Human Capital: Building Strategic Capabilities Through Focused Talent Management

"The things being measured were not strategically relevant and things that were strategically relevant were not being measured" Scott-Jackson

Professor William Scott-Jackson, Director, Centre for Applied HR Research, Oxford Brookes University Business School argues that effective talent management requires a clear understanding of the organisation’s strategic priorities.

Recent research by the Centre for Applied HR Research, at Oxford Brookes University Business School, in conjunction with the Chartered Management Institute, proposes a simple process for identifying, developing and measuring those capabilities which will add real strategic value to the organisation and which can be therefore described as human capital. Once identified, the acquisition, development and retention of these strategic capabilities can become a major component of talent management in the organisation. This does not replace or detract from the need for general development of skills and capabilities through effective HR processes and delivery, but does demonstrate a focus on meeting the strategic needs of the business.

Phase 1: Strategic Intent

The first stage in the process is to identify the strategic intent of the organisation. This may be captured in various written statements or strategic plans but is more likely to be expressed fully through discussion with senior management. A workshop with senior management, using a formalised methodology to extract ideas, will not only provide an agreed definition of strategic intent but will also allow the managers themselves to outline the kinds of capabilities through which their strategic intent will succeed or fail. The involvement and engagement of senior managers in this first defining phase will also help ensure buy-in and agreement to subsequent phases.

The first phase should result in several key statements which describe the preferred future of the organisation and, in particular, how it will differentiate itself from the rest of the market. This process does not require a detailed strategic plan but simply a clear idea of the general direction that the senior management wish to follow.

For example, an international hotel group describes it’s intent to achieve rapid international growth whilst maximising guest satisfaction and retention through the service they receive from staff. A key strategic capability for group, therefore, is the friendliness of its staff in their interactions with customers. Further investigation demonstrates that this capability can be created through specific recruitment of particular personality types, clear expectations of behaviour, focused training and development, respect for colleagues, excellence of support services and staffing levels and, most importantly, a demonstrable focus on this objective and adherence to its principles from top management down. Similarly, a major bank defined a strategic intent of maintaining upper quartile fee levels whilst increasing customer numbers through exceptional service.

Phase 2: Identify required strategic capabilities

Once the strategic intent is clear and senior management have had the opportunity to define the required capabilities in outline, then it is possible to define the required capabilities in more precise terms. For example, for the bank, ‘friendliness’ was also defined as a strategic capability, but, in this particular context, ‘friendliness’ really applied only to cashiers and meant helping (but only when asked), not being garrulous, maintaining a professional but friendly demeanour, not being ‘over-friendly’ (smiling where appropriate for example), dealing firmly but professionally with complaints and issues, saying ‘no’ assertively but not aggressively, and so on. Even for a capability that is widely understood, the detailed definition and specific behaviours required will differ, depending on the organisation’s context and strategic intent.

Click image for details of seminar

In another example, a developer/manager of shopping malls aimed to expand rapidly, whilst maintaining high rentals through providing its retailers with more ‘footfall’ . This means that a retailer (e.g. Debenhams) would choose to pay a higher rental in order to occupy a particular mall which attracts more potential customers per day than a competing mall. The attraction of customers to a particular mall depends partly on the shops which occupy the mall but also on the design, facilities and overall experience of using the mall. A key capability, then is world leading expertise in mall design and customer psychology. This capability may well be in short supply globally and it would be critical to strategic success to ensure that the capability was acquired and developed in competition with other mall developers. The scarcity of strategic capabilities is a common phenomena in many sectors and represents a competitive opportunity for organisations which have a firm grasp on their strategic intent, the required capabilities and the talent management programmes to build those capabilities.

Phase 3: Identify the ‘drivers’ of each critical capability

Having defined each strategic capability precisely, it will then be necessary to calculate the drivers which will increase that capability. For example, a bank had identified ‘ability to deal with change as individuals’ as a key strategic capability. Research by CAHRR then found that a key component of this characteristic was expressed through the individual’s attribution style – the way in which people explain positive and negative events to themselves. Attribution style, in turn could be assessed and, more importantly developed. This allows a talent management strategy to be developed, incorporating assessment and training for ‘individual change competence’ as a key component.

Phase 4: Talent Management Strategy

As with ‘individual change competence’, in-depth research and detailed analysis can allow carefully defined strategic capabilities to form the basis of a comprehensive talent management strategy. This would include recruitment, development and retention of key capabilities. It may be, as with friendliness of cashiers, that the key capabilities are contained within particular roles and these would be the focus of strategic talent management.

Phase 5: Measurement and evaluation

This research actually commenced with a study of human capital measurement which found that, in general, things being measured were not strategically relevant and things that were strategically relevant were not being measured. Having identified the few strategic capabilities that will make a real difference, it is then possible to design specific measures to assess the development and growth of those capabilities. For cashier friendliness, for example, recruitment, appraisal and performance management processes can all include assessments of this capability and specific measures such as customer feedback can be used as a measure. In the same way that the capabilities have to be defined to match the specific context and intent of the organisation, the measures have to be developed to meet the bespoke needs of the organisation.

As noted above, none of this replaces the normal objectives of increasing the overall efficiency, effectiveness and general capabilities of the organisation through effective HR processes and policies. The process outlined allows the identification, development and measurement of those key capabilities which will make a real difference to the achievement of the organisation’s strategic intent. If the organisation can build sufficient of these key capabilities, then it will succeed, if it lacks these key capabilities, then it will fail.