How to Build a Capability Framework That Enhances Busin…

Workforce planning and development is a hot topic in every organization. However, many still struggle to launch effective change programs. 

Too often, HR initiatives like performance management, learning management, and even talent management don’t impact organizational growth or objectives as they should.

Fortunately, there is another way: the capability framework. 

A capability framework integrates with HR processes to strengthen business performance. It provides a holistic overview of organizational and human capabilities and their assigned competencies. The framework enhances HR processes to be truly strategic by aligning HR management activities with organizational goals. 

Let’s dive into the essentials of structuring and building a capability framework and how they connect learning and performance to enhance business growth. 

Key components of a capability framework

A capability framework is made up of five key components that are crucial for its effectiveness. Without these components, it becomes less of an actionable tool and more of a vague L&D concept.

1. Capabilities: These can be core business capabilities or role-specific skills. For example, for a sales role, an employee may need to master the skill of sales data analysis and reporting.
2. Levels of competency: Levels of expertise or proficiency for each capability is another component. These range from beginner to expert and assist in performance reviews. For instance, a salesperson with the lowest level of competency in sales data analysis and reporting would mean that they have only a basic knowledge of sales data analysis. As they improve their capability, their competency increases.
3. Role-specific requirements: A capability framework also includes detailed job descriptions and descriptions of the capabilities required for different roles. It outlines clear expectations for each role, which can be supported by capability development.
4. Development plans: Guidelines, resources, and steps for employees to develop and enhance their capabilities are important as well. The best pathway is dependent on the type of role — for example, creative roles may benefit from collaborative learning experiences, while roles with more technical skill requirements wouldn’t.
5. Assessment tools: Assessment tools are the methods and tools used to evaluate employees’ current capabilities, including performance reviews, capability self-assessments, or 360° feedback.

Now that we’ve explored the different components of a capability framework, it’s important to distinguish between the types of capabilities organizations focus on.

The difference between business and human capabilities

There are two types of capabilities that frameworks concern themselves with: business and human capabilities.

Business capabilities deliver strategic business objectives and goals. They can be used to determine which decisions are strategically important for an organization to prioritize.

On the other hand, human capabilities enable employees to perform their specific job roles and achieve their objectives. Enabling employees to master their own job roles and responsibilities drives business strategy.

Understanding the distinction between business and human capabilities is crucial, as both are interdependent. But it’s also vital to understand how competencies fit into this broader framework.

Difference between capabilities and competencies

Some places will tell you that capabilities and competencies are the same thing, but that just isn’t true. Capabilities have competencies, while competencies are measurements of capability.

Let’s break that down.

Capabilities are derived from business strategy. They outline the essential actions an organization needs to take to succeed at what it does and meet future goals and demands. Capabilities can be used in strategic workforce planning, human resources, and professional development. 

Capabilities include things like marketing strategy and planning or onboarding and orienting new hires. You’ll notice they’re pretty specific to job roles because they’re the core strengths needed for employees to perform their roles.

Competencies, however, are a part of capabilities. They’re the leveled scale used to measure how well a capability is performed. Competencies are measured on levels like emerging, intermediate, and advanced. For example, at a beginner level, an employee is still learning and developing their assigned capability. At an advanced level of competency, an employee has mastered their skills and exceeds expectations in their performance. 

The important thing to remember is that lower-level competency isn’t necessarily a bad thing. An entry-level employee won’t be expected to have the same level of competency in a capability that an executive would. And some capabilities are not as immediately business-critical to develop as others.

Why building a capability framework is important

No learning and development (L&D) project is truly strategic until it’s consistent across the whole organization. A capability framework can be integrated across the whole business, which means everyone is on the same page when it comes to capability development.

When everyone works and learns toward the same organizational goals, decision-making becomes more strategic, and development opportunities can be better prioritized based on business needs.

Source: Acorn

Talent management

We often think of a capability framework as something that only benefits the business as it currently stands, from enabling L&D opportunities to identifying individuals for succession planning. However, given that a capability framework covers all the capabilities required of specific roles, it supports all aspects of talent management, both internal and external.

Capability frameworks outline the capability requirements for each position within the business. This helps in two ways:

• It allows for more in-depth job descriptions to be created for vacant positions, helping target specific talent during recruitment. This not only creates a better talent pool to hire from, but it also allows HR to assess the best candidate for the role based on their capabilities.
• High-potential employees (HiPos) within the organization can be identified, flagged, and prepared for succession. However, existing talent in your organization might not meet the capability requirements to take on the role. A capability framework will highlight areas for development, helping employees upskill and take on bigger roles.

Learning and development

Using a capability development framework for L&D is essential. LinkedIn once found that 94% of employees would stay with companies longer if employers invested in their professional development. A more recent report shows that 53% of Gen Z workers (the next big workforce demographic) value learning for career progress more than any other generation in the workforce.

