Organizing For Future Readiness

Back in 2013, weak signals clearly pointed to a structural change that was desperately needed. In a Post from that year, I described the type of change I envisioned in a world that looked very different than the world where these structures were born. The pandemic, as it has on so many levels, made something lying beneath the surface very visible. What it should also illuminate for leaders is that the future is uncertain, approaching rapidly, and likely to contain regular extreme events. Those factors make future readiness crucial to viability. To be future-ready, and to operate in a world dominated by uncertainty and pace, structures must change. When I say structure, I mean a broad set of things to consider:

MANAGEMENT
MEASUREMENTS
POLICY
PROCESS
PROCEDURE
LEGAL FRAMEWORKS
REGULATORY FRAMEWORKS
LAWS
ACCOUNTING PRINCIPLES
ORGANIZATION STRUCTURE
BUSINESS MODELS
OPERATING MODELS
GOVERNANCE
INSTITUTIONS
CORE CHARACTERISTICS

This recent McKinsey Article looks at the change imperative. In it, they echo my thoughts that the pressure to change has been building for years, although far too often ignored. Well before COVID-19 entered the scene, organizations were too slow, too siloed, too matrixed, and too bureaucratic. As they state in the article: “Companies were organized for a world that is disappearing — an era of standardization and predictability that’s being overwritten by four big trends: a combination of heightened connectivity, lower transaction costs, unprecedented automation, and shifting demographics.”

In their research, they see organizations experimenting with new models. They acknowledge that no one has cracked the code, but some exhibit signs of future-ready companies. Their work identified three common characteristics: they know who they are and what they stand for; they operate with a fixation on speed and simplicity; and they grow by scaling up their ability to learn, innovate, and seek good ideas regardless of their origin.

A winner-takes-all business environment makes the challenge more acute. McKinsey research finds that up to 95 percent of economic profit is earned by the top 20 percent of companies. The Rise of Ecosystems where dominant players gain scale through network effects amplifies this phenomenon. Ecosystems represent multi-stakeholder collaborative environments operating at the edge of business, where decision speed is crucial. Yet, as McKinsey points out, today’s organizations are set up as traditional hierarchies or matrix organizations with roots stretching back to the industrial revolutions of the 18th, 19th, and 20th centuries. That legacy slows decision speed and challenges our ability to think differently about our structures. The article states the following:

The great majority of decisions should be delegated to the lowest levels possible, giving employees at the company’s edges agency and accountability for decisions they are equipped, and best placed, to make. As an executive at another company confided during the early days of the pandemic, “We are making a month’s worth of decisions every day at the moment.” Such examples suggest that companies do have the muscles to accelerate decision making. Now they must strengthen and flex those muscles, embedding what they’re learning from the crisis into redesigned decision-making processes for the future.

The article goes on to describe the nine organizational imperatives that leaders must focus on. Read the article for a deeper dive on the nine below.

Originally published at http://frankdiana.net on January 14, 2021.