Capabilites Essay

5342 words - 22 pages


Assets like leadership, talent, and speed are what produce superior market value. A capabilities audit can show you how you measure up-and how to build on your intangible strengths.

Capitalizing on Capabilities
by Dave Ulrich and Norm Smallwood
they admire, people quickly point to organizations like General Electric, Starbucks, Nordstrom, or Microsoft. Ask how many layers of management these companies have, though, or how they set strategy, and you'll discover that few know or care. What people respect about the companies is not how they are structured or their specific approaches to management, but their capabilities an ability to innovate, for example, or to respond ...view middle of the document...

In this article, we look at organizational capabilities and how leaders can evaluate them and build the ones needed 119

HBR SPOTLIGHT I ntang Ible Assets

to create intangible value. Through case examples, we explain how to do a capabilities audit, which provides a high-level picture of an organization's strengths and areas for improvement. We've conducted and observed dozens of such analyses, and we've found the audit a powerful way to evaluate intangible assets and render them concrete and measurable.

Organizational Capabilities Explained
while people often use the words "ability," "competence," and "capability" interchangeably, we make some distinctions. In technical areas, we refer to an individual's functional competence or to an organization's core competencies; on social issues, we refer to an individual's leadership ability or to an organization's capabilities. With these differences in mind, let's compare individual and organizational levels of analysis as well as technical and social skill sets:

These might include such capabilities as innovation and speed. Organizational capabilities emerge when a company delivers on the combined competencies and abilities of its individuals. An employee may be technically literate or demonstrate leadership skill, but the company as a whole may or may not embody the same strengths. {If it does, employees who excel in these areas will likely be engaged; if not, they may be frustrated.) Additionally, organizational capabilities enable a company to turn its technical know-how into results. A core competence in marketing, for example, won't add value if the organization isn't able to spark change.

There is no magic list of capabilities appropriate to every organization. However, we've identified ii -listed belowthat well-managed companies tend to have. (Such companies typically excel in as many as three of these areas while maintaining industry parity in the others.) When an organization falls below Shared Mind-Set and Coherent the norm in any of the li capabilities, Brand \dent\ty: We are good at ensuring Organizational Individual dysfunction and competitive disadvan- that employees and customers have posi1 3 tage will likely ensue. tive and consistent images of and experiAn individual's An organization's Talent: We are good at attracting, mo- ences with our organization. To gauge functional core competencies competence tivating, and retaining competent and shared mind-set, ask each member of 2 4 committed people. Competent employ- your team to answer the following quesAn individual's An organization's ees have the skills for today's and to- tion: What are the top three things we leadership ability capabilities morrow's business requirements; com- want to be known for in the future by In the table above, the individual- mitted employees deploy those skills our best customers? Measure the degree technical cell (l) represents a person's regularly and predictably. Competence of...

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