Organizations often have ambitions to develop their capabilities.
They establish communities of practice, appoint capability owners, develop methodologies, and encourage knowledge sharing.
At the same time, they may measure individual performance through KPIs that actively discourage these activities.
Consider a consulting organization.
A consultant who spends all their available time delivering to customers performs well according to utilization metrics.
Another consultant spends part of that time developing methodologies, mentoring colleagues, or creating reusable knowledge.
The first generates more directly attributable revenue.
The second may be contributing more to the organization’s future ability to generate revenue.
Yet according to the KPI, the first consultant is performing better.
Measuring the Wrong Contribution
There is nothing inherently wrong with measuring utilization. Consulting organizations depend on billable work.
The problem arises when a metric designed to measure one aspect of performance becomes a general measure of individual contribution.
Utilization measures billable time. It does not measure the value someone creates for the organization.
A consultant delivering an assignment creates value through their own work.
A consultant developing an approach that enables twenty colleagues to deliver better assignments creates value through the work of others.
The latter contribution may be substantially greater, but it is harder to observe, attribute, and measure.
And what is difficult to measure is often difficult to reward.
The Capability Paradox
Capability development requires investment.
Someone must examine existing practices, identify improvements, develop better approaches, and help others adopt them.
All of this takes time that could otherwise have been spent on billable work.
The organization wants its capabilities to improve, but evaluates the people responsible according to criteria that reward them for spending their time elsewhere.
Capability development becomes something to do when there is time left over.
And in an organization optimizing utilization, there may be very little time left over.
The organization has made capability development dependent on the availability of a resource it is simultaneously trying to eliminate: unused capacity.
The resulting behaviour is entirely predictable.
Yet the organization may interpret the lack of capability development as insufficient engagement, ownership, or initiative.
Perhaps people are simply responding exactly as the organization has instructed them to.
From Productivity to Leverage
Individual productivity concerns what someone accomplishes through their own work.
Organizational capability concerns what the organization can accomplish repeatedly, independently of particular individuals.
Developing that capability means making knowledge, methods, and practices available beyond their original creators.
Its value is often indirect, distributed, and delayed.
A methodology developed today may improve dozens of assignments over several years.
But those improvements will appear in the performance of the consultants using it, not necessarily in the performance indicators of the person who developed it.
The organization benefits without necessarily recognizing where the benefit originated.
If we measure individual contribution primarily through direct output, how do we recognize contributions that improve the output of others?
What Are We Actually Optimizing?
The obvious response might be to introduce additional KPIs for capability development.
But counting methodologies, knowledge-sharing sessions, or reusable assets does not necessarily tell us whether organizational capabilities have improved.
We would simply be measuring more activities.
Perhaps the more important question is whether the organization’s management mechanisms support what it is trying to achieve.
Maximizing utilization and developing organizational capability are different objectives. They compete for the same resources, and the organization must decide how to balance them.
That balance cannot be established through strategic declarations alone. It must be reflected in how work is prioritized, capacity is allocated, and contributions are evaluated.
Otherwise, capability development remains an ambition that the organization’s own management system works against.
Perhaps the question is not whether we have the right KPIs, but whether we understand what our KPIs are preventing us from achieving.
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