Organizational agility is making great leaps forward, and CTDOs are positioned to roll out key practices.
Economic, technological, and social forces continually disrupt business across all industries and regions around the globe. Agility—being aware of external and internal changes so you can adapt strategy, structures, processes, people, and technology to deliver better results—is a critical force in surviving these challenges.
Fortunately, a recent McKinsey Global Survey reveals that organizational agility is on the rise. Although few organization-wide agile transformations have been fully implemented, 37 percent of respondents to the McKinsey study say they are in progress. In addition, three-quarters of respondents say organizational agility is a top-three priority on their units' agendas.
"Rapid changes in competition, demand, technology, and regulations have made it more important than ever for organizations to be able to respond and adapt quickly," says McKinsey. "In such environments, the need to demonstrate agility is top of mind."
Not surprisingly, the activities where leaders are most likely to apply agile practices are those focused on the customer: innovation, customer experience, sales and servicing, and product management. But McKinsey also found that companies are directing agile efforts on internal end-to-end processes. At least four in 10 respondents say their companies are using agile methods to processes related to operations, strategy, and technology, and roughly a third say they are applying agility to talent management.
The reason for this transformation is clear: Agility pays off, asserts McKinsey. Eighty-one percent of the respondents in agile units report a moderate or significant increase in overall performance since their transformations began. And on average, respondents in agile units are 1.5 times more likely than others to report financial outperformance relative to peers, and 1.7 times more likely to report outperforming their peers on nonfinancial measures.
That concurs with data released in Achieving Greater Agility, a new report from the Project Management Institute. The PMI study found that organizations with higher agility reported that more projects successfully meet original goals and business intent than those with low agility. In addition, PMI reports that revenue growth is greater among more agile organizations. In fact, 75 percent of organizations with high agility report a minimum of 5 percent year-over-year revenue growth last year, compared with only 29 percent of organizations with low agility.
"In today's market, successful organizations must be able to react and adapt to unexpected roadblocks and market changes," says PMI President and CEO Mark A. Langley. "Organizations with high agility can switch priorities quickly without losing momentum."
But the PMI report is quick to note that organizations do not need to choose between speed and flexibility, or stability and scale: "True agility is a balance—not a battle—of choices. Organizations balance the need to be adaptive, fast, and cost-effective with the need for high performance, discipline, and risk management."
That advice supports guidance from McKinsey, which notes that agile organizations need to be both dynamic and stable. According to the report, stable practices "cultivate reliability and efficiency by establishing a backbone of elements that don't need to change frequently." Some examples include a shared vision and purpose, performance orientation, and an action-oriented decision culture.
For instance, organizations with low agility say their leaders rarely involve employees in strategic and organizational decisions that affect them, compared with 85 percent of their agile peers. Additionally, McKinsey reports that leaders in agile organizations are better at embracing shared and servant leadership and more frequently incentivize team-oriented behavior and invest in employee development.
Meanwhile, dynamic practices "enable companies to respond nimbly and quickly to new challenges and opportunities." That includes such factors as information transparency, open physical and virtual environment, role mobility, and continuous learning. The McKinsey report reveals that agile organizations excel much more often at information transparency—for example, holding events where people and teams share their work with the unit. They also are more likely to say new knowledge and capabilities are available to the whole unit, which enables continuous learning.
Clearly, organizational agility is not a one-size-fits-all undertaking. "Those using more than one approach can reconfigure their processes and combine different techniques to cope with their own distinctive challenges," notes PMI. "They establish a mindset enabling flexibility."
What's more, many of the agile practices outlined by McKinsey fall within the wheelhouse of talent development. Talent development executives are well-positioned to take a leading role in helping their companies transform into more agile units.
18 Agility Practices
McKinsey suggests 18 practices are critical for achieving organizational agility. Each practice falls within five core categories: strategy, process, structure, people, or technology.
92% Actionable strategic guidance (strategy)
91% Shared vision and purpose (strategy)
91% Entrepreneurial drive (people)
89% Shared and servant leadership (people)
89% Standardized ways of working (process)
88% Cohesive community (people)
85% Fit-for-purpose accountable cells (structure)
82% Performance orientation (people)
82% Action-oriented decision architecture (structure)
% of respondents who follow practice
87% Information transparency (process)
81% Rapid iteration and experimentation (process)
80% Continuous learning (process)
79% Flexible resource allocation (strategy)
78% Open physical and virtual environment (structure)
75% Sensing and seizing opportunities (strategy)
62% Technology, systems, and tools (technology)
60% Role mobility (people)
56% Active partnership and ecosystem (structure)
% of respondents who follow practice
Source: How to Create an Agile Organization, McKinsey & Company, 2017
Read more from CTDO magazine: Essential talent development content for C-suite leaders.