Organization Capability. What Is It?

Ask around…what is ‘organization capability?’ Is it a number, a judgement, a mix of opinions, efficiency measures, unique resources or talents, or a few metrics from competency frameworks? It’s an obvious question we could ask in organization sciences. The organization is supposedly designed to have some capability to do something well. What was the ‘doing something well’ and what was the ‘design’ that intended to do it?

There were numerous related trends in or around ‘capability’ throughout the decades: ‘strategic capabilities,’ ‘dynamic capabilities,’ ‘core competencies,’ ‘intangible resources,’ and ‘organization knowledge,’ to name a few. There is also ‘organization capacity,’ which seems to be a measure of a rate, standard or output ceiling (taking a dictionary meaning) rather than the force to achieve it (capability). There’s also the ‘resource-based view’ – the idea that it is differences, uniqueness and inimitability that are the focus of strategy and direction to create or sustain a competitive advantage. The measures for these concepts are heavily dependent on bespoke methods that come up with bespoke answers, as good as they all are. Most relate to strategic planning.

If we go back to the designed part of the topic – organization design intends to create a capability. It links strategy and delivery through a formal structure and a desired people profile (in simple terms). If this is so, then asking the question ‘what is organization capability?’ relates to design that was supposed to achieve the desired outcomes (organization effectiveness). From there, can we measure how the people and structure are doing relative to design? We say we can!

That said, the outcomes are unavoidable. If everything is going perfect, then presumably the design worked out. If not, then presumably design is a problem, somewhere in the mix. The strategy-oriented measures above presume performance is known and aspirations are known, and that those strategic capabilities can be seen in some way. They will also be unique to that organization. They’re not a standardized measure. And, they don’t necessarily show the reasons why those capabilities (or lacking) exist. This goes back to design.

Given the resources and efforts that go into areas such as HRM, organization development, and strategy, it seems fair to be able to illustrate an organization’s Capability, and to know how it relates to design intentions or effectiveness. We suggest there is a Foundational Capability which precedes other strategic capabilities. At the very least, maintaining a measure of foundational capability underpins strategic planning. Strategic capabilities are important, yet how they got there is just as important. That brings us back to people and structure. Measure it.