How to Run an Organizational Capability Assessment for Your Business

This matters because organizational capability underpins everything from employee competence and leadership effectiveness to how well your business connects with customers. Unlike individual capabilities, organizational capabilities reflect how the business performs as a system—shaped by strategy, structure, and collective execution, not just individual skills.

To build those capabilities intentionally, you first need to understand where you stand. That means assessing your organizational capability to see what’s working, what’s missing, and what needs to change. In the sections below, we’ll break down the three steps to running an effective capability assessment for your business.

What is organizational capability?  

Organizational capabilities are the means by which a business brings its resources and people together to deliver value to stakeholders and customers, as well as respond to industry and organizational changes. These are the strategic assets of an organization—like expertise, systems, and information—that are drawn on to execute business strategy and get work done. 

The importance of organizational capabilities 

Businesses stand out when they’re considered “coherent”. At a technical level, this means they have clear, defined capabilities aligned (i.e., coherent) with their external market position.

In other words, organizational capabilities build value and drive strategy in a way that enables respect from customers who, when done consistently, will see your brand as trustworthy, reliable, and relevant, because that’s what your business is good at.

Building the right strategic capabilities for your organization drives your company’s effectiveness in: 

• Adapting to change. When capabilities are clearly aligned to business strategy, organizations can plan for what’s next with intent. That includes preparing for future roles, emerging skills, and evolving strategic priorities, rather than playing catch-up by reacting after gaps appear.
• Performance management. Organizational capabilities define the skills, behaviors, and knowledge required for success in each role. When those expectations are clear, performance management becomes more consistent and more actionable for both managers and employees. This is exactly why we built a performance learning management system (PLMS) to make capabilities visible and usable in day-to-day performance, development, and learning.
• Gaining a competitive advantage. Strong organizational capabilities allow businesses to respond to customer needs faster and more effectively. By translating organizational priorities into observable, measurable capabilities, strategy stops living in slide decks and starts driving real action.

The impacts of not assessing organizational capability  

Assessing organizational capability gives you a clear view of whether your business is actually set up to execute its strategy. It shows where performance is being supported by the right capabilities and where gaps are undermining results. A capability assessment doesn’t just surface what needs to improve; it helps you validate whether your current approach is moving the organization in the right direction.

Without that visibility, critical risks go unnoticed. Leadership capability is a common example. If your organization doesn’t have the leadership maturity required to deliver its strategy, that gap won’t just affect current performance; it limits future growth. This disconnect is more widespread than many teams realize: 71% of managers and leaders aren’t aligned with their organization’s strategy. And even worse news: they pass that misalignment down to their teams. Plus, when capabilities aren’t clearly defined and assessed, leadership development becomes reactive, inconsistent, or doesn’t happen at all.

Over time, underdeveloped capabilities create misalignment across the business. Teams operate with different assumptions about what “good” looks like, decisions become harder to scale, and execution suffers. That internal confusion eventually shows up externally, weakening how consistently the organization delivers value to customers.

How to perform an organizational capability assessment  

An organizational capability assessment is a diagnostic that shows how well your business is performing across the capabilities that matter most. It helps you understand where you’re strong, where gaps exist, and how your current capability maturity compares to broader industry expectations.

With that foundation in place, let’s break down the three steps to running an effective organizational capability assessment.

Step 1: Identify key capability sets

The first step in performing an organizational capability assessment is to define the crucial capabilities for your context. These are the building blocks of a capability framework.

The best way to do this is to outline your strategic intent or goal, as defined by the CEO’s priorities. This way, every decision you make from this point forward is informed by (and built on) this goal.

Start defining the right capabilities by determining what you do best. This can seem overwhelming without structure, but at most, we recommend sticking to a maximum of six capability sets at this highest level. These are the core capabilities that define your company’s strengths.  

