In a business environment that is characterized as disruptive, rapidly changing and you-name-the-descriptor, leaders often struggle to keep up. Computer hardware has been replaced by the cloud. Business processes have been replaced by ‘hacks’. Business travel has been replaced by Skype. Reports have been replaced by infographics. Organizations must be able to quickly adjust business strategies too– become more agile – in the face of increasingly rapid changes.
Rapid organizational change, though, can cause stress for employees. How can leaders convince top talent to stick around when strategies and organizations change rapidly?
In a McKinsey & Company interview titled Going from Fragile to Agile, two McKinsey organizational development principals, Aaron De Smet and Chris Gagnon discuss the topic. Here are some (edited) excerpts:
Rapidly changing business conditions are demanding more flexible organizations, explaining why agile companies outperform others. The pace of change has gotten a lot faster. It’s just a lot more intense.
Look at the statistics on how long companies last in the Fortune 500. They’ve dropped so precipitately that all of our clients are talking to us about the pace of change. Doesn’t matter industry, doesn’t matter geography. CEO tenure is also way down.
So against that backdrop, McKinsey’s been doing a large amount of research, utilizing a big tool that we have—the Organizational Health Index. Measuring organizational speed AND stability. If you emphasize speed and if you at the same time emphasize stability, you have hit a sweet spot that will lead you to far and away outperform anybody who’s just doing one or the other.
How can you have both?
Well, take speed as a proxy for how responsive, nimble, and dynamic the organization is. And speed is the best proxy we have to measure it. Just go fast, in lots of ways and on lots of dimensions. Going fast does not mean that you have to be completely chaotic and unstable.
The best companies create what we’ve started to refer to as a “stable backbone.” I don’t want to seem like we have all the answers here. We’re working this live with our clients and looking at some fascinating companies and what they do. But if you were to draw commonalities, you’d say that what that stable backbone seems to do, most of the time, is take care of people. It answers the “what’s in it for me” questions, like “how am I going to get evaluated? How am I going to get paid? How am I going to get developed?” And the best organizations seem to say, “don’t worry about that. We’ve got that taken care of. You have a home, and that home doesn’t change. Our strategies may change all the time. The things we do to be fast and responsive to the market may change. But your home’s not going to change. Relax.”
If we go back to look at these agile companies and approach them and say, “hey, we’re going to change this element of our strategy,” in an agile company people can say, “great, I’m in. How do we start?” They know the backbone’s there to take care of them. They’ve seen this movie before. They know they’re going to see it again. It’s part of their job expectation, as opposed to “whoa, wait a minute.”
I think it gets at this notion we’ve been telling each other forever—change is hard. And there’s some truth to that, I get it. But change that’s good isn’t as hard as change that’s bad. I think a really important thing is that people enjoy being in these agile organizations.
Based on the McKinsey research, then, a key to creating and sustaining an agile organization is to have a “stable backbone” for people. When key leaders and talent understand that their livelihood and career upside are not at risk when strategies change, they are more likely to embrace the changes. Organizational agility can then become a major source of competitive advantage.