Building organizational capabilities
Building organizational capabilities, such as leadership development or lean operations, is a top priority for most companies. However, many of them have not yet figured out how to do so effectively. The odds improve at companies where senior leaders are more involved.
Nearly 60 percent of respondents to a recent McKinseysurvey1 say that building organizational capabilities such as lean operations or project or talent management is a top-three priority for their companies. Yet only a third of companies actually focus their training programs on building the capability that adds the most value to their companies’ business performance.
We defined a capability as anything an organization does well that drivesmeaningful business results. The survey explored which capabilities are most critical to a company’s business performance and why they focus on the capabilities they do. It also asked executives how their companies create and manage training and skill-development programs and how effective those programs are in maintaining or improving on their priority capabilities.
It’s notable that the majorityof companies don’t focus on a specific priority capability for purely competitive reasons; most often, the reason is that the capability is part of their culture. Further, some three-quarters of respondents don’t think their companies are good at building the capability that is most important. When senior executives are involved in setting the capabilities agenda, companies are more successfulat aligning those agendas with the capability most important to performance and more effective at building the needed skills.
1 The online survey was in the field from January 12, 2010, to January 22, 2010, and received responses from 1,440 executives representing the full range of regions, industries, functional specialties, and seniority.
McKinsey Global Survey results
A strategic priority
Companies can gain a competitive advantage by building foundational capabilities such as lean operations and project management or industry-specific capabilities such as merchandising or underwriting. Indeed, executives say building capabilities is a top priority for their companies: 58 percent of respondents say it’s amongtheir companies’ top three priorities, and 90 percent place it among the top ten.
Even in the context of the current financial crisis, 29 percent of respondents say their companies have not changed their training budgets; 11 percent have actually increased them.
Notably, however, the most common reason respondents give for their companies’ focus on the capability identified as most importantto business performance is that the skill is a part of their companies’ culture, rather than any competitive reason (Exhibit 1).
Lack of alignment
Despite the importance of capability building on the strategic agenda, executives’ responses indicate they’re not very good at executing: only about a quarter think their companies’ training programs are “extremely” or “very effective” in preparingvarious employee groups to drive business performance or improve the overall performance of their companies (Exhibit 2). % of respondents,1 n = 1,375 Reason organization focused on a specific skill (eg, sales and pricing, leadership) Survey 2010 Capability building Exhibit 1 of 6 Glance: Exhibit title: Why companies focus on building capabilities Its importance as a fundamental part of ourculture Competitors’ capabilities 34 Long-term global trends (eg, shifting markets) Other 16 10 9 Short-term external events (eg, economic downturn) Customer demands 21 9 1 Respondents who answered “don't know” are not shown.
Why companies focus on building capabilities
Sixteen percent of respondents in China and 20 percent in India say capability building is a top priority for their...