Competency vs Capability Mindset: The Organisation

Design your organisation for the potential of its people and their capabilities, not the limits of an expertise.

I recently noticed that Capability or Competency? Mindsets matter was the second most read post on this blog. Part of the appeal of that post is that it addresses a critical shift in mindset for those grappling with the new dynamics of the future of work. We stand facing an organisational version of the personal insight Marshall Goldsmith described succinctly as “What Got Me Here Won’t Get Me There”

Competency-led Organisations

The Core Competency concept introduced by Prahalad and Hamel refined a concept that had been strong in management for decades. It is undoubtedly true that organisations compete by being better, more competent, at something than their competitors. However the mindset of being more competent differs from a competency. This subtlety was often lost as core competency flowed into the mainstream of management thinking.

The focus on core competencies created a mindset that organisation gets to choose its competencies as part of a strategic planning process and should set targets for competencies to fulfil its strategy.  While Prahalad and Hamel spoke of the need for organisations to look forward to assess and build their competencies, much of the focus in organisations has been historical. The biggest outcome of the discussion of core competency has been a narrowing of organisational ambition and a focusing of activity on historical strengths. “That’s not our core competency” is more common than “We can leverage core competencies”.

Influenced by themes that go back to the beginning of scientific management, we have turned core competencies into rigid processes, standards and policies. We have judged these competencies by what sustained competitive advantage in past markets. We have spent less time on the changing customer perceptions of value and the ongoing dynamics of the future marketplace driven by new competitors. The list is long of disrupted organisations who felt safe because a new entrant lacked their core competencies. In many cases the infrastructure to reinforce and sustain these core competencies became a burden in their ability to adapt and survive. 

Capability-led Organisations

The Big Learning mindset that pervades the future of work highlights that competitive advantage in the next century is based on the ability to build the capabilities required to compete in an environment of uncertainty. Rather than specifying a fixed goal of competency, we seek to build an open capability to fulfil our strategic intent and our customers’ needs as they arise.

Adapting organisations to foster autonomy, learning and change is what enables people to build the practical capabilities necessary to learn, grow and execute. The process you inherit is less important than the customer insight you gain in working to meet your customer needs. Prahalad and Hamel reinforced that in Competing for the Future their update of the core competencies discussion. The discussion on the need for organisations to build open capabilities that can help manage and drive adaptation.  These capabilities include openness to their networks and environment, collaboration, ability to learn, share and drive change. Critical too is the development of purpose as the new focus for organisational activity and the inherent rationale for groups of people to come together in work to benefit others.

Design for Capabilities

Responsive Organisations need to design for a capability-led response to a uncertain future. They need to develop core Big Learning practices like working out loud, personal knowledge management, adaptive leadership and experimentation. They need to design their organisations to allow individuals and the collective to focus on the realisation of purpose.

This organisational design will leverage networks, transparency, autonomy, experimentation and the inherent motivation of employees in ways that we have not yet seen. Developing a new competency in holocracy, agile, lean product development, design thinking, big data or any other single practice is not enough. An organisation must build the capability to continuously adapt to customer needs in a changing market.

Ultimately, it will also focus organisations more strongly on realising the potential of people, customers and other stakeholders. We need to design our organisations to build the capabilities that realise human potential. That can only help make work more human.

Manage Portfolios of Capability – #BigLearning

In strategy, we often think of organisations as portfolios of capability. Capability creates options. The set of capabilities in an organisation enable you to do some things and not others. Managing that portfolio to allow for performance, adaptation and growth is critical to success in changing environments.

The same principles apply to learning for individuals in organisations. We can help our people see learning as a way to manage their portfolios of capability. This approach creates options and adaptability for the individual and the organisation. Individuals who manage their own portfolios of capability will have richer and more purposeful careers.

Traditional Learning

Traditional learning approaches borrow from the industrial management mindset. What matters is the role, which is an input in a production process. The role has to have certain fixed capabilities. Therefore we recruit and train our people to have those capabilities.

When something changes, we have a problem. We focused on a fixed role, not the people. We treated people as cogs in a process and hoped we could find or stuff them with the capabilities required for a role. This learning largely happens independent of the individuals purposes, hopes or dreams. Their desire to have a role requires them to learn fixed capabilities.

