Executive Leadership. Building World Class Organizations
But there are 11 intangible assets that well-managed companies overall tend to have. These companies typically excel in only three of these capabilities, while maintaining industry parity in the rest. Companies that use capabilities audits enhance their ability to execute strategy—and generate powerful results. For example, focusing on key capabilities of efficiency and collaboration helped U. Decide which business unit division, region, entire company to audit.
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Any part of your organization responsible for delivering on strategic objectives can benefit from auditing. Medical-device manufacturer Boston Scientific targeted its international division for auditing, to improve service quality and profitability. Shared mind-set and coherent brand identity: ensuring positive, consistent perceptions of the company among employees and customers. Customer connectivity: building enduring relationships of trust with targeted customers. Use surveys to gather data on current and desired capability performance.
Identify the two or three capabilities most required to deliver on strategic goals. Determine which current capabilities should be further strengthened to enhance future success. They also identified strategic unity as another vital capability, but rated it as a division weakness. Develop an action plan.
Outline steps needed to strengthen key capabilities.
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Boston Scientific managers decided to invest further in talent —even though it was a division strength—because it was critical to their customer-acquisition strategy. They strengthened marketing talent to target more diverse customers. If you ask them which companies they admire, people quickly point to organizations like General Electric, Starbucks, Nordstrom, or Microsoft. What people respect about the companies is not how they are structured or their specific approaches to management, but their capabilities—an ability to innovate, for example, or to respond to changing customer needs.
Such organizational capabilities , as we call them, are key intangible assets. These capabilities—the collective skills, abilities, and expertise of an organization—are the outcome of investments in staffing, training, compensation, communication, and other human resources areas.
They represent the ways that people and resources are brought together to accomplish work. They form the identity and personality of the organization by defining what it is good at doing and, in the end, what it is. They are stable over time and more difficult for competitors to copy than capital market access, product strategy, or technology.
In this article, we look at organizational capabilities and how leaders can evaluate them and build the ones needed to create intangible value. For example, a financial services firm must know how to manage risk. These might include such capabilities as innovation and speed. Organizational capabilities emerge when a company delivers on the combined competencies and abilities of its individuals. An employee may be technically literate or demonstrate leadership skill, but the company as a whole may or may not embody the same strengths.
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If it does, employees who excel in these areas will likely be engaged; if not, they may be frustrated. Additionally, organizational capabilities enable a company to turn its technical know-how into results.
There is no magic list of capabilities appropriate to every organization. Such companies typically excel in as many as three of these areas while maintaining industry parity in the others. When an organization falls below the norm in any of the 11 capabilities, dysfunction and competitive disadvantage will likely ensue. We are good at attracting, motivating, and retaining competent and committed people. Competence comes as leaders buy acquire new talent , build develop existing talent , borrow access thought leaders through alliances or partnerships , bounce remove poor performers , and bind keep the best talent.
Leaders can earn commitment from employees by ensuring that the ones who contribute more receive more of what matters to them. We are good at making important changes rapidly. Speed may be tracked in a variety of ways: how long it takes to go from concept to commercialization, for example, or from the collection of customer data to changes in customer relations. Just as increases in inventory turns show that physical assets are well used, time savings demonstrate improvements in labor productivity as well as increased enthusiasm and responsiveness to opportunities.
Leaders should consider creating a return-on-time-invested ROTI index, so they can monitor the time required for, and the value created by, various activities. We are good at ensuring that employees and customers have positive and consistent images of and experiences with our organization.
To gauge shared mind-set, ask each member of your team to answer the following question: What are the top three things we want to be known for in the future by our best customers? Measure the degree of consensus by calculating the percent of responses that match one of the three most commonly mentioned items. The next step is to invite key customers to provide feedback on brand identity. The greater the degree of alignment between internal and external mind-sets, the greater the value of this capability. We are good at obtaining high performance from employees. Performance accountability becomes an organizational capability when employees realize that failure to meet their goals would be unacceptable to the company.
