – Skills → competency → capability growth becomes a clear pathway.
✔ Enables accurate succession planning – Readiness ratings rely on capability AND competence.
✔ Enhances compliance and audit readiness – Regulators (especially in healthcare) want clear capability + competency documentation.
✔ Improves learning strategy – Skills mapping links training content to real work performance.
Bringing It All Together: A Single Integrated Model
Bringing the elements together, this lifecycle view illustrates how capability and competency support assessment, development, performance and succession.
Figure 4. Integration of capability and competency across the talent lifecycle.
Practical Next Steps for Your Organisation
-
Define capability requirements for every role
(certifications, experience, licences) -
Build or refine competency frameworks
aligned to behaviours, tasks and context. -
Create or import skills lists where relevant
for technical, clinical and operational roles. -
Link skills → competencies → capability
inside your job architecture. -
Assess competencies at the appropriate level
(self, manager, peer, knowledge test, evidence, observation) -
Map training and development to skills + competencies
not job titles. -
Use capability + competency data for succession and talent reviews.
In summary
Capability, competency and skills are three distinct — but tightly connected — layers of workforce performance.
Organisations that understand and use these distinctions achieve:
- stronger development outcomes
- clearer performance expectations
- more reliable assessments
- better succession decisions
- improved clinical/technical compliance
- higher workforce readiness
- This triad is foundational to any modern capability and competency system — and is the basis for job architecture, performance, development and succession.
FAQ
What is the difference between capability, competency and skills?
Capability refers to qualifications, experience and credentials that indicate role readiness.
Competency is the demonstrated application of knowledge, behaviours and skills in real work contexts.
Skills are the task-level abilities that support competent performance.
Why can’t qualifications alone prove competence?
Qualifications indicate potential and foundational knowledge, but they don’t show how well a person applies that knowledge in operational conditions. Competence requires observed performance, behavioral indicators and verified skill execution.
How do capability, competency and skills connect to job roles?
A job role specifies its required capability (entry criteria), core competencies (behaviours and applied knowledge) and underlying skills (task abilities). Together, these define what “good performance” looks like for that role.
What is the best way to assess competency?
Competency is assessed through multiple forms of evidence: behavioural indicators, performance observations, practical task demonstrations, verified skills, and manager or peer assessments. Combining these methods creates a reliable, defensible assessment.
How do skills mapping and competency frameworks work together?
Skills mapping identifies the task-level abilities required for a role. Competency frameworks describe how those skills, combined with knowledge and behaviours, are applied in practice. When mapped together, they give precise insight into development needs.
How can organisations keep capability and competency frameworks up to date?
Using a centralized system makes it easy to adjust role requirements, update competency indicators, track skill changes and maintain a single source of truth. Updates flow automatically into assessment, learning, performance and succession processes.
Clinical & Technical FAQs
How do capability and competency apply in clinical roles?
Capability ensures clinicians hold the required licenses, certifications and scope of practice. Competency confirms they can apply clinical knowledge and skills safely and consistently through observation, simulation, supervised practice and documented evidence.
How can clinical competence be proven for audits and accreditation?
Clinical competence is demonstrated through a combination of verified skills, direct observation, competency assessments, case evidence and alignment to standards (e.g., Magnet, Joint Commission, NCNZ, professional boards). A centralized system ensures auditors can see current, verifiable evidence.
How are competencies assessed in technical or operational environments?
Competency is verified through task demonstrations, operation of equipment, safety behaviours, troubleshooting scenarios and supervisor sign-off — combining skills and behaviours for reliable evaluation.
What helps keep technical skill matrices up to date?
A centralized system linked to job roles ensures updates to processes, equipment and standards flow automatically into skills lists, assessments, refresher training and reporting.
Common Mistakes to Avoid
What is the biggest mistake organisations make with competency frameworks?
Treating them as static documents. Competency frameworks must be operational tools connected to assessment, learning and performance to stay current and useful.
Why is mapping skills directly to job titles a problem?
Job titles are broad and change over time. Skills must be mapped to tasks to give accurate visibility into capability gaps and development needs.
Why doesn’t training attendance equal competence?
Training shows exposure, not performance. Competence requires observed application — practical demonstration, behavioral indicators and consistent results on the job.