Human Resource departments strive to link their programs to develop the competencies of their workforce to their company’s efforts to implement a strategy that achieves and sustains competitive advantage. Their road leads through a bridging effort – building essential organization capabilities.

An organization capability consists of a combination of practices that achieve an organizational goal. Those organization-wide capabilities that further progress toward a long-term strategic objective are deemed to be ‘Essential Capabilities.

The chain from competence to strategy has a number of links.

• Individual competence leads to effective individual performance
• Effective performance of individuals leads to better organizational practices.
• Better organizational practices lead to strong essential capabilities
• Strong essential capabilities lead to successful strategy implementation.

Example: Creating Customer Loyalty

1. Strategic Challenge

Let us assume that the company wishes to embark upon a customer-centered strategy.

To sustain competitive advantage it needs to go beyond customer satisfaction to customer loyalty. It wants to ensure that its customers remain customers for life.

2. Essential Capabilities

We claim that 3 Essential Capabilities are required for the company to master that Strategic Challenge.

• Customer Focus – Listening attentively to customers and acting on their behalf.
• Customized Value – Customizing goods and services to each specific customer.
• Customer Partnering – Forming intimate one-to-one relationships with customers to enhance their success.

Leadership is required to identify ‘what we need to be good at’ and to inspire striving for continuous improvement of these capabilities.

1. Company Practices

Each essential capability can be operationalized in terms of a number of company practices. For example the capability ‘Customer Focus’ requires such practices as:

• Employees listen carefully to customer suggestions and comments
• Management encourages employees at all levels to dialogue with customers.
• The company responds to customer requests and/or complaints in a constructive manner.
• The company uses a variety of methods to survey customer opinions.

Certain company practices depend upon pivotal jobs. Customer focus relies heavily on sales and customer service reps.

2. Competency Development

Each practice depends upon the competency of the individuals involved and the leadership ability of management to coordinate these separate performances. For example the following kind of competencies would support the customer focus practices:

• Competence in active listening, empathizing, and dialoguing with customers.
• Leadership competence in motivating workforce to be customer-centered.
• Problem-solving competence to suggest solutions to customer issues
• Technical competence in collecting, analyzing, and using customer feedback.
• Teamwork competence in getting all parts of the organization to work together on behalf of customers.

Such competencies should be developed both formally and informally, via courses, coaching, and on- the- job experiential learning.

The individuals who work at pivotal jobs should understand the linkages between their competencies, which lead to effective practices, which lead to superior organization capabilities, which lead to brilliant execution of strategy.