Today’s global operating environment is too unpredictable to rely on organizational structures devised over a century ago. As the drumbeat of business disruption grows, organizations can become more adaptable by unlocking the power of networked teams.
In the 1950s, the average lifespan of an S&P 500 organization was around 60 years. Now, it’s about 15 years—and continues to decline.1 Lean start-ups are moving with purpose, speed and agility to reshape markets. By contrast, most major corporations are heavily layered, bureaucratic, and stifled by complex webs of reporting lines that weigh-down leadership and smother talent. In order to compete in this environment, we believe organizational structure must evolve to unlock the potential within enterprises and unleash the latent power in networked teams. Under this new model, predictable efficiency gives way to rapid adaptability. Smaller is actually better. Focused teams with resources, air-cover, and real decision authority will always be “faster to market” than heavily structured groups that require approvals before each step. We are not suggesting that an oil super-major or global consumer business giant needs to look like the latest start-up, but we are suggesting that the current designs of these massive organizations often crush the free-flowing energy and culture that makes teams of small disrupters so successful. 1 Salim Ismail, Exponential Organizations (New York: Diversion Books, 2014).
This paper explores the four main elements for building a flexible, team-based, and networked organization that is capable of competing effectively in a complex environment and adapting quickly to an uncertain future. The findings are based on our observations from our global client base and our experience reorganizing the world’s largest companies.
The scale of transformation required to create what we call the “flexible organization” should not be underestimated. Research shows that only one-third of large companies that embark on a major change effort accomplish their original goals. One of the main reasons is that any transformation effort must overcome fierce potential resistance. To avoid this trap, a phased approach is recommended that incubates the new flexible design on the “edges” of the organization most threatened by disruption, while protecting the successful “core.” Incubation is a proven method for fostering change, especially for large organizations that want to hedge risk and use a skunkworks approach to build momentum for transformation before incorporating it into the broader business. The key issue is to determine which “edge” to incubate. Organizational units facing the following challenges are potential candidates:
Traditional functional organizational structures consolidate scarce talent in siloed teams and then sell access to that scarcity to the rest of the enterprise. Companies that make the decisions to disrupt at the edge should borrow a page from successful start-ups by adopting a new design—one that creates cross-functional, autonomous teams organized by specific outcomes. These new networks of teams cannot be led by traditional managers. To be successful, team members must be inspired by confident, knowledgeable leaders who can provide cross-functional coaching and development with a focus on team dynamics to drive the desired outcomes. Instead of becoming another version of a tangled matrix organization, this new model of networked teams must be transparent, digitally aligned, scalable, and adaptable.
One of the most promising ways of unlocking the latent power of existing social dynamics is by shifting organization design towards multidisciplinary teams that are empowered with the right skills, decision-making authority, and freedom to adapt to market developments without being forced to go up multiple “food chains” to obtain sign-off. In some respects, the era of the visionary leader, the heroic manager, and the perfect structure needs to give way to the well-oiled system that harnesses the power of many managers at once. This is the essence of utilizing a systems mindset in organizational design. Transformation efforts need to address the “whole” organization, rather than a myopic emphasis on adopting the latest design thinking within an individual function.
A new organization design alone is not enough to achieve the flexibility today’s global companies need to compete. The network of teams must be empowered and supported through purpose, leadership, talent, technology, and processes:
Building a flexible organization may seem an impossible feat, but our experience suggests there are immediate steps that can launch your transformation to becoming an adaptable organization.
The components of a flexible organization exist in nearly every business. It takes a strong leader with a clear vision and an unwavering commitment to unlock the power of networked teams and create a platform that allows the organization to adapt in a complex, uncertain world.
In the contemporary world, a small business must be flexible. If your business is too rigid, then it will fail. Rapid changes will occur- in technology and also in the economy - which means that only organizations that are flexible so that they can adapt to these changes will succeed, which will give them a massive advantage over more-rigid organizations.
You should seek to promote flexibility in your organization. You can do this by encouraging your employees to find new ways of doing business that are better. You should also be brave enough to do away with policies that do not work, because there are advantages that come with promoting flexibility in your organization.
One of the problems with an organization that is rigid and mechanistic is that it cannot adapt. Whatever challenges that come along will strain the organization. Eventually, a challenge will come along that's so massive that the organization may falter.
One of the factors that seriously alters the playing field is technology. When technology comes along that is disruptive, companies that initially had an advantage find themselves at a disadvantage. They need to figure out ways in which they can use the old technology, which will refine their former business practices so that they can then regain their competitive edge.
An organization that is flexible will respond to changes by evolving. The most flexible organization does not fight change; a flexible organization accepts change as an inevitable part of the business environment, so it learns to maximize its opportunities whenever change comes along.
A flexible company will be willing to try new methods and processes, even when the old processes seem to work just fine. Flexibility in business means that you don’t live by the maxim, “If it ain’t broke, don’t fix it." Instead, a flexible company will look for ways to find something that works more efficiently than what you already have.
Let’s start with your company policy. As a flexible company, you should be willing to review and refine your corporate policies so that you will encourage innovation, so that you can then find more-efficient and more-effective methods. This is a key factor in how important it is to have flexibility in operations management.
As time progresses, this culture of constantly experimenting and improving your processes will mean that your company becomes more efficient, so that it can enjoy higher revenues and reduced costs.
The most flexible organizations offer their employees a more diverse range of options. These organizations make it easier for their employees to lead personal lives that are more fulfilling, while also enabling the employees to meet their work commitments.
One factor that can help is to allow your employees to telecommute - or at least, to offer them a flexible work schedule. This would be a boon to your employees, since it would benefit those who have families or other responsibilities.
Another example of a flexible organization is that you could consider allowing job sharing, so that you could split one job among two employees, who each work part-time, rather than having one employee who works full-time. You will be allowing the two job-sharing employees to have more flexibility in their scheduling, thereby enabling them to become more productive.
When you accommodate your employees' needs like this, you enable your employees to become more loyal to your company, so that it becomes easier for you to retain your best employees who might otherwise have left the company, had your company offered only a rigid schedule.
When your management structure is flexible, you will get the most out of your workforce, depending on their individual talents. No two people are the same, so no two employees have exactly the same skill sets. A good manager knows how to bring people together who have differing talents and then to unite them under a single cause.
When you unite your team so that their skills complement each other, you have a flexible unit that can handle a diverse range of issues. They become able to take on any challenge that comes their way, and in so doing, they enable the organization to become more effective.
A manager who is too rigid won’t do this. He will try to force square pegs through round holes. putting his employees into roles where their abilities are not effective