Review on David Mcclelland's Theory

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In 1973, David McClelland published a paper titled “Testing for competence rather than intelligence”. In this paper, he founded a theory on competency and he demonstrated how it result in higher job performance.

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McClelland proved that behavioral traits and characteristics of an individual are more influential than aptitude tests in proving which individual would be successful on the job. McClelland (1973) “Superior performers did things such as exercise good judgment, notice problems and take actions to address them and set challenging goals- that is displayed behaviors relatively independent of aptitude, skill proficiency, and experience level.”

McClelland defined a set of competency variables; it is useful in determining job performance, and these variables not biased by race, gender, or socio-economic factors.

McClelland’s competency theory consists of two factors

Use of criterion samples that includes a process of comparing superior performing individuals with average individuals to identify the reasons for them being successful.

Identifying specific behaviors in individuals that will result in to successful outcomes. Competencies is described in the way an individual behaves, the competency models provide a clear outline for coaching, giving performance feedback to an employee, and is used for shaping the desired employee behavior pattern. Competency-based training programs would help to reduce the gap between the required and the actual work skills of an employee.

Definitions of competency

Competencies are the characteristics of an individual employee. It may be in of any form of knowledge, attitude, skill, motive, value, self-concept or traits. Rao, T. V. (2003) “any underlying characteristic required for performing a given task, activity or role successfully can be considered as a competency.” The competencies are categorized into four main types, namely technical, behavioral, managerial and conceptual. There is no rigidity about categorization and a given competency may fall into one or more types.

A competency means that an individual is able to perform a critical function, task or work in a given position or role by using his/her talents, skills and knowledge. Competencies in an organization are of two types namely; organizational specific competencies and generic competencies. Talents, skills and knowledge may be intellectual, emotional, social and physical abilities to do a necessary activity. Spencer (1993) “Competency is an underlying characteristic of an individual that is causally related to criterion – referenced effective and/or superior performance in a job or situation.”

Characteristics of Competencies

Motives: The motives are unconscious feelings and inclinations, which compel people to exhibit a set of behaviors and cause them to action. The definition of motive is what a person constantly thinks about or wants to do and it results into actions. Motives “drive, direct, and select” a particular behavior toward achieving a certain action or goal.

Traits: Spencer & Spencer (1993) describe traits as physical characteristics of individual, steady, and consistent responses to a particular situation / event or information. For example, being a good listener is a physical trait for a Counsellor; Quick reaction time is a physical trait of a good fielder in a cricket match.

Self-Concept: These are self-awareness competencies possessed by a person; it includes attitudes, values, aspirations, and self-image. McClelland, Koester & Weinberger (1983) “A person’s values are respondent or reactive motives that predict what he or she will do in the short term and in situations where others are in charge.”

Skill: Spencer (1993) defines skill as “The ability to perform a certain physical or mental task.” Mental or reasoning skill competencies include analytical thinking and conceptual thinking. It represents efficient application of knowledge, experience and tools earned over a period. Skills are revealed proficiencies or abilities, which are learnt, developed, and expertise from experiences.

Competencies Possessed by Finance Professionals

Finance is an integral part of every organization. The most common finance professions are accountant, corporate finance officer, financial advisors, investment finance officer, financial analyst, trader, chartered financial analyst, chief financial officer (CFO) and so on. For a CFO, apart from the fundamental competencies, a variety of finance focused competencies are required. These competencies are a must for every finance professional, though the degree of possession may vary as the designation.

Knowledge, Skills and Attributes of A CFO

In the knowledge component of competencies, formal accounting qualification is required. In addition to that, financial and other mathematical skills are value adding, hence he/she must be having multi-disciplinary knowledge. Analytical abilities in terms of internal audit and understanding of GAAP (generally accepted accounting principles) is also needs to be acquired. In a democratic country like India, finance professional should be constantly and thoroughly aware about government policies. To incorporate with the current VUCA (Volatility, Uncertainty, Complexity and ambiguity) time, any finance professional should be able to have wholesome knowledge of current IT software, should know data trending and how to connect business with data science to make a culture of analytics.

To enhance and apply the knowledge in practical use, skills are essential. Skills can be of two types; hard skills and soft skills. Hard skills are those skills which enhances the education, language and machine knowledge. For a finance professional, hard skills like documentation, business language proficiency, strategic design and planning, understanding of governance model are much needed. Soft skills can be classified in five parts, as following:

Personal skills: Integrity, pro-activeness, communication and presentation skills, business insight, good judgement power, effective business writing, professional demeanor, adaptability, detail orientation, supervision etc.

Interpersonal skills: Team work, conflict management, negotiating, and facilitation, cross functional perspective etc.

Professionalism skills: Unwavering professionalism, commercial acumen, capacity for innovation within the company, advisory, change management, collaborative, team oriented etc.

