The Fifth Element: Building Capability

The Balanced Scorecard has gone from fad to practice. A survey recently reported that more than 50% of the Fortune 500 was using or would adopt the balance scorecard strategic framework this year.  The four elements of financial, internal, external and innovation systems are outlined in a matrix of performance used to identify critical issues. 

Over time, investors have used trailing indicators as an effective method of determining future value—profitability, revenues, return on capital, cash flow and economic value added among many other strategies for determining the capacity to perform. However, in the real time economics of the connected future, one thing and one thing only will provide the key to future performance potential—capability.

 Companies who build capability will survive and prosper in the coming years.  As turbulence and accelerating change erode traditional business models in fast time--measurement will switch from trailing indicators to leading indicators.  Research is coming to bear on the fact that brand loyalty; growing loyal customers and employee engagement are leading indicators of future performance potential. [Coffman & Harder, 1998]

Teaching and coaching in every layer—led by senior leadership is the first measure. "GE, Allied Signal, Intel, PepsiCo and Coca-cola are all examples of teaching companies." [Tichy & Cohen, 1998] The real performance indicator for this strategic objective is ubiquitous information and the feeling that people can get what they need in real time without hassling with a bureaucratic chain of command. Feelings can be measured, just ask people! Facilitated sharing is a passive leadership activity that occurs in a teaching/coaching culture. It also decreases organizational viscosity faster than any other means—increasing speed.

Innovation speed is difficult to measure. Yet the key is the nature of a company’s revenues and profits in new products, services and relationships (3M mandates this ratio). How much of what we do today is reflective of what we have done yesterday and how much of tomorrow’s business is based on today? Failing to innovate fast enough can be a real problem in today’s marketspace. We can’t depend in most cases on tomorrow looking like more of today in a lot of industries. Sure we have those cash cows, but if you intend to attract capital, customers and relationships, you had best build-in the capability to innovate—quickly and create permission to fail. Innovation is most often directly proportional to iteration potential. Anything that lowers the speed of iteration lowers speed of innovation, cycle time and organizational agility.

People are confused about what this means. Can you pick up the phone and talk to the end user of your product or service—do you even know who they are? Does your web site measure statistics on the 5 W’s? Are your teams connected? For example, is marketing connected to manufacturing and I don’t mean at the hip, but at the thinking and feeling levels—through a network placenta?

Do you know what the effects of your work are having on the results of someone else? Can and do you build capability around response…to customers, people who were your customers, people who aren’t your customers and people who could be your customers—internal and external?

The edge of an organization is going to be determined by its conversations—internal and external--their quantity and quality. If we can speed up, increase the volume or improve the quality or our conversations, capability will improve. Connecting communities of interest, practice and commitment into constellations of shared learning will precipitate real time connectedness.

The other key issue is network effects. The power and leverage of networks increases with the number of people in the network. Take this analogy. A single fax machine is useless, but to the extent that fax machines are ubiquitous, the network effect of using a fax machine is exponential.

Capability here describes systems that become self-correcting and generative—leading to a state of self-authoring. Self-authoring is a development term for an order of consciousness that exists when people have a view of their own systems and those same people know the viewpoint of others about that system. It allows us to be self-correcting and generative. We create the ability to self-generate a solution at the touchpoint rather than having a mandate to do so—mandates are too slow! We also create learning from knowledge management at every level in the organization and we enable people to act. Thus the age of generati—a generative environment that begets generative activity.

What is it? How do you get it? The now-old Sears turnaround exists as proof that employee satisfaction matters. If your employees can answer the following twelve questions in a manner that is satisfying to them—you got it!

The following list of questions is distilled from a meta-survey conducted by The Gallup Organization as a result of studying and interviewing over 1 million employees. The following 12 questions have been demonstrated by research to relate to Business Unit Productivity, Profitability and Customer Loyalty. The essential components of the 12 areas have been reframed as "audit questions" and are listed by Gallup as the following:

 [copyrighted by The Gallup Organization]

1. I know what is expected of me at work.

2. I have the materials and equipment I need to do my work right.

3. At work, I have the opportunity to do what I do best every day.

4. In the last seven days, I have received recognition or praise for good work.

5. My supervisor or the person I report seems to care about me as a person.

6. There is someone at work who encourages my development.

7. In the last six months, someone at work has talked with me about my progress.

8. At work, my opinions seem to count.

9. The mission/purpose of my company makes me feel my job is important.

10. My associates (fellow employees) are committed to doing quality work.

11. I have a best friend at work.

12. The last year, I have had opportunities at work to learn and grow.

Details at http://www.gallup.com/poll/managing/managing.asp 

In conclusion, the fifth element—capability--will become the defining element. It will connect the other four elements in a matrix of organizational agility. So how do you do it? Here’s how!

1. Create a leadership/coaching system that links all business functions.

2. Right Action=Reward the right: people, things, ways, time and reasons

3. Create the feeling in your organization that people can fail to succeed.

4. Create the necessary infrastructure to connect people with metrics.

5. Become a teaching organization and teach at every level continuously.

6. Enable people with development opportunities to higher levels of function.

7. Understand appreciative coaching and how to build a culture around it.

8. Make it fun to work in your company.

9. Make perfectly clear what should be perfectly clear.

10. Get out of people’s way.

Mike Jay is a practicing business coach who writes on business topics surrounding performance, development and success. buildcapability@leadwise.com .

©Copyright 2000  Mike R. Jay, All Rights Reserved  This document may not be copied, reproduced or stored in an electronic retrieval system without expressed written permission from the author.  For more information:  www.b-coach.com or call 877.901.COACH.