1. • Operational capabilities are an organization’s ability to align its skills and processes with its business strategy, enabling it to meet stakeholder expectations. Because these are specific to your operations, sometimes they can be hard to spot. Your organization may offer the same services as many others, but your operational capabilities are specific to how your business follows its processes. 
2. • Strategic capabilities determine a company’s ability to execute its business strategy and vision. They transform ideas into reality.
3. • Dynamic capabilities are about adapting to change. These are capabilities that build and change over time in reaction to shifts in the business environment.
4. • Context capabilities are the behind-the-scenes functional capabilities that are essential but not unique to your specific business needs.
5. Behavioural capabilities are related to the attitudes of employees towards their growth.
6. Structural capabilities are connected to the structure and arrangement of the organisation.

Next, you need to determine your resources and processes. 

• Resources include data sources, knowledge, financial resources, and systems that support organizational capabilities. 
• Processes are the means by which organizations turn resources into outputs. It’s about how people work together to meet objectives. 

These are needed to build organizational capabilities for your company, which is why it’s important to define your goals beforehand. This way, you know how to prioritize resources and processes for each capability.

Step 2: Assess capabilities 

When you’ve got the sets, start defining the specific capabilities your organization needs to execute its strategy. For each capability, clarify what “good” actually looks like in practice—how the work gets done, who’s involved, and what processes or resources are required to support it. You can validate this by gathering input through targeted surveys, manager interviews, and existing performance or operational data.

This step should give you two clear outcomes:

1. The process and resourcing requirements for each capability
2. A baseline view of your organization’s current capability maturity compared to where you need to be.

An easy way to show this is a capability maturity matrix, which shows how developed each capability is across five levels:

1. Initial 
2. Repeatable 
3. Defined 
4. Capable 
5. Efficient. 

You can also use dedicated capability tools to establish a strong baseline before assessment begins. We designed our Capability Library and Capability Assistant specifically for this purpose: to help organizations define what to assess using clear, industry-aligned capabilities that can be tailored to business strategy. This removes the guesswork and inconsistency that often creep in when teams try to build capability frameworks from scratch.

Once that baseline is in place, capability assessment focuses on strategic importance versus proficiency to surface where the most critical gaps exist. A capability gap analysis makes this actionable by showing where current performance falls short of what the business actually needs. We’ve broken this down in more detail in our guide on how to use a capability gap analysis report, including how to interpret the data and prioritize development efforts.

From there, capability maturity can be tracked over time and, where relevant, compared against best-in-class benchmarks to give clearer context on progress and impact.

Step 3: Identify areas for improvement 

At this stage, the focus should shift from what exists to what’s missing. This means focusing on the gaps between strategic importance and current proficiency, rather than treating all gaps as equal.

These gaps matter most because they directly affect your ability to execute strategy. Look for patterns across roles, teams, or functions—repeated gaps indicate an organisational issue rather than individual underperformance.

Once priority gaps are clear, decide on the action based on why each gap exists:

• Assign structured, capability-linked learning content when people lack the knowledge or practice required to perform the capability. This is common in new roles, new processes, or newly defined expectations. The response should be targeted learning content and practice activities mapped to the capability and its required proficiency level—not generic training.
• Set explicit performance goals when the capability is understood but not consistently demonstrated. In these cases, the capability needs to be written into goals, success measures, and 1:1 conversations so it’s reinforced in day-to-day work.
• Use manager coaching when the capability depends on judgment or behavior. This is typical for capabilities like leadership, decision-making, or stakeholder management, where improvement comes from applying the capability in real situations and refining it over time through feedback.

This is backed up by long-running research. McKinsey’s work on capability building shows that organizations see meaningful performance gains only when capability development is directly tied to strategic priorities and reinforced through day-to-day work—not when learning is treated as a standalone activity.

Key takeaways  

An organizational capability assessment helps you identify which capabilities to prioritize next by showing where current performance falls short of strategic needs.

• Used well, capability assessment data creates a practical foundation for future planning, helping organizations focus on the capabilities that will drive performance and growth.
• It shows what your organization can do today, what it needs to be able to do to deliver its strategy, and where the gaps sit between the two.
• Its value lies in how clearly it informs decisions about priority capabilities, development effort, and where to invest next.