Leadership and management skills: Problem solving, intellectual curiosity, steward, planning, coaching and mentoring, time management etc.

Organizational skills: Multitasking, change influencer, risk management, performance management, compliance, productivity, identifying and bridging the skill gap, conducting cash flow planning, anticipating and serving evolving needs, managing clients and so on.

Individual attributes are viewed mainly as acquired from one’s accumulated life experiences and how they are to put in use for organizational success. Management experience with generalist approach is highly required in a finance professional. Having strategic mindset, evidence-based approach, strong work ethics, and broad business perspective (internal and external consulting, emerging management practices, and strategic alliances) is just as necessary. For a successful CFO; understanding business drivers and direction as well as an understanding of the need for client confidentiality - is one of the basic attributes. Along with that; knowledge of treasury management, portfolio optimization, capital allocation, market positioning and ability to give decisions in a politically charged atmosphere is equally needed.

Strong management, new and innovative platforms, career progression and recognition are known as huge motivators for finance professionals.

CGMA Framework

The CGMA (Chartered Global Management Accountant) Competency Framework is designed to help management accountants and their employers to understand the knowledge requirements and assess the skills needed for both; current and desired roles. The framework is supported by the need for objectivity, integrity and ethical behavior, and it includes a continuous commitment to acquire new skills and knowledge.

The four areas of the CGMA competency framework is as following:

1. Technical skills: For applying accounts and finance skills

- Financial accounting and reporting

- Cost accounting and management

- Business planning

- Management reporting and analysis

- Corporate finance and treasury management

- Risk management and internal control

- Accounting information systems

- Tax strategy, planning and compliance

2. Business skills: In the context of the business

- Strategy

- Market and regulatory environment

- Process management

- Business relations

- Project management

- Macroeconomic analysis

3. People skills: To influence people

- Negotiation and decision-making

- Communication

- Collaboration and partnering

4. Leadership skills: Lead within the organization

- Team building

- Coaching and mentoring

- Driving performance

- Motivating and inspiring

- Change management

Das, Smitha (2007) the researcher gave importance to employee competency development as it’s a process building trust among the employees. Once the employers understand the strength and weakness of the employee they can be made to work to ensure organizational success. The employee can be trained to make them knowledgeable, competent and skilled. This builds trust among the employees and they show loyalty towards the employer.

Shermon, Dr. Ganesh (2004) the researcher underlines the need to comprehend and shape the competencies for Organizational development and future. The various dimensions include business competency, people competency, and the link between them. The researcher concluded that performance, behavior and capacity building are the foundations for any organizational achievement and growth. The job-role competency mapping can be used as a tool for building the same.

Spencer and Spencer (1993) the researchers suggest that the method of developing a competency-based model will be Behavioral Event Interviewing (BEI). The researchers for preparing this model compared high performers and average performers to understand how each of the group achieves their different levels of success. Based on the results, the researcher compared the performance groups and developed the competency model.

McClelland, David (1973) “Behavioral traits and characteristics are more important than aptitude and intelligence in determining job success.” The researcher proved than communication skills, patience, goal setting, and ego development will be needed more than intelligence level to be successful in doing a job.

Boyatzis (1982) applied competency in the managerial work area. The researcher proved that the best fit for any managerial job would be an individual who has a strong vision, values and philosophy; understands the job demands and is able to adjust to the organizational environment, culture and climate.

In an online survey by R. Indjejikian and M. Matejka (2009) on CFOs of the “American Institute of Certified Public Accountants” (AICPA), it was found that the median tenure of a CFO is about four years for most entities. Other significant determinants to facilitate the incentives were found as general management targets given to them such as; operation management, people management, customer orientation. Adding to that; reporting targets, financial targets also plays a big role. Communication and teamwork at workplace were also identified as key determinants.

While examining the predominant leadership orientations of CFOs at U.S. four-year public colleges and universities, Charles R. H. (2013) found that these two factors are necessary for CFOs to be effective i.e. self-awareness and how they understand a matter from different perspectives, and an understanding and appreciation of their relationship with the chief academic officer (CAO) of the institution. These factors were found as per CFO’s perception about themselves and how they are perceived by the CAOs.

Blustain, Buck, Carnaroli, Golding, McGurty, Suttenfield, and VanDerhoof (2013) of “National Association of College and University Business Officers” (NACUBO) identified six competencies that the higher education CFOs should master namely; communication, advisory, risk management, decision analysis support, institutional effectiveness, and sound management. They also identified three roles which the CFOs should possess. Those roles are of capacity builder, cultural traveler, and horizon thinker.

