Report of the Two-Day Course held at the Australian Graduate School of Management, Sydney Campus, 21- 22 August 2003

“You can get capital and erect buildings, but it takes people to build a business.”

Thomas J. Watson, IBM.

“If the greatest database in the company is housed in the individual minds of the associates of the organisation, then that is where the power of the organisation resides. These individual knowledge bases are continually changing and adapting to the real world in front of them. We have to connect these individual knowledge bases together so that they do whatever they do best in the shortest possible time.”

Robert Buckman, Buckman Laboratories.

What is building organisational capability?

It is the term used often to describe a process of examining an organisation to increase its capacity to meet its goals, build on its business to enhance efficiency and create growth. This course provided an introduction to the analysis of large organisations through the use of case studies of corporate non-government organisations and theoretical models largely developed by the program directors. The program directors were Scott Snell, Professor of Human Resource Studies and Director of Education in the Centre for Advanced Human Resource Studies, School of Industrial and Labour Relations at Cornell University, USA, and Steve Frenkel, Professor of Management at the Australian Graduate School of Management.

Building an organisation’s capability requires careful analysis of the organisation’s core competencies and how these are supported by the organisations; processes, relationships and technology. Core competencies are what reflect the organisation’s value proposition. The value proposition or organisational goals reflect the needs of the customers or stakeholders, owners (or in the case of government organisations, the taxpayer) and employees. Throughout the course the case studies of IBM, Starbucks, Buckman Laboratories, Boeing, Biotech Companies, Ford, ChevronTexaco, Toyota, Microsoft, Dayton-Hudson (owners of Target), Sears, Continental Airlines, and Southwest Airlines reiterate the central business asset is in its people. The nature of successful businesses is in service more than products. Capturing and responding to innovation is critically important to the long-term growth of the organisation.

The terms intellectual capital were used interchangeably with core competencies. These are the combination of human capital (people skills and knowledge), social capital (the relationships between people) and organisational capital (the organisations processes). Having alignment between human, social and organisational capital so that each supports the other is central to the building of the organisation’s capability. Performance measures such as the use of the balanced score card need to also have what is termed as not only vertical but also horizontal alignment to be able to enhance the organisation’s capability.

The course included a focus on the “triple bottom line”, the organisation’s sustainability. When organisations look simply at financial measures as a key to performance they typically downsize also referred to as “corporate anorexia”. During times of laying-off staff much of the human capital leaves the organisation creating was is termed as “brain-drain”. Serious structural damage can be caused to an organisation if people with substantial social capital leave. (An exercise of mapping who people go to for advice can identify the people with valuable social capital.) Some large corporations have stopped reporting quarterly to the stock market to be able to relieve the financial pressure of focusing on the creation of profits during periods of economic instability. This enables these organisations the ability to re-focus on sustainability, innovation and growth.

Central to the organisation’s core competence are knowledge workers. These are the people with the particular skills sets that are integral to the organisation’s performance. Knowledge workers work through the organisation’s culture and are not reliant on the organisation’s operating procedures. They hold much of the intelligence of the organisation. In building the organisation’s capability, this level of intelligence needs to be built in at the “shop floor”. When organisation’s invest in people there becomes a culture of reciprocity and loyalty.