Capos can be improved with Levels, Star Levels, Quality, and Skills.  You can improve Levels by gaining EXP points through Battles.  The Star Level can be improved by collecting a Capo's favorite hobby item.  After you upgrade to a new Star, new Capo skills will be available.  Quality can be improved by equipping your Capos with special Items, and then enhancing them.  Skill can be improved by equipping your Capos with Skill Notes based on their corresponding attributes, and then upgrading them.