Managing Organisational Capabilities – Ditch the One Size fits all for the 80/20 rule.

Capability Management In theory is a logical and sensible approach that in practice has not lived up to its promise.

Capability Management enables organisations to identify, develop, and maintain the abilities and resources an organisation needs to achieve their goals. By effectively managing capabilities, organisations can improve their competitiveness, adapt to changes in the market, and stay ahead of the curve in terms of technology and innovation.

During my many years of consulting across industries including Healthcare, Defence, Financial Services, Telecomm and NFPs, I have struggled to find a noteworthy implementation of Capability Management that contributes to business outcomes as it was intended. (I would like to think I am wrong or simply ignorant. Please let me know if you have come across one).

Before we begin it is important to clarify the two common flavours of capability management in the industry. Capability Management as used by HR and L&D professionals focuses on workforce KSA (Knowledge, Skills, and Attitudes). The second and more overarching flavour of Capability Management is the abilities and resources an organisation needs to achieve a goal or outcome. For example, Australian Defence defines Capability as the effects provided by a ‘system’ of interlocking and interdependent inputs such as Personnel, Organisation, Collective training, Major Systems, Supplies, Facilities and training areas, Support Command and management. A separate blog post on this coming soon. For this blog, Capability Management refers to workforce Knowledge, Skills and Attitudes.

There are many reasons the current ineffectiveness of Capability Management, but the reason that I want to focus on in this blog is that organisations do not prioritise their efforts and try to do too much Capability Management.

HR & L&D often strive for comprehensive and meticulous capability management including multiple levels of competencies and all-encompassing skills frameworks for all job families. They overlook the significant effort and resources required to properly implement and maintain effective Capability Management. The reality a high level of detail and resolution for all organisational capabilities may not be feasible given the limited resources available and the fast-changing nature of business.?

The solution is to apply the 20/80 rule to Capability Management

The 80/20 rule, also known as the Pareto principle, states that approximately 80% of the effects come from 20% of the causes and is used to identify areas where the majority of outcomes can be achieved with a relatively small proportion of inputs. The 80/20 ratio is not a hard and fast rule and may vary in different situations, but the principle still serves as a useful tool for decision-making and prioritisation.

Organisations can achieve a significant improvement in results by focusing their resources and efforts on vital 20% of the capabilities that produce the majority (approximately 80%) of their outcomes. The figure below depicts a grid mapping business priority of the capability against its permanence (shelf life). The top 20% of business priorities (green band) is where the effort should be prioritised. The bottom 20% can be safely ignored in most cases unless?it has compliance implications.

High Priority + High Permanence Capabilities (Critical)

• Identify high-priority capabilities: Start by identifying the capabilities that are essential to the success of your organisation and likely to remain relevant and in demand over the long term. These will vary with the industry, size and maturity of the organisation. Examples include program management in Construction, triage in emergency rooms or service delivery in Not for Profits. A structured process for prioritising capabilities to deliver on business goals is essential, which will be the subject for a separate blog.
• Assess the permanence of the capability: Look for capabilities that are based on an enduring body of knowledge and certification supported by a well-established professional community. Examples include project management, technology and healthcare which have established professional associations and certifications.
• Embedding high-priority capabilities into your business processes and systems: To achieve long-term success, it's essential to integrate high-priority capabilities into your business processes and systems including performance management. One effective strategy is to establish academies or centres of excellence focused on developing specific skills and knowledge areas. By providing employees with targeted training and support, you can cultivate a culture of continuous learning and improvement that drives innovation and growth.?

High Priority + Low Permanence Capabilities (Emerging)?

• Take the MVP (Minimal Viable Product) approach: When it comes to emerging capabilities e.g. Blockchain technology, it's important to take an MVP approach. This means developing a basic, functional version of the capability that can be tested and refined over time. It allows you to quickly and cost-effectively validate the potential impact and viability of the technology. It is critical to work with an expert who can help develop a roadmap for the development of the capability.
• Closely monitor for progression: Emerging capabilities are inherently uncertain and volatile. While some may prove to be game-changing technologies, others may not survive in the long term. That's why it's crucial to keep a close eye on their ongoing relevance be ready to trim the investment if it doesn't meet expectations.
• Use the power of communities and crowdsourcing: An effective method of developing emerging capabilities is by tapping into the passion and interest of employees who are enthusiastic about it. You can leverage their expertise, insights, and creativity to accelerate the development and maturity of the capability. Crowdsourcing can also be a powerful tool for accelerating the development of emerging capabilities by tapping into the collective intelligence of a large group of people.

Low Priority + High Permanence (Maintain)

• Run on autopilot: To streamline the development of Low Priority + High Permanence capabilities, consider automating the process using online systems including the development of a course in a MOOC (massive open online course) style, which provides 24/7 access to content and allows participants to engage in online discussion. It can help to reduce costs and increase scalability.
• Provide pathways for self-development: Provide pathways for employees to undertake self-development in the capabilities without consuming extensive organisational resources. These pathways may include access to online course libraries and membership to professional associations.

Low Priority + Low Permanence?

• Invest sparingly: In the triage of capabilities, Low Priority + Low Permanence capabilities should require very little investment (if any)

As you can see managing capabilities is a complex and challenging process that requires careful planning and management. While a one-size-fits-all approach may seem straightforward, it can be limiting and inefficient, as it does not allow for the prioritisation of scarce resources to the most critical capabilities. By prioritising the most critical capabilities and investing resources accordingly, you can build a resilient and innovative organisation that can thrive in a rapidly changing business landscape.

About me - Designing and implementing enterprise Capability Management is my passion. My approach I prefer is:

• Integrating with Performance, Learning and Knowledge Management.
• Use communities of practice and crowdsourcing to develop capabilities.
• Use technology to scale and personalise.

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