The State of Organizations 2023 - Flipbook - Page 19
CHAPTER 1: TEN DEEP DIVES
Closing the
capability chasm
To achieve a competitive advantage, companies
need to build institutional capabilities that go
beyond conventional learning programs.
W
hat’s changing?
With the growing deployment
of new technologies in the
workplace, from automation
to AI, the skills that are
needed to drive growth and value over the next
decade are changing, and companies everywhere
are looking to fill capability gaps. In our experience,
companies across sectors often announce
technological or digital elements in their strategies
without having the right capabilities already in place.
Individual skills and the learning programs to build
them are just one part of the capability challenge that
companies face today. More broadly, they need to
build institutional capabilities if they are to achieve a
competitive advantage.
Institutional capabilities are, put simply, the key
elements that make up a company’s superpower—
that is, an integrated set of people, processes,
and technology that creates value by enabling an
organization to do something consistently better than
competitors do. Institutional capabilities stem from a
company’s strategy and need to involve work that is
integral to the company and its industry. When well
produced, such capabilities become a lasting edge,
leading to consistent outperformance and growth in
competitive advantage over time.
But organizations today find themselves lagging
behind in their core activities, often as a result of
insufficient resources or consistent commitment to
institutional capability building. Filling these gaps is
a big agenda, but one that is increasingly recognized
as significant. In our State of Organizations
Survey, 90 percent of respondents asked about
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capability building deem it to be something that their
organizations need to act on now or soon. Yet only 5
percent feel that their organizations’ capabilities are
set for the next several years (Exhibit 13).
The benefits of getting it right
McKinsey analysis of organizations undergoing at
scale transformations showed that organizations in
which at least 10 percent of employees were engaged
in capability-building programs were twice as likely
to improve their organizational health scores as
organizations that didn’t have such engagement. And
analysis of 38 publicly listed companies showed that
when companies included more than 30 percent of
their workforces in capability-building programs, they
enjoyed TSR 43 percent above benchmarks after 18
months. Just as important, the benefits flow both
ways: employees are excited to develop valuable new
skills and knowledge.
In a 2020 McKinsey survey of more than 860
executives, 78 percent said capability building was
very or extremely important to their organizations’
long-term growth (versus 59 percent of leaders who
said so before the global COVID-19 pandemic). And
more than half of surveyed leaders (53 percent)
ranked capability building as the most useful way to
close skill gaps—larger than the combined share of
those who cited external hiring, redeploying people,
and hiring contract workers.
Issues to address
Organizations are having a hard time acquiring
employees to fill capability gaps because they often
lack the ecosystem-style approach that’s needed
to make the necessary, and lasting, changes to their
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