Building Organizational Capability to Drive Business Results

September 10, 2010

In Built to Win, Creating a World Class Negotiating Organization (Harvard Business Press) Larry Susskind and I argue that improving negotiation outcomes requires treating negotiation as both an individual and organizational capability.

The notion of organizational capabilities has been catching on. Recently McKinsey Quarterly surveyed a range of organizations and leaders about what they are doing to build organizational capabilities to drive business results. McKinsey defined an organizational capability as “anything an organization does well that drives meaningful business results.” Their survey asked executives how well their companies create and manage training and skill-development programs, and how effective those programs are in maintaining or improving on their priority capabilities.

Nearly 60 percent of respondents said building organizational capabilities was a priority for their companies, but 75 percent said their companies weren’t good at building the most important capability. The survey also found that:

  • Narrow incentives were often seen as undercutting the behaviors required for the organization to collaborate effectively.
  • Involving senior executives in defining capabilities made it more likely that capabilities would actually improve.  
  • Training methods were ineffective when they did not target the key problem or behaviors that needed to be addressed, or failed to think beyond individual skill building to organizational systems such as knowledge management and performance reward systems.

While McKinsey’s echoes a number of points made in Built to Win, it does not spell out a clear remedy.  How can leaders systematically implement a cost-effective change program that targets both individual skills and organizational capabilities?

In the area of negotiations we offer the following prescriptive advice.

  1. Start with a Negotiations Audit.  A negotiations audit done by an expert with deep understanding of negotiation theory can help organizations to get their arms around where they are falling short – before they commit significant training dollars.
  2. Invest in Tailored Training.  Content that is perceived as more relevant is more likely to be encoded and retained by learners.  By investing in tailored training, companies can build their long-term intellectual capital and target the particular issues that are preventing them from doing better.  
  3. Build Coaching Capabilities.  By building their internal and external coaching capability, organizations can ensure that gains from training are sustained over time.
  4. Commit to Measuring Impact.  By committing to measuring business results (rather than just participant reactions to training) through post-training evaluations, companies can ensure that the money they are spending is generating a real return on investment.

In times when dollars are short, globally competitive companies simply cannot afford to continue with training-and-more-training as a leadership development strategy.  There is a more powerful, less expensive way to improve negotiations.  If companies and other organizations took only these four steps, they would greatly improve the effectiveness of their programs. 

In future posts, I’ll describe more steps that best-in-class companies are taking to build their negotiations capability.  If you have examples or ideas to share, please add your comments below.

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