Capability without adequate capacity is a recipe for stress and frustrated ambition - senior managers see their strategies fail in the fight for scarce resources as work queues grow and grow.
Capacity without appropriate capability often leads to poor performance - 100% effort, but real achievement stuck at 50%.
Given these two less than perfect solutions, which is the better approach? In the past organisations have tended to give priority to one or the other - thereby guaranteeing sub-optimal performance. More successful companies have addressed this false dichotomy - it is possible to have the right capability and the right capacity - it's just that a one-size-fits-all solution simply will not work.
Capability and capacity issues were among the principal drivers for the surge of outsourcing seen in the '90s. Appealing, but (as it turned out) not compelling, arguments were made about the ability of large groups of specialists to form self-enhancing communities of practice to drive up capability. Meanwhile, the statistics of large numbers would take care of the peaks and troughs of demand - thus satisfying the capacity problem.
A related concern is that the 'leaching' of intellectual property (IP; that increasingly highly valued commodity - which must include the knowledge held by internal resource) has proved very hard to limit, with the associated reduction in distinction between, and specific value proposition of, competitor companies.
A further linked trend was the introduction of 'contractorisation'; reducing permanent headcount and replacing with, usually long-term, contractors. The implied flexibility, the matching of capacity with demand, and indeed the selection of the appropriate skills without the costs of training has proved largely illusory. While attractive in terms of matching numbers to demand, it has turned out not to resolve the challenges of capability or capacity.
Once again the loss of IP - or rather the failure to retain IP - has become a very serious issue. The problem is so serious that some organisations have begun a concerted effort to 'decontractorise', which means exactly what it says - with long term contractors being faced with stark choices of 'join (and accept the salary reduction) or leave'! But there are other issues, not least of which are the difficulty in the performance management of contractors and the level of personal development investment made by contractors is often lower than that carried out by organisations.
They are addressing the capability problem by staged and structured investment in their staff, especially those identified as 'key', because they are, or will be, owners of essential IP. 'Will', because rather than hiring only experienced, trained, (and so skilled) individuals, successful organisations are placing 30% of investment in developing people. Their capacity problem, however, is being dealt with in rather more interesting ways. Firstly by hiring - usually through managed-service providers - and secondly by managing the demand.
This second approach is particularly apparent in well-run project-based organisations. The financial pressure over the past few years has challenged the way investment is made in projects with the result that enterprise-wide project portfolio management has become a valued activity. By applying the principles derived from financial portfolio management and concepts of value in a more rigorous way, the demand for projects is being addressed, and with it, capacity.
The questions their Boards are addressing today are not just about the desirability, but also the do-ability of change, and that is defined in terms of capacity and capability, no longer just in terms of pounds and pence.
Contractor skills and expertise and internal development can usefully be brought together. For larger organisations this blend is formed through the development of professions or academies or by simply establishing communities of professionals who share a common goal.
But in each it is clear that the most successful form of capability development isn't about providing training courses. It has been proven that a blend of knowledge transfer (often via courses and e-learning) for the less experienced, followed by 'application-based' learning to enhance and broaden expertise and experience, is the most effective approach.
It is the latter of these approaches that is becoming increasingly valued and valuable within organisations. It also provides an ideal opportunity to gain increased value from contractor resources through 'live' knowledge and skills transfers - acting as expert coaches and providing support to the community.