skip to Main Content

What’s going on inside organisational capabilities?

Organisational capabilities is a term that is used to cover a range of factors that contribute to business success. For example, McKinsey & Company define organisational capabilities as, “anything an organization does well that drives meaningful business results.” Because organisational capabilities are such a broad term, and it is used to cover a range of business features, it can be difficult to get a good sense of what it is drawing our attention to. Broad understandings of organisational capabilities frame the organisation as a single entity, and yet, inside businesses and organisations are a number of people who, individually and in combination, have a range of capabilities. As the Australian Public Service Commission points out in its definition, organisational capability, “…combines people skills with the organisation’s processes, systems, culture and structures to deliver business outcomes.” To do this well, “people and systems…need to be consciously aligned to corporate outcomes and priorities, and lines of accountability”.  This definition works well because it emphasises the interaction that occurs between people and organisational structures and processes.

At the level of human resources, capability development, as defined by Maret Staron and Robby Weatherley, focuses on the development of the individual or team through a range of strategies or activities that aim to achieve current business goals, meet future challenges and build capacity for change. Staron and Weatherley also identify that individual and group capabilities are intricately interconnected and that they develop in relation to the varying contexts, challenges, needs and demands that employees encounter, at work, as well as in their private lives. Therefore, organisational capabilities develop gradually as employees interact and work together to develop solutions within a company, and they can’t be developed through incremental staff training practices or company procedure manuals alone.

Employee capability development is essential in a business world characterised by constant change. We live in a techno-economic paradigm in which knowledge is a commodity (Lastres, Cassiolato & Maciel, 2004; Staron, Jasinski & Weatherley, 2006). In ‘the knowledge era,’ information is shared widely and is readily accessible, so competitive advantage is determined by being the quickest to identify and meet real customer needs in innovative ways. Employees need to be able to exhibit technical expertise in work contexts characterised by, “impermanence, turbulence, multiple and competing agendas and priorities, diversity in ideologies, ambiguity, multiple roles, irritations, uncertainty and contractions” (Staron et al., 2006, p. 7). Broad capability skill-sets are needed to navigate these complex demands and potentialities.

Workplace capabilities are mostly intangible, tacit and implied, and are located within organisational activities as well as within individuals. They aren’t necessarily outlined in guidelines or procedure manuals since they are not easy to transmit explicitly. Knowledge is an example of an intangible organisation-specific resource and it’s considered to be the most important resource as well as the one that’s most likely to afford a company its competitive advantage (Grant, 1996; Hitt, Bierman, Shimizu & Kochhar, 2001). Bringing together the specialised knowledge(s) of employees and generating innovative solutions that align with company priorities and customer needs is ultimately, “the essence of organizational capability”(Grant, 1996, p. 375).

More reading and references

  • Grant, R. M. (1996). Prospering in dynamically-competitive environments: Organizational capability as knowledge integration. Organization science7 (4), 375-387.
  • Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective. Academy of Management Journal, 44(1), 13–28.
  • Lastres, H. M., Cassiolato, J. E., & Maciel, M. L. (2004). Systems of innovation for development in the knowledge era: an introduction. Georgia Institute of Technology.
  • Staron, M., Jasinski, M., & Weatherley., R. (2006). Life-based learning: a strength-based approach for capability development in vocational and technical education [White paper]. TAFE NSW International Centre for VET Teaching and Learning.
Back To Top

Pin It on Pinterest

Share This