Managing a Portfolio is Adaptive

Nobody is in perfect identity with the capabilities listed on their role description. We all have diverse portfolios of capability. We have different education, experience and networks. We are hired because we bring more to the role than others.

How often have you seen someone with skills required elsewhere but who doesn’t get to apply them? An IT manager once challenged me to demonstrate that new employee profiles couldn’t help him with his need for a programmers in a particular language. “I know all the programmers here”, he said. The first name that came from a search of employee’s profiles highlighted a financial analyst in the same organisation who had a masters in computer science and had declared their experience in programming in that language. The analyst was unknown to the IT manager. What secret talents are hidden in your employee population?

Let’s manage people, not roles so that we can leverage our individual and collective portfolios of capability. People adapt by drawing on additional skills and capabilities. People can look ahead and learn for the next role or the next challenge. Importantly that allows our employees to manage their own portfolios of capability beyond this role and into their whole life.  

A Capability Portfolio Approach for Organisations and Employees

  • Start with your employee’s needs: Use Design thinking to understand your employee journey before, during and after their time with you. What does a new perspective do to help you change the way you enable them to learn?
  • Manage a portfolio strategy: You have business needs for certain skills. These become the priority areas for your portfolio of capabilities in the organisation. However, they will not be the only areas you have skills in the team. Re-weight the priorities of the portfolio constantly as the business needs change.
  • Encourage employees share their full set of capabilities with you. Enable them to disclose the skills and experiences that they have that can help you with your business challenges. Look for options that can be created with these additional capabilities for employees and the organisation. Make capabilities searchable, encourage collaboration and create clearing houses to enable projects to call on those skills as needed.
  • Let employees develop to their purposes and their needs: If you are clear on your business needs, employees know what skills need to be developed. If they don’t want those skills, it is better they don’t want to stay. Finding the alignment between employee purposes and your portfolio needs will strengthen the organisation
  • Hire and Encourage Diversity: Diverse people bring diverse capabilities into the organisation. Everyone of these is a future option. That’s an option that comes for free when you hire someone whose capable of doing the job.
  • Employees are accountable for their portfolios of capabilities: This has always been the case but we lost focus on development in some of the paternalistic HR models. Organisations should support and enable development, but they can’t do it to an employee. Leveraging PKM, working out loud and 70:20:10 models enables employees to take greater control of their learning.
  • Use employee’s capabilities and watch them grow: The best way for a capability to stay current and grow is to be used. How do you let employees step outside their role and use skills on a project, a secondment, helping out a peer in a collaboration, on a hobby project or volunteering externally.

Use Digital Capabilities to Build Digital Capabilities

Our traditional management models die hard. 

Many organisations are starting to consider how they build new digital capabilities like agile, hypothesis-based experimentation, design thinking, analytics and collaboration. Yet when they start to plan these changes to more digital ways of working, they use management models from pre-digital management:

  • transactional approach to interventions
  • solutions defined by expertise
  • linear implementation approaches
  • waterfall project plans
  • push compliance and competency models focused on supply of new skills to employees
  • narrow delivery models using only learning and classroom learning
  • limited if any measurement of the changes

These approaches seek to make organisations ready for more digital management using the methods of traditional management.

Digital Dog Food

We can do better than this. We can start by asking projects to build digital capabilities to eat their own dog food. If nothing else, they will learn on behalf of the organisation the challenges and opportunities of new digital ways of working. 

New Digital Capability Building

Projects to build digital and responsive capabilities in organisations can be role model projects for those capabilities. Taking a leaf from the digital tool suite challenges those building capability to consider capability building that offers:

  • many paths on the learning journey as part of career paths and achievement of learner goals
  • mobile options, social learning and performance support to sustain learning in the digital work place and wherever is convenient for employees
  • offers people pull and push options across the range of 70:20:10 learning with options also for the depth of content and timing of learning experiences
  • encouraging people to seek out and share learning options from the depth of learning available in their personal networks 
  • engaging programs built from deep insights into the change and capability challenges for employees in working in new ways

New Digital Delivery

The projects to build new digital capabilities themselves can adopt digital approaches by shifting to:

  • agile delivery
  • minimum viable solutions
  • hypothesis-led test and learn iteration
  • considering needs for adaptive change and related changes on the wider organisational system
  • encouraging learners to act as a community to support successful delivery of the project goals.
  • strong analytics supporting not just the delivery of learning but also the strategic contribution of the capability building  
  • leveraging collaboration and networks in and outside the organisation to build capabilities, particularly in making smart decisions on what to build and what to buy.

