The capability-building imperative: Make purposeful investments in people

To thrive in a fast-changing world, leaders must treat capability building as a strategic weapon, says McKinsey’s managing partner for North America.

As an adviser to senior executives and a passionate people leader, McKinsey senior partner Liz Hilton Segel has spent considerable time in the past year thinking about—and planning for—rapid changes in the business world and their implications for the future of the workforce. She is the author of the recent articles “Positive leadership in uncertain times” and “Five ways to design a better mental-health future for a stressed-out workforce.” Hilton Segel recently shared her views on how companies can use their capability-building programs to both build strategic advantage and improve employees’ wellbeing. The following are edited excerpts of her comments.

‘A sense of personal growth’

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Liz Hilton Segel

One of the lessons that companies have learned during this pandemic is how much change is possible so quickly. That lesson has amplified the mindset within organizations that capability building is important—and that it’s critical for all employees to have a personalized learning journey. Every employee’s approach to their career should be one of excitement about being able to develop new skills and new knowledge that helps enhance their productivity all along their career path.

Sometimes people have the mindset that once they’ve built a competency in an area—it could be in customer service, pricing, accounting, or something else—their learning is done; they’ve arrived as a leader or manager. What we’re all realizing today is that for everyone, no matter how long they’ve been at a company or at what level, there’s always a next horizon of learning that’s important for them to stay current, given the speed at which business is changing. The more employers and employees embrace the idea that each person has a personalized learning journey ahead, the more successful the company will be.

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On leadership in the next normal

For example, a customer-service organization saw more potential in its frontline employees and decided to invest in capability building. What was critical to the success of this program was that each day of learning was incorporated into employees’ daily routines and made relevant to their day-to-day success. Instead of taking place in a separate classroom, the company offered learning in the form of a mix of experiences, sometimes in small huddles of ten or 15 people, with a snack-size lesson, maybe 15 minutes. People could share information with one another and then combine that with things they learned through working one-on-one with their supervisor or manager.

Employees directly and tangibly saw their own performance improve, and many saw their compensation increase as a result. But what they noted most was their sense that they had grown in terms of personal fulfillment and enrichment; they believed they were able to live up to more of their potential. That increased their overall sense of happiness and their loyalty to the organization. Time and again, when we look at employee engagement or employee-satisfaction surveys, we see how powerful it is when people feel a sense of personal growth—when they feel equipped to do the best possible job they can.

Long-term returns on investment

Capability building will have a direct result on your financial performance, on your ability to compete more effectively for customers, and on employee satisfaction—so treat capability building as one of the most important strategic weapons you have. Make purposeful investment in it.

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On capability building as a strategic advantage

One thing that seems to hold organizations back from developing sophisticated capability-building programs is that these investments need to be immediately expensed in that year, even though the returns will be available to the company for several years. I would challenge leaders to make the direct and conscious trade-off between the capital investments that they make—which, by definition, are capitalized and then depreciated over several years—and the human-capital investments they’re making that are enabling their employees to adopt new skills for the future needs of the company.

I would encourage CEOs and CHROs [chief human-resources officers] to think clearly about investments that you’re making in your employees as having a multiyear investment return. Look at the investment in any one year against the payout of the performance shift that will come several years down the road.

Wellbeing as a skill

If people’s whole wellbeing is the best it can be, they’re going to be that much more productive at work. I’m hopeful that a new generation will show how wellbeing is a skill that can be cultivated—just like communication or leadership or problem solving.

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On practicing the skill of wellbeing

With technology in our lives 24/7, it’s become standard to work constantly. If you don’t have your priorities straight in terms of protecting your physical and mental health, and if you don’t have a clear sense of purpose, it’s very easy to let work and other people’s priorities take over your existence. My hope is that we begin to think about wellbeing as something to practice. Individuals can test what works for them. Companies can be supportive, providing ideas, curricula, and safe spaces for people to exchange notes on what’s working. I think this is a journey that most professionals will need to start.

We may be watching a generational shift unfold. Younger generations are much more apt to share things about their personal lives with peers and with colleagues. That manifests itself in social media, of course, but also in their conduct in the workplace. And so part of being a leader in the modern world is being open to sharing more things about your personal life, your worries, stories beyond the work context. Truly authentic and empathetic leaders in the modern era know that when they show something of themselves, it invites others to do the same.

One thing that’s near and dear to my heart is making sure that we have conversations on mental health as often and as easily as we discuss physical health. Leaders can help open up these conversations just by asking, “How are you doing today? How was last week? What would make next week better?” These are small steps, but they can help start the dialogue.

Common mistakes

One mistake we often see companies make is when learning programs or capability-building programs are not directly tied to an expected performance improvement. Companies get much more out of their efforts when they are extremely clear about what performance change they are seeking, whether that’s revenue growth or quality improvement or higher employee-satisfaction scores.

Another mistake is spending too much time in the classroom context—meaning a physical classroom where people come in for a week or two to learn in a concentrated way that is separate from their day-to-day job. That’s not time well spent; it’s not an efficient way to have someone absorb new skills and new content and then directly apply them. Nor is it necessary. We’ve surveyed people about their level of satisfaction with virtual programs. More than 80 percent said they found the virtual programs as successful as an in-person experience. Another benefit of digital programs, of course, is flexibility—there’s no need for a physical location, and companies can make any of their domain experts accessible to any employee in the world at any time.

What’s next in capability building

Several cool ideas have been in the making for a few years and are coming to the forefront. One example is leveraging virtual reality [VR]—for example, using VR to practice dealing with a difficult customer. Another example is adaptive learning, where the digital curriculum unfolds differently for each participant based on how that participant performs on quizzes or tests offered along the way. A third example is user-generated content: participants add their ideas and the curriculum is constantly updated to incorporate those ideas. These are opportunities to not only build new skills but also make the learning curriculum more emotionally engaging and more relevant to each person.

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