The way to track it is to examine the tools you use to manage performance. By looking at a performance appraisal form, can you derive the strategy of the business? What percent of employees receive an appraisal each year? How much does compensation vary based on employee performance? Some firms claim a pay-for-performance philosophy but give annual compensation increases that range from 3. We are good at working across boundaries to ensure both efficiency and leverage.
Collaboration occurs when an organization as a whole gains efficiencies of operation through the pooling of services or technologies, through economies of scale, or through the sharing of ideas and talent across boundaries. Collaboration may be tracked both throughout the organization and among teams. You can determine whether your organization is truly collaborative by calculating its breakup value.
Estimate what each division of your company might be worth to a potential buyer, then add up these numbers and compare the total with your current market value. We are good at generating and generalizing ideas with impact. Organizations generate new ideas through benchmarking that is, by looking at what other companies are doing , experimentation, competence acquisition hiring or developing people with new skills and ideas , and continuous improvement. Such ideas are generalized when they move across a boundary of time from one leader to the next , space from one geographic location to another , or division from one structural entity to another.
For individuals, learning means letting go of old practices and adopting new ones. We are good at embedding leaders throughout the organization. Companies that consistently produce effective leaders generally have a clear leadership brand—a common understanding of what leaders should know, be, and do. How many backups do you have for your top employees? In one company, the substitute-to-star ratio dropped from about to about 0.
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We are good at building enduring relationships of trust with targeted customers. Customer connectivity may come from dedicated account teams, databases that track preferences, or the involvement of customers in HR practices such as staffing, training, and compensation. When a large portion of the employee population has meaningful exposure to or interaction with customers, connectivity is enhanced. To monitor this capability, identify your key accounts and track the share of those important customers over time.
Frequent customer-service surveys may also offer insight into how customers perceive your connectivity. We are good at articulating and sharing a strategic point of view. Strategic unity is created at three levels: intellectual, behavioral, and procedural. To monitor such unity at the intellectual level, make sure employees from top to bottom know what the strategy is and why it is important.
To gauge strategic accord at the behavioral level, ask employees how much of their time is spent in support of the strategy and whether their suggestions for improvement are heard and acted on.
When it comes to process, continually invest in procedures that are essential to your strategy. For example, Disney must pay constant attention to any practices relating to the customer-service experience; it must ensure that its amusement parks are always safe and clean and that guests can successfully get directions from any employee. We are good at doing something new in both content and process. Innovation—whether in products, administrative processes, business strategies, channel strategies, geographic reach, brand identity, or customer service—focuses on the future rather than on past successes.
It excites employees, delights customers, and builds confidence among investors. This capability may be tracked through a vitality index for instance, one that records revenues or profits from products or services created in the last three years. We are good at managing costs. Efficiency may be the easiest capability to track. Inventories, direct and indirect labor, capital employed, and costs of goods sold can all be viewed on balance sheets and income statements.
This exercise can work for an entire organization, a business unit, or a region. Indeed, any part of a company that has a strategy for producing financial or customer-related results can do an audit, as long as it has the backing of the leadership team. The Massachusetts-based company Boston Scientific has enjoyed strong growth over the past 25 years. Using the 11 generic capabilities defined above as a starting point, leaders at Boston Scientific adapted the language to suit their business requirements. This exercise showed gaps between current and desired capability. For example, on strategic unity—the extent to which employees understood and agreed upon strategy—the score for actual achievement was 0.
First, select a business unit plant, division, region, zone, industry. The leaders discussed the survey findings at an off-site meeting. Then, before forming an overall improvement plan, they defined the capabilities that would be most critical to executing that strategy.
They also launched an effort to create a leadership brand, starting with a new model of high performance. Designed to meet the specific development needs of your organization, Queen's Custom Programs apply our expertise to your unique objectives. Work alongside our team of experts to build an executive education experience tailored from the ground up for your organization. Over the past decade, the world-class faculty has developed an industry-leading broker education solution for our company.
Suitable for senior managers and executives of all functional areas, participants must have managerial experience. Learn more Download a Brochure. This interactive 2-day program focuses on the most critical foundations of effective leadership and management, enabling new managers to overcome the challenges they will encounter during this transition. In this program, participants will discover new ways to move their organization forward through business model innovation and design thinking.
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