G. A. Railey, Jr. (2010) studied that the CFOs liked the responsibility and career advancement opportunities as part of their career progression. Quoting one of the respondent’s statement- ‘I have always been good with people and money’ shows the multi-disciplinary interest and knowledge for becoming a successful CFO. Some CFOs like the challenge of a position they saw as difficult, complex and demanding while others liked the opportunity to make a difference and contribute to the organizational missions.

Mary Soroko (1997), in her paper about female CFOs and their leadership traits in higher education institutes, discovered that the subject’s professional integrity and optimistic approach were found significantly influencing the culture and climate of the institution. Subject’s positive frame of mind seemed to influence organizational receptiveness to growth and change. Hence, the results suggest that the CFO’s cultural leadership skill plays an important role in maintaining the health and vitality of post-secondary institutions. The subject’s leadership and vision promoted innovation, facilitated change, and enhanced productivity; all of which enabled her institution to operate in an effective, cost efficient manner.

Angelia G. Adams (2014) examined females working as the senior-level CFO and CAO administrative positions regarding their understanding of “How the workplace environment, mentoring, and professional development has affected their advancement”. The result showed that workplace environment was valued the most, followed by professional development and lastly, mentoring. Five major themes emerged relating to the role of workplace environment were identified as changing environment, leaders’ perception, advancement, and non-barriers in terms of gender.

Ronald P. Conlin (2016) did a survey research regarding whether leadership skill requirements to perform one’s job effectively varies by job function. Major three leadership traits of a finance professional were identified as: the ability to strategize, the ability to process large amount of information and lastly, the ability to communicate within and outside of the organization. The result of the study showed that the most important skills for a finance professional were listening, accuracy, critical thinking, active learning and professional writing. It was also found that the interpersonal leadership skills were more important to those in sales function than for those in finance functions.

Lawson, Raef and Larry R. (2018) Unlike other operative functions in the organization, accounts department has a lot to worry about the challenges they have to face as the rapid disruptive technological change and the consequences that follow. A typical line of thought is that by acquiring competencies in areas such as predictive analysis, the accountants can achieve the role of ‘business partners’ by helping management in approval and execution.

G. Unnikrishnan, R. Jose, A. Hose (2017) “Behavioral Finance: An Insight into Investor Psychology”. Behavioral finance tries to link the concepts of psychology to investment management in order to explain the various irrational behaviors that the investors showcase at certain stages. The researchers compared traditional finance with behavior finance and discovered that behavior of an investor is very much influenced by psychology and his/her attributes toward their work and method of their work.

The world has encountered a phenomenal development in business entities and the quantity of business substances, and additionally an immense increment in the need of talented and skilled workforce in various utilitarian territories of business. One such key area in business is finance department. Skills like managerial, technical, organizational, inter personal and conceptual skills are the most required skills in an organization. Many times, candidate gets proved false positive, when skills and job role doesn’t get align. The study is intended to bring to light the key competencies and skill sets that are required for success in the aforesaid profession.

Based on the previous studies, it can be said that there might be a subtle gap in the current finance workforce of the country and their skill-sets, as there’s very less amount of literature available which is focused towards this area. Gap analysis will give a straightforward intend to measure transferable aptitudes and put them to practices. By recognizing the competencies, job specifications can be assigned more precisely. The studies can later be implemented to the learning and development programs, soft-skills enhancement programs, and also can be added to university level study material as a part of management courses.

Behavior competencies need to be recognized for a harmonious workplace environment, and this study can enhance and can help to train any underdeveloped skill/ability. The role of finance function has been continuing to extend beyond budgeting, reporting and controlling to more of strategic level. The evolution of finance has changed the approach from traditional to modern to latest technological mindset to cope up with potential risks. In the current scenario, CEO (Chief Executive Officers) and CFOs are shaking hands, instead of butting heads. Finance department in an organization, has emerged from transaction processing and book keeping to get involved in decision making and risk management. Yet, talent management and the technical knowledge of staff- is generally viewed as the biggest weakness of the finance department.

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In a private company, where finance is a vital part of Human Resource Process and forecasting; competencies like risk management, detailed knowledge of products and service lines, marker and commercial environment awareness is the most important. Other competencies which a finance professional should have are - Leadership skills to drive through change in finance, setting and communicating the vision and strategy, turning strategic plans into operational plans and targets (including defining KPIs) and monitoring the progress against strategy, creativity/ability to think “out-of-the-box”/ conceptually strong mindset, effective communication of financial and risk issues to C-suite colleagues, taking a forward-looking view and so on.

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Review on David Mcclelland’s Theory. (2019, August 27). GradesFixer. Retrieved October 1, 2023, from
“Review on David Mcclelland’s Theory.” GradesFixer, 27 Aug. 2019,
Review on David Mcclelland’s Theory. [online]. Available at: <> [Accessed 1 Oct. 2023].
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