McKinsey: Capabilities training for business performance

10 February 2015 Consultancy.uk

Well trained staff, up-to-date on the latest best practice and developed to deal with a wide range of situations, seem like ideal candidates. As part of the wider business performance, firms continue to invest in capability training for their staff, a survey by McKinsey & Company shows. While firms continue to focus on training their staff, many do not have the tools or goals in place to quantitatively assess the value added of the trainings.

McKinsey & Company recently released its second ‘Building Capabilities for Performance’ survey, which aims to discover how firms are currently engaging with staff capability* trainings, identifying trends and comparing those that are doing well against the average to identify what tends to work. The survey is of 1,448 executives, from the full gambit of regions, industries, company sizes, tenures and functional specialities.

McKinsey & Company

Having well trained staff is seemingly integral to the performance of a firm. Half of the respondents globally placed capacity building in their top three strategic goals, with Asian countries particularly pushing for well trained staff, with 62% for India and 58% for China. The high priority for training and retraining staff is not necessarily for competitive reasons, in answering the question: “Factors that most affect how organisations prioritise institutional and individual capabilities”, Customer Demand was ranked highest at 51%, followed by Strategic Importance at 47%, Competitiveness and Primary Drivers of Value sharing third at 35%. The drive toward meeting customer demand can be seen back in the changes in where money is going in terms of training. With an increase of 11% compared to 2010, more money is spent on frontline staff training in 2014, possibly reflecting the need to meet customer demand, face-to-face.

Half of executives rate capability building as one of their comanies top three priorities

The method for training staff hasn’t greatly changed in the last four years, with on-the-job teaching remaining the main method for capability training, with 56% of firms saying they use this method extensively and 37% somewhat; this is followed by one-time internal course conducted in a classroom setting, being taken up extensively by 34% of firms with 54% relying somewhat on this method; Online courses are extensively used by 34%; and experimental methods, such as ‘model offices or factories’ are used the least frequently at 8% and somewhat at 34%, although 54% of firms never use these methods.

On-the-job teaching remains the most popular method for building organizational capabilities

One of the findings of the survey is that there is a significant difference between the businesses that spend considerable time developing the skills of their staff. Only a firth of firms have their human resource and business units co-own learning, where they work together to align learning objectives with business needs.

The top performs in capability building were found to place a considerable importance on a number of key metrics in their staff training, with 78% encouraging their employees to develop their skills continuously compared to the average of 42%. Creating a framework for staff development was also placed highly on the list; with 68% of the top performers saying to be extensively engaged in the development of tools, methods, and standard procedures for capability building, compared to 26% for the average.

Actions to maintain and improve their capabilities

The challenges
While capability building is indicated as an important aspect of business development, especially in a quickly digitalising business environment demanding new capabilities, the way to create effective training and measuring the objective effect of trainings continues to be seen as a challenge. The biggest issue, with 48% of respondents finding it difficult, was to clearly link the development of training programs with business goals, a further 40% of respondents found that the lack of resources for the programmes was a problem, and a lack of metrics seen as the biggest challenge for 36% of companies embarking on staff training.

Biggest challenges in building institutional capabilities

A potentially concerning trend is that more than half of respondents indicate that they do not know if their capability developing programs have reached their quantitative targets in the past three years or they have not set a target at all. Without such an understanding, strategic choices for effective staff development become more difficult to argue for, fund and execute.

* McKinsey defines the term ‘capabilities’ as “all skills, processes, tools, and systems that an organisation uses as a whole to drive meaningful business results. Individual capabilities refer to training, learning, or specific skills.”

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