More Effective

Working on transformation projects in these new ways won’t always be efficient.  It definitely won’t be easy. However, using the tools and approaches of digital management enables organisations to learn and evolve their goals through the process of transformation. This learning will be the path to step changes in effectiveness and a better match to employee and organisational needs.  At a minimum, it helps ensure that the project creates a team of highly capable change agents to help drive the next phase of the journey.

Coach the Community to Create Value

We may have begun to move from an adoption conversation to a value conversation. However our hierarchical mindsets can still hold us back. A responsive organisation needs to shape how value arise from collaboration, not try to specify it top down.

Embrace Value

More and more organisations are focusing on how to create strategic business value in their organisation through the use of collaboration. They are seeing the value that can be created as a community journeys from Connection to Innovation. They recognise that adoption & use should reinforce the strategic goals of the organisation and is not an end in itself.

The Temptation to Specify

When an organisation identifies the way that it can create value in a community, our hierarchical tendencies begin to kick in. We start to specify how a community shall work to create value. This is how most organisation’s strategy planning processes usually work. We end up with a plan of what other people have to do. 

Some guidance can be useful at the beginning of a community’s life when people are sense making. However, too much instruction will become a constraint on the value creation if the goals of value creation remain externally imposed on the community.

The best value comes when a community can use its knowledge, capabilities and ideas to create value in new ways. That won’t happen if the community has specified usage cases and a limited focus on the value that it can create.

Coach the Community to Create the Own Value

A large part of the difference between management and leadership is the difference between direction and coaching. Responsive organisations demand leaders who can coach teams managing highly adaptive situations, rather than direct.

Organisations need to coach the members of their communities to create valuable new ways of working using collaboration:

  • Coaching begins by clarifying goals: How do you help your communities understand the alignment between organisations strategic goals and the goals of their own work? 
  • Coaching should enable action & experimentation: How do you help people to translate the opportunities that they can see into work that they can do alone or with the support of others?
  • Coaching should build capability: What skills do people need to manage this process for themselves? What barriers need to be cleared? How can they learn to create, deliver and coach themselves going forward?

The Value Maturity Model Collaboration Canvas is a coaching framework to help community leaders, champions and managers to shape the creation of value through collaboration. The tool asks members of the community to think through the questions that will enable them to create their own value. Spreading this coaching mindset through your organisation is the most powerful way to transform the value created by collaboration & communities. Spreading a coaching mindset through your organisation builds capability as it builds alignment and creates value.  Enabling people to coach themselves helps your organisation become more responsive. It is the only way that you will get the value you didn’t plan and to adapt to the challenges you did not forecast.

Competency or Capability? Mindsets Matter

Competency and capability are near synonyms. However I find there is a world of difference in the mindset that lies behind each measure of individual development. The difference in mindset has major ramifications for careers, talent development and diversity. The two mindsets raise different questions when assessing individuals.

I have personal experience of the difference. When I have failed to win a role that I sought, the feedback is almost always framed in terms of lack of a demonstrated competency. However when I win new roles it is rarely because I had a demonstrated competency in the area of expertise that defined the role. My career has been based on bringing my set of capabilities to address the challenges and needs of each role.

Competency Mindsets vs Capability Mindsets

Discussions framed around competency are often conducted with a mindset of assessing an individual against a defined standard. Often competencies are defined quite specifically and related to limited areas of expertise. Compentencies are often seen as tools to enable someone to do a job. Competency assessment is much more likely to be oriented to formal qualifications, demonstrated prior experience or demonstration of specifically determined skills in action.  People seek to define a fixed goal for a skill relying heavily on past performance. Reaching competency is often seen as the end of the road for that skill. That mindset can be quite limiting in assessment & development of individuals.

