Capability models, performance management, and knowledge management: how they all fit together

Often the day-to-day demands of work prevent us from stepping back and seeing how the big pieces fit together. While you might not have the same ecstatic reaction of this guy discovering a rainbow in his backyard, hopefully this post will help you have an even better answer to “what does this mean” (if you can make it to 1:17 in the clip).

Capability (competency) model, performance management, knowledge management: many of these terms get interchanged, however, in my experience I have seen distinct and specific applications for the processes as businesses work to maximize their return on investment in human capital. Below the diagram is a quick definition of the terms with links for more information.

The whole is greater than the sum of the parts.
The whole is greater than the sum of the parts.
  1. Business Strategy: While Michael Porter has a longer answer, Jack Welch defines strategy (in his book Winning) as “making clear cut choices on how to compete.” In a previous post, I compiled the 9 Critical Questions on Strategy.
  2. Organizational Design: just as form follows function in art and nature (but not chickens), an organization’s structure should follow its strategy. Jaques takes a scientific yet pragmatic approach in Requisite Organization.
  3. Capability Model: while purists will prefer to use the term “competency” to emphasize demonstrated abilities (rather than future potential), in either case a model, such as SHRM’s, provides a framework for a hierarchy of skills that can be developed and applied at various levels of the organization.
  4. Role Definitions: each role (remember, each position can have multiple roles, just like a father can be a cook, landscaper and coach) needs a definition of its responsibilities and scope
  5. Role-based Capability Model: Combine 3 with 4, and you get an inventory of the capabilities (competencies) required to be successful in each role. This is an essential input to the processes below. Do not pass go, do not collect $89 (after taxes).
  6. Four related processes to improve an organization’s return on human capital
    1. Talent Intake: defining the requirements for each role will empower your recruiting organization to provide a better slate of candidates for vacancies, and help new hires get up to speed and contributing within the first phase of the talent cycle.
    2. Knowledge Management: a central repository for standards, policies, procedures, and other specific “tribal knowledge” accumulated with experience in any organization. A top-notch knowledge management system combines the “push” of compliance with the “pull” of recognition for contributors and highly accessible content (like wikipedia and TED).
    3. Performance Management: while a recent duel of data fit models has caught a lot of buzz, an effective performance management process gives employees meaningful, actionable feedback on their performance vs expectations in role, and allows the organization’s leadership to identify high-performing, high-capability players and put plans in place to address staff who are under-performing. Performance review surveys are typically more complicated than they need to be, and the best ones I’ve seen capture 360-feedback quarterly.
    4. Capability Development: programs combine training and succession planning to close development gaps identified in any of the above processes. Training can be delivered through self-study, online learning, classroom based training, and on the job coaching.

While none of these definitions go deep enough to be applicable on their own, hopefully differentiating between the terms with a few resources for further research will be a good start to helping your team go “all the way across the sky.”

What did I leave out? What other approaches have you seen work also? Leave a comment and let us know.

Three steps to grow faster in the Information Economy

Behind barriers are new markets for growth
Behind barriers are new markets for growth

One of the key components in my career search has been joining an organization with a high growth rate. This has prompted me to think about what steps businesses can take to scale a “killer” idea into new markets. Below is a loose framework with a couple examples. Does it resonate with you? What examples come to mind to strengthen or disprove the theory? I look forward to your comments, and I hope that my lesson for success doesn’t sound too much like the Underpants Gnomes.

1. Generalize your competitive advantage. Start by making an abstraction of what makes your businesses viable. Like any tough problem, the answer will be obvious in retrospect. It might be helpful to answer key questions on your strategy first and then generalize it. Also Jim Collins has written some great books comparing companies and what contributes to their success or failure.

2. Translate across barriers to new markets for growth. What are the barriers that stand between your strategic advantage and new growth? These barriers could be functional (e.g., moving from finance to HR), geographic, or up/down the supply chain. Peapod by Stop & Shop, salesforce.com, Lean/Six Sigma as management fads, and Starbucks VIA/Verismo are all examples that spring to mind.

3. Deploy with operational excellence. Regardless of the market you choose (or create), your team will need to expand with speed and efficiency. Michael Porter argues that operational excellence is a prerequisite, not a strategic advantage. Jack Welch reminds us to “pick a general direction and implement like hell.”

9 Critical Questions to Clarify Strategy: from Start-Up to Maturity

Whether your business is just an idea to talk about with friends or a mature, publicly traded icon of industry, having a clear strategy is essential to survive in a competitive market. To adapt one of my favorite quotes from Ping Fu, it is more important to be clear than to be right.

Collis & Rukstad's Strategic Sweet Spot
Collis & Rukstad’s Strategic Sweet Spot

I’ve compiled the core ideas from my favorite HBR articles on strategy, listed at the bottom of this post (plus an idea that I think is from Jack Welch but I can’t attribute) into the 9 critical questions:

  1. WHY does the business make money? i.e., what gap in the market does it fill?
  2. HOW does the business make money? i.e., what are the transactions that generate cash flow and margin for the business?
  3. What is our specific objective?
  4. What is our scope?
  5. What is our competitive advantage? i.e., how are we better, cheaper, or different than the alternatives?
  6. What is our strategic sweet spot? (see diagram)
  7. What are the relevant products in the market and their geographic coverage?
  8. Who are the buyers, suppliers, competitors, substitutes, and potential entrants?
  9. What forces control profitability? (see diagram)

    Michael Porter's Five Forces
    Michael Porter’s Five Forces

If the answers to these questions aren’t clear for your current business–no matter how big or small–think about it and spark some conversation. The answers will help you focus and might surprise you.

If you have questions, feedback, or know where #1 & #2 come from, leave a comment!

References

Collis, D. and Rukstad, M. “Can you say what your strategy is?” Harvard Business Review, April 2008, Reprint R0804E.

 

Kaplan, R. and Norton, D. “Having trouble with your strategy? Then map it.” Harvard Business Review, September 2000, Reprint 000509.

Porter, M. “The Five Competitive Forces that Shape Strategy.” Harvard Business Review, January 2008, Reprint 0801E.