Capability frameworks let you assess how well employees perform the required capabilities. Where there are capability gaps, there are development opportunities and development plans to be made. Organizations can use capability frameworks to target learning and development at specific capability gaps to provide more meaningful learning.

In other words, learning needs to be relevant to an individual’s needs and goals. It’s the only way to facilitate improvement in employee and business performance.

Performance management

Traditionally, performance management has been a once-a-year event in which managers break down employees’ good and bad performance over the year. A lot of times, those breakdowns and insights don’t lead to tangible action plans for employees to take. 

A capability framework changes that by providing a clear map of capability requirements across the organization. It provides a clear guide for how employees should be performing if they aren’t currently meeting those requirements.

In other words, a capability framework bridges the gap between performance reviews and actionable steps for employee improvement. It creates a foundation for more objective performance assessments, development needs, and career pathways.

Structuring a capability framework

Knowing how to structure a capability framework is crucial to ensure it’s actually usable by your business. If it’s not done right, it can become a disorganized set of capabilities that aren’t linked to anything.

To avoid this, capability frameworks are broken down into three categories:

• Core capabilities
• Sub-capabilities
• Competencies

These categories first establish capabilities at the business level, and then groups of smaller capabilities are established that feed into them. These capabilities are defined in business terms, so if the capability can’t be defined in terms of its importance to overall business priorities, then it’s not actually a capability.

“Capabilities and competencies have grown in importance in performance management over the past few years. With the growing skills gap, ensuring that new abilities directly translate into better performance is more of a priority for a company’s bottom line.”

Grace Savides
Senior Research Analyst, G2

It can be easy here to fall into the trap of grouping capabilities in a hierarchy, whether that’s a hierarchy of importance or a hierarchy of job roles. A capability framework should group capabilities according to category first and hierarchy second and should have a balance of technical and soft skills across the framework.

Source: Acorn

What are core capabilities?

Core or organizational capabilities are the highest category of capability in a framework. They’re the overarching business capabilities that outline the actions needed to meet strategic objectives.

To define organizational capabilities, ask yourself: How does the business perform core functions to generate business value? 

Capabilities at this level use fairly generic language because they need to apply broadly to the business. Core capabilities include strategic delivery, communication, and resilience. They’re pretty broadly defined because it’s the sub-capabilities that fall under each of them that give more context.

What are sub-capabilities?

Sub-capabilities are core capabilities broken down into specific skills, knowledge, behavior, processes, and tools. They’re a collection of capabilities that fall under broader core capability categories to add deeper context. Under the core capability communications you might have “managing and creating corporate identity” as a sub-capability.

It’s important not to go overboard here. Too many sub-capabilities can become a nightmare to develop (to say nothing of tracking that development). Enterprises tend to have around 10-20 sub-capabilities, which can be organized into core capabilities like business departments or functions such as marketing or sales. 

There shouldn’t be any capabilities duplicated across different departments, either. Duplication just means you lack internal communication, resulting in the development of the same capability twice. That’s a lot of wasted time and effort. 

Another issue is that siloed information can’t be effectively integrated with each other to make meaningful insights about capability performance.

For example, suppose department A and department B are developing the same capability at the same time but tracking progress separately. It will become difficult to consolidate separate data sets on the progress of capability development. That means you end up with version control issues and a lack of accurate, up-to-date data.

The best way to organize sub-capabilities into departments and hierarchies is to make a business capability map outlining where all your capabilities lie within the organization. 

A business capability map is a centralized source of truth across the whole organization based on big-picture priorities. It’s a visual asset that all stakeholders, including internal teams, can see and understand where capabilities fall in relation to each other. It’s also a great way to ensure teams see where they’re contributing strategic value to the business because it’s more likely to make them engage with change programs.

What are competencies?

Competencies are the levels of proficiency used to measure capabilities. These form the basis of employee performance evaluations.

The ideal number of competencies per capability is three, but some capabilities may go up to five. At the very least, your range of competencies should cover the following levels of performance:

• Emerging or needs development
• Proficient or meets expectations
• Advanced or exceeds expectations

Ideally, you want all your employees to be advanced in their capabilities. This ensures that as businesses evolve and adapt to market changes over time, the workforce is well-equipped to adapt and perform as well.

The capabilities that are most important to develop will change based on industry changes, emerging technologies and standards, and business goals. Organizations can use a business capability heat map alongside their capability framework to identify and prioritize capabilities for development.

How to build a capability framework

The most effective capability frameworks are tailored to your business needs. After all, core capabilities, job roles, departments, and even the use case of a capability framework vary from business to business. 

There are five key steps to building a capability framework customized to your organization:

1. Define your goals
2. Gather business data
3. Define and assign capabilities
4. Implement the framework
5. Monitor the framework

1. Define your capability framework goals

The first step is to decide on the goals and scope of your project. A capability framework provides a foundation for multiple business activities, like performance, learning, and talent management.