Capability as a mindset should be focused on the ability to deliver an outcome, not a test score. Capabilites tend to be seen as infrastructure to achieve an outcome. This mindset tends to be more general, more open to allow more room for the application of other or similar skills and explicitly allows for a talented individual to prove a potential to show their ability in future.

Considering capabilities allows an individual to choose how to tackle at problems, roles or situations. Importantly, there is much less likely to be a defined limit to a capability which allows for the development of greater mastery over time.

Talent Development

A mindset of building competency in the development of talent often leaves the talent wondering why their career is not in their control. Talented people feel limited when pursuing competencies as a series of boxes to be ticked to progress to the next opportunity. There is little chance to skip ahead and prove the potential that made them talent in the first place.

Disruptive change also means that many narrow competencies individuals acquire can become rapidly irrelevant. At the very beginning of my career, I was quite proficient in the use of Wang messaging systems.  Thankfully my more general capabilities in communication supported my future career as email and now social technologies succeeded that now redundant system.

Focusing instead on the ability to achieve outcomes and building capability towards those outcomes gives the individual greater latitude to shape their career.  It also allows greater opportunity to demonstrate that ability in new or different roles that may not have the typical opportunity to show competency at a task.

Our Changing Future Demands Capability not Competency

In a rapidly changing world, defining the standard or even the actions required in a role in advance is challenging.  Organisations increasingly need to shift to outcome based performance measurement with less specific direction on tasks.  

The defined hierarchies that enabled graduated assessment of competencies and detailed command and control process management are proving more and more challenging to manage.  Flatter organisations are more focused on capabilities required to execute strategy.  Networked organisations help us see that the required capabilities+ may well exist in any part of the organisation’s network.  

We need people to bring diverse skills to solve new challenges and we need people to engage with their roles to build a continuous improvement in capabilities.  Allowing people the rewards of movement to mastery in any capability is critical to engagement.  

Merit: Think Capability, not Competency

Merit is a contentious issue in diversity. Often merit is used as an excuse for poor diversity outcomes. Merit can clearly influenced by conscious and unconscious bias. However, when discussing merit we are often unclear whether we mean merit considered on a competency or capability basis.  

Merit measured as competency tends to favour those who have had the opportunity to build prior knowledge and experience. Competency favours the usual suspects. Focusing instead on capability opens opportunities to consider new candidates and allows greater consideration of potential.

Any individual who has had limited opportunity to be fostered earlier in their career is likely to perform better in a mindset focused on their talent potential and ability to deliver, rather than prior experience or accrued skills.

Look Forward to Capability

The distinction between competency and capability is not one that is hard and fast. What this distinction does is open a new question in our decision making. Next time you are considering a role or a candidate reflect on whether there is a difference in your decisions if you look back to a competency or forward to capability. 

Actionable insight matters more than big data.

Don’t worry how big your data is. Focus on how actionable your insights are.

The only thing that delivers business value is turning insights into effective action. Big data can deliver new insights but they will only drive your business when they are put into action to create new sales, save money or create other ways delivering better value in line with your strategy.

Many companies forget to leverage the insights in their existing customer systems. Do your people remember to make a birthday call to a key client using data in your customer relationship management system? Do referrals, leads & other opportunities identified always get executed effectively? Are anniversaries, expiry dates and other retention triggers well managed? Before you launch into new insights make sure you have captured the low hanging fruit.

Big data is often celebrated with examples of counterintuitive insights. Counterintuitive insights are hard to predict and equally hard to action. People doubt the strategies that come from black boxes. Doubt is not a great enabler of action. Organizations often lack the capability to execute the counterintuitive strategy. For example, knowing that left handed plumbers are more likely to watch opera is not much use unless your opera company has a hardware partnership.

Big data is often sold as a source of new strategy. It is rare that a company changes strategy on one insight. Usually, insights enable you to better execute your current strategy. These insights will confirm the hypotheses you used to create the strategy and translate general plans into the right actions with specific customers. Start your focus on better insights with what you need to do to drive your current strategy and leverage your existing capabilities.

Before you boil the ocean in a battle of data completeness, decide what you need to know and can use to create value. Invest in the capabilities to better action insights. You might be surprised by the insights you already have that are opportunities. Focus your insights on driving your business, not the size of your data bill.