Know Which Organization Capabilities Make a Difference Using the Organization Guidance System

Talent matters; organization matters even more. In our research, organization capability has four times more impact than talent on business results. Individual competencies are ingredients, but organization capabilities represent the recipe that combines ingredients into an overall meal experience. HR and business leaders add more value to all stakeholders when they create and deliver organization capabilities. We offer new insights and research on how to do so.

Evolving Concept of Organization

We have spent much of our professional lives defining and improving organizations.

In our work on defining capabilities that help organizations succeed in the marketplace, we have identified twelve well-studied capabilities that may deliver outcomes.

Twelve Well-Studied Organization Capabilities

1. Talent

   We attract, motivate, develop, and retain talented and committed people at all levels of the organization. (workforce, competence, people)

2. Agility

   We make change happen fast. (change, adaptability, flexibility, cycle time)

3. Strategic Clarity

   We create a shared agenda, and broad commitment and engagement around our strategy. (strategic unity, purpose, new rules of the game, mission, vision)

4. Customer Centricity

   We foster strong and enduring relationships of trust with target customers. (NPS, market share, customer share, customer intimacy)

5. Right Culture

   We create and embed the right culture throughout the organization. (shared mindset, firm identity, values)

6. Collaboration

   We work together to make the sum more than the parts. (teamwork, cross-functional, alliances, coordination)

7. Social Responsibility

   We establish a strong reputation for managing planet, philanthropy, people, and political agendas. (CSR, ESG, social citizenship, triple bottom line)

8. Innovation

   We create and deliver new products, services, business models, and ways of working that are commercially successful. (product creation, curiosity, knowledge management)

9. Efficiency

   We reduce the costs of our business activities (standardization, re-engineering processes, streamlining)

10. Accountability

    We set and meet commitments on time and within budget. (execution, discipline, high-performance orientation)

11. Information/Analytics

    We acquire, analyze, and apply information to improve decision-making. (predictive analytics, dashboards, scorecards)

12. Leverage Technology

    We exploit and apply the latest technological trends. (digital age, AI machine learning)

Guidance on Organization Capabilities

To move from these organization capability descriptions (Figure 3) to prescriptions, the Organization Guidance System offers data as guidance in Figure 4. This figure shows the relative impact of each of the 12 capabilities (rows) on four outcomes we measured in (columns B, C, D, E, and F). By using a variance decomposition model, we can better understand how different organization capabilities will deliver different results.

Guidance on Relative Impact of Organization Capabilities on Key Outcomes

Organization Capabilities	A Global Mean
		B Employee	C Strategy / Business	D Customer	E Financial	F Social Citizenship
Talent	3.41
Agility	3.27
Strategic Clarity	3.45
Customer Centricity	3.56
Right Culture	3.33
Collaboration	3.41
Social Responsibility	3.37
Innovation	3.10
Efficiency	3.20
Information	3.18
Accountability	3.20
Leverage Technology	3.03

The findings in Figure 4 dramatically shift the discussion from how to improve weaknesses in the organization to what organization capabilities have the most impact on your business results. While these findings are aggregated across global companies that used OGS, your organization's desired organization capabilities may vary by context (industry, pace of change), strategy, and desired targeted business results. Some findings include:

1. Strategic clarity impacts all stakeholders the most, especially customers. Strategic clarity is embracing a purpose, differentiating in the marketplace, exploiting market opportunities, and sharing a commitment to the strategic agenda.
2. Employee impact comes from building the capabilities of talent, agility, strategic clarity, and right culture.
3. Customers are driven by strategic clarity, customer centricity, and innovation.
4. Social Responsibility (so far) has little impact on results, nor does information or technology. 
5. Financial outcomes are driven by strategic clarity, customer centricity, and efficiency.
6. Strategy and Business outcomes are driven by strategic clarify, customer centricity, and right culture. 

These results will require pondering to figure out why some organization capabilities deliver some results more than others.