However, there’s no point in building an in-depth capability framework if you don’t intend to use it business-wide. Thus, make sure your capability framework goals are aligned with your organization’s broader objectives. This will allow you to use it across the organization and maintain uniformity. 

You could ask yourself: What outcomes do you want to use the framework to achieve? Is it to improve workforce planning, employee development, or performance management? This ties your capability framework to measurable business outcomes, which makes reviewing and updating the framework later on much easier.

2. Gather data on the business

You need to gather data on the business so that the framework presents an objective overview of the business and its functions. Make sure you engage and get buy-in from relevant stakeholders, such as managers and leaders. 

Many change programs usually fail because of resistance to change or a lack of leadership support. You have to convince business leaders by showing them how a capability framework will address their pain points. If their main concern is driving more revenue for the business, then show them how the framework addresses capabilities that will increase revenue.

Beyond leadership, you will also need to align with business unit leaders, who will have their own KPIs and pain points. After all, a capability framework can’t effectively further the organization’s goals if it’s alienating business functions. These leaders will have insights into the development needs of their specific departments, which you can use to build out sub-capabilities in the framework. 

3. Define and assign capabilities and competencies

Now that you have detailed job descriptions and responsibilities recorded, you can use them to define and assign relevant capabilities. You could do this manually, but using a tool to do the heavy lifting for you is easier. A learning management system that automatically assigns capabilities based on the job descriptions you input hugely speeds up building a capability framework.

Simply assigning capabilities to roles means defining the skills needed for a role. But that alone isn’t enough. You also need to detail the different competency levels for each capability and assign which level is relevant to specific job roles and seniority. Knowing this will be useful for performance evaluations and recruitment.

For example, say you have a job role outlined for a marketing communications officer. Part of the job involves managing social media and email marketing — in other words, a digital marketing capability.

If you were to break down digital marketing into three major competencies, you would get the following:

• At an emerging level, the employee understands the importance of digital marketing, social media, and email marketing and has a basic understanding of digital marketing concepts. They know that it’s important to reach out to and engage with customers using digital channels, but they may not have the knowledge to execute that outreach effectively yet.
• At a proficient level, the employee is able to create and execute digital marketing campaigns, as well as create and manage digital content. They’re also able to use both social media and email marketing to reach out to and engage with customers. However, they are still unable to be truly strategic and proactive.
• At an advanced level, the employee is strategic with digital marketing, leveraging data and research to inform an effective and proactive digital marketing strategy. They’re able to use data analysis to drive business growth with digital marketing campaigns.

At this stage of building a capability framework, you should also map content to your capabilities. 

All learning content you provide learners should develop specific capabilities. This means you can give learners content that’s relevant to their capability needs. Again, this is a lot faster and easier to do with a learning management system that specializes in capabilities and speeds up the process of assigning learning based on employees’ development plans.

4. Implement the framework

The next step is to integrate the capability framework with your HR processes to improve them. The capability framework can be used to:

1. Identify a job role’s specific capabilities
2. Assess those capabilities in new talent or HiPos
3. Determine whether new talent or HiPos possess the right capabilities for the role or whether they need to be developed

You should also provide training for managers alongside the capability framework. It’s useless to use a capability framework in performance management if managers don’t know how to use it to direct performance evaluations. Apart from evaluating past performance, a capability framework can also be used to light the way for future performance.

5. Update the framework

Organizational capabilities don’t necessarily change, but they do need to be continuously developed. Some capabilities are also less critical to develop than others. There will inevitably be a shift in technology, standards, or processes, which may affect business priorities and activities in the future.

New technologies in the industry may require new capability sets to be added to the framework. As the business scales, new teams might be added as well. Thus, you need to regularly evaluate your framework to ensure that it’s up-to-date with organizational objectives.

Most importantly, evaluate how effectively the capability framework has impacted HR processes. There should be a clear performance uplift. And if there isn’t, adjustments must be made. Maybe the assigned role-based capabilities aren’t driving strategic outcomes, or the framework was poorly integrated.

Review and update your capability framework regularly. Once a year is a good place to start. 

Boosting business efficiency with capability frameworks

Building a capability framework is a simple process. It bridges the gap between traditionally separate business activities to create more strategic processes overall. Where performance management once existed in a vacuum, it’s now linked to L&D, workforce planning, and talent management. That means fewer resources are spent due to business activities operating in silos and more time spent building up a sustainable and agile workforce.

And, since a capability framework links all processes and activities back to organizational strategy, you can rest assured that all employee development, recruitment, and workforce planning initiatives drive organizational outcomes. 

A lot of change management programs don’t do well because no one, especially leaders, sees the value in completing them. However, building a capability framework highlights what capabilities have strategic importance and addresses the pain points leaders are worried about. It means you’re more likely to get buy-in and investment across the board and actually make an impact with your change initiatives.

Looking to further enhance your team’s capabilities? Discover 3 strategies to build a skills-based organization and take your performance to the next level!

Edited by Supanna Das