Here’s How to Build Organizational Agility

3 key lessons from the "World's Most Admired" on how to transform culture to keep pace with change.
By: | December 12, 2018 • 10 min read

According to a recent CEO survey by PwC, nearly a quarter of chief executives believe that technology will completely reshape competition in their respective industries in the next five years. Given the accelerated rate of change, however, one wonders what the other CEOs expect to happen.

Built largely for scale, the high-volume, low-cost, process-oriented structure of many organizations is at odds with the streamlined, developmental, on-demand way we live and work today. For many organizations, the tension between the historical stability and control they’ve enjoyed and the disruption created by a new environment with new ways of doing work will be too much to overcome. Organizations that were befallen by rising competition and consumer expectations enabled by technology litter the business landscape.

But there are organizations—legacy and digitally native—that have both survived and thrived amid the constant uncertainty. Many factors, from quality of management and balance of short- and long-term objectives to a high tolerance for risk and a superior consumer experience, contribute to their success. These traits, among others, make up what we call organizational agility, or the ability to adapt quickly to changing market conditions to maintain or enhance competitive position. Our research shows that organizational agility is a hallmark shared by the perennial leaders on Korn Ferry’s “Most Admired for HR” list, which we produce every year in conjunction with Human Resource Executive®. Put another way, organizational agility is what separates the best from the best of the rest.

Background and Methodology

For the last 21 years, Korn Ferry and Fortune have partnered to identify the “World’s Most Admired Companies,” a project that we recalibrate with HRE for the HR-focused rankings.

In the course of this research, Korn Ferry conducts separate studies focused on best practices that distinguish WMACs from their peers. Key differentiators we have studied in past years include: board governance and human capital management, culture, strategy implementation, preparing for the future of work, employee engagement and enablement, and effectiveness in conducting business globally, among others. This year, we chose to highlight organizational agility. The pace of change demands that companies adopt an agile operating approach. In our study, we asked approximately 500 senior executives from organizations participating in the WMAC rankings to reflect on approaches to building agility into their cultures. Here are their three key pieces of advice:

1. Don’t Wait—Anticipate

Agility and pivoting are sometimes used interchangeably, but considering them one and the same is not only inaccurate, it also fundamentally misunderstands what agility is and how it is applied. Agility is proactive. Pivoting is reactive. Agility anticipates. Pivoting chases. Agility keeps you a step ahead of the game. Pivoting is typically a step behind.

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Our research shows that WMAC executives rate their companies higher than their peers for their ability to anticipate industry changes (87 percent versus 75 percent favorable, respectively) and innovate and capture the next market opportunity (84 percent versus 66 percent, respectively). Relatedly, while agility contributes to organizational success, promoting and sustaining it depends heavily on responses to failure. Innovation doesn’t come without a few setbacks, after all. WMAC executives give their companies higher marks than their peers for empowering people to take risks without fear of adverse consequences (71 percent versus 63 percent, respectively) and using performance-management programs to reward well-intentioned failures resulting from experimentation (53 percent versus 39 percent, respectively).

Another important distinguishing factor is that WMACs are hyperfocused on the consumer. They recognize that the consumer experience is now the pacesetter for the employee experience, citizen experience, B2B experience and more. “You cannot rest on your laurels in this world. Customers won’t have it,” Amazon CEO Jeff Bezos wrote in his 2018 annual shareholder letter.

Indeed, WMACs, of which Amazon is a perennial all-star performer, understand agility is generally not about cost reduction and productivity improvement but much more about changing customer needs and technology shifts. That said, the landscape is changing so quickly that stripping out processes, breaking down silos and establishing connectivity across the organization is seen by WMAC executives as critical to helping organizations become more agile.

2. Keep Focused Amid the Frenzy

In 2006, a Yahoo executive by the name of Brad Garlinghouse wrote a blistering memo claiming the company was suffering from underinvestment and a failure to innovate because its lack of vision caused the organization to spread itself too thin with an abundance of projects. Known as “The Peanut Butter Manifesto,” today the memo lives on in business schools, boardrooms and consultancies like ours as a case study for what happens to organizations when they lose focus. (It’s worth noting that Garlinghouse went on to hold several prominent leadership positions after leaving Yahoo—including his current role as CEO of fintech company Ripple—while Yahoo sold out to AOL, now owned by Verizon.)

It’s not hyperbole to say that the manifesto’s message is even more applicable today than when it was drafted 12 years ago. With an endless array of new and emerging technologies and infinite ways to apply them, figuring out where to place bets to achieve business objectives is an unenviable task. At the same time, organizations must innovate and disrupt themselves—maintaining the status quo leads to certain death. Our research shows that WMACs are distinctive in setting clear objectives, learning from experience and redeploying resources when needed. Relative to their peers, WMAC executives report that their companies do a better job than their peers of focusing on a reasonable number of priorities (77 percent versus 59 percent, respectively) and more effectively manage staffing levels and competing objectives so that teams can execute (70 percent versus 63 percent, respectively).

More importantly, WMACs don’t get caught in the commitment trap. If something doesn’t work, they learn and move on quickly. WMAC executives report that their companies more readily shift resources away from less-promising initiatives and toward more attractive opportunities than their peers (71 percent versus 60 percent, respectively). But when WMACs fail, they fail responsibly. They view missteps as learning, rather than missed, opportunities. Amid success or failure, WMACs are given higher marks by executives than peer companies for capturing and learning from data (65 percent versus 50 percent, respectively).

This kind of focused frenzy is necessary in today’s constantly changing landscape. Organizations that adopt an agile development approach operate on a more even keel and better balance short- and long-term objectives. There is a talent benefit as well—organizations with a clear and compelling direction show higher levels of employee engagement, and focusing employees on “must-win battles” enables them to do and deliver more.

3. Think People, Not Positions

Another hallmark of WMACs is that they have well-developed talent strategies and focus on getting the right people in the right roles. For instance, WMAC executives say that their companies put more weight on evaluating learning agility in hiring new talent than their peers (66 percent versus 47 percent, respectively) and place more value on expertise over formal experience when matching people to initiatives and teams (88 percent versus 74 percent, respectively). Put another way, WMACs understand that the future of work isn’t about filling positions. It’s about leveraging people’s individual skills to achieve maximum collective value.

That’s easier said than done, of course, particularly for organizations that have historically operated in silos with rigidly defined roles. But success today requires more collaboration across the organization to leverage information that already exists and combine it in new ways.

Case in point: ING. A recent Harvard Business Review article looked at how the global bank replaced its traditional structure with a fluid, agile talent-management system composed of tribes, squads and chapters—basically small teams of workers from across the organization—designed to solve specific problems within a defined time frame. WMACs excel at utilizing this kind of interconnectivity and collaboration to manage initiatives.

By their very nature, short cycles of episodic or non-recurring work impact performance-management and talent strategies. A predetermined set of accountabilities doesn’t work when people are being put together in new teams at a higher rate and higher volume than ever before. Our research shows that, relative to their peers, WMAC executives indicate that their companies have a clearer point of view on how their talent strategy reinforces their business strategy (70 percent versus 59 percent, respectively) and are more effective in assessing and rewarding team, as opposed to individual, performance (67 percent versus 58 percent, respectively).

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Moreover, talent strategies of WMACs closely align to their higher awareness of industry changes and sharp prioritization of initiatives. They are rated higher by executives than peer companies in developing roles that align with future needs (71 percent versus 57 percent, respectively) and taking quick action when performance depends on talent capabilities the organization currently lacks (70 percent versus 51 percent, respectively).

It’s important to recognize, however, that creating teams to achieve clearly defined short-term objectives doesn’t equate to a continuous churn of people and skill sets. Rather, what WMACs do better than their peers is focus on what talent can learn and apply based on their skills instead of simply filling a formal open position.

Agility As a Cultural Norm

Ingraining agility into an organization isn’t just something a CEO wakes up and decides to do. It’s actually quite difficult, as it must be woven into the fabric of an organization’s culture and purpose. Encouraging collaboration, supporting experimentation and managing change are attributes of agility, among others, that leaders must harness and spread throughout the organization.

In driving the right behaviors, WMACs look beyond performance-management and compensation approaches. Fewer than 20 percent of WMAC respondents flagged revisions in these areas as being among their top change priorities, for instance. Senior leaders place much more emphasis on establishing the right culture, a common purpose and role modeling of agile approaches. Culture and purpose play formative and normative roles at WMACs, in addition to filling in the white spaces between processes.

Making agility part of an organization’s culture and purpose has positive talent implications as well. Less than half of WMAC respondents indicated that their focus has shifted away from loyalty and retention and toward short-term relationships with employees. For WMACs, organizational agility is part of the employee-value proposition, sending a message to talent that there are growth and development opportunities for them as part of the total-reward equation.

 

Nathan Blain is senior client partner and global leader for organizational strategy and digital transformation at Korn Ferry. Mark Royal is senior director at Korn Ferry. Melvyn J. Stark is senior client partner at Korn Ferry.