Organisational Capabilities Defined
Harvard Business Review defines organisational capabilities as the “collective skills, abilities, and expertise of an organization—is the outcome of investments in staffing, training, compensation, communication, and other human resources areas”. Organisational capabilities develop when a business satisfies its employees’ combined talents and abilities.
Companies Focus on How To Build Organisational Capabilities
According to Mckinsey & Company, building fundamental skills like project management and lean operations, as well as industry-specific skills like merchandising or underwriting, provide businesses with a competitive edge. Their Global Survey results indicate that 58% of respondents say “it’s among their companies’ top three priorities”. Moreover, the most common reason for companies’ capability focus is not competitiveness, but because the skill is part of their organisation’s culture.
Missing the Mark
The survey also indicates that the thought-to-be most crucial capability for a company’s business performance is out of alignment with training programmes. Only 33% claim that their training and skill-development initiatives concentrate on enhancing the most crucial competence for their companies. For instance, the majority of respondents believe that leadership ability is the trait that most significantly affects performance. However, just 35% of respondents claim to dwell on it. Moreover, only 36% of executives think their businesses are better at developing leaders than the competition.
Businesses also find it difficult to quantify how training affects operational performance: according to 50% of respondents, just 30% of organisations employ any other metrics outside direct input. Additionally, a third of respondents are unsure about the return on investment in training made by their companies. Companies don’t seem to set their agendas based on employee role prioritisation since they are unsure of the impact of training, which may not truly have the greatest effect on the bottom line.
Furthermore, while “resistance to change” is frequently seen as a hindrance to developing new capabilities, nearly as many participants in this poll cited a shortage of resources and an undefined vision.
How To Build Organisational Capabilities According to Mckinsey:
- “Businesses need to be more deliberate in identifying the competencies that actually affect business performance and adjusting their training initiatives accordingly. Those that put a strong emphasis on developing leadership skills are more likely to believe that their training initiatives have a positive impact on business success”.
- “Senior leaders should set the agenda for building capabilities, as those agendas align with the capability most important to performance. Based on the study, Capability building is more important when senior executives decide on the training agenda than when other groups do so. For instance, 38% of respondents at businesses whose senior management control the training agenda said their primary training and skill-development initiatives are concentrated on fostering or sustaining the top skill priority for the company, as opposed to 28 percent at organisations where HR sets the agenda”.
- “Because it is embedded in their corporate culture and not because it serves any competitive purpose, most businesses concentrate on the capability executives claim is most crucial to business performance. Despite the fact that culture is a significant factor in effective capability building, businesses that prioritise particular capabilities for business-related rather than cultural reasons have a stronger competitive advantage”.
CPC and On How To Build Organisational Capabilities
The proven CPC approach that helps businesses to position for World-class Performance features, Strategy clarity and Leadership capability which results in Change that impacts the Culture. Our flagship Leadership solution comprises 16 modules of skills sessions based on credible research models. We use 360-degree profiling to establish a baseline and post-training projects, coaching and a post-program profile that demonstrates learning assimilation and application.
The CPC-LDP has been taken by participants across Australia and in 12 other countries in the Asia Pacific region. Australian and global companies have enjoyed greater success as a result. This program uses the acclaimed Denison Organisational Culture Survey coupled with proprietary diagnostics that uncover powerful insight and focus, to produce sustainable outcomes.
The McKinsey research above shows that our approach of; developing clear Strategy, building leadership capability and focusing on core Culture-driven Change efforts, is a proven practical methodology to address the key challenges shown in Exhibit 5 above.
Talk to us to learn how your business can benefit.