Factor 1: Capitalizing on organization capability

Organizations must be designed to help deliver strategy. To do so, HR

professionals and business leaders should focus on an organization as a set of
capabilities rather than as processes, structures, or systems. Focusing on
organization capabilities ensures that desired strategies are realized. HR
professionals should be able to do organization audits trough five steps:
1. Select the organization element in which de organization audit should
occur.
This element might be the entire organization or business unit, region, or
plant. An organization audit must be sponsored by the leadership team of
that element.
2. Create the content of the audit
The team designing the audit should take these generic capabilities and
adapt them to the requirements of the organization. One approach to
capturing the espoused capabilities involves reviewing company public
documents, executive speechers, minutes of executive committee
meetings, advertising, and media reputation indexes.
3. Collect data from multiple groups on the current and desired status of the
capabilities being assessed.
This information may be collected by pursuing a variety of patterns:
- 90 degree: collect data from only the leadership team of the unit
being audited. This is the quickest method, but it is often deceptive
because the leadership teams self-report may be biased.
- 360 degree: collect data from many groups within the company. The
assessment of different groups may tell a very different story
depending on how each group sees the information
- 720 degree: collect information not only form inside the company but
from groups outside the company; External assessors might include
investors, customers, or suppliers. These external groups become
important because, ultimately, they are the groups that will determine
if the organization has intangible value.
4. Synthesize the data to identify the most critical capabilities requiring
managerial attention. The data from the audit need to be condensed into
key messages an then translated to action. Getting to a few focused
capabilities requires prioritizing and identifying which capabilities will have
the most impact and be the easiest to implement.
5. Assign teams to deliver critical capabilities by putting together an action
plan with steps to take and measures to monitor.
This capability plan should be focused and timely. Once the critical
capabilities are identified, design an consistent process for defining and
delivering that capability. We have seen companies bring the senior learn
together for a half-day meeting to cover the following points on critical
capabilities:
- Definition of capability
- Decisions about accomplishing capability
- Measures to track and monitor capability
- Actions that can be taken to deliver capability

Lessons learned from Capability Audits

No two audits will look exactly the same, but our experience has shown us that,
in general, there are good and bad ways to approach the process. We
recommend a few guidelines:
- Get focused.
Its better to excel at a few targeted capabilities than to diffuse energy
over many capabilities. This means identifying which capabilities will
have the most impact considering the resources required and
prioritizing accordingly: the remaining capabilities identified in the audit
should meet standards of industry parity.
-

Learn from the best

Compare your organization with companies that have world-class
performance in your target capabilities. Is often helpful to look for
analogous industries where companies may have developed
extraordinary strength in the capability you desire.

Create a virtuous cycle of assessment and investment

A rigorous assessment helps company executives figure out what
capabilities will be required for success, which helps them determine
where to invest.

Compare capability perceptions

Like 360-degree feedback in leadership assessments, organizational
audits may reveal differing views of the organization.

Avoid underinvestment in organization intangibles

Often, leaders fall into the trap of focusing on what is easy to measure
instead of what is most in need of repair.

Dont confuse capabilities with activities

Instead of asking what percentage of leaders received 40 hours of
training, ask what capabilities the leadership training created.

Looking ahead
HR professionals become capability builders when they can do organization
audits that have clear capability results. Like any skills development effort,
organization audits often start small, allowing their sponsors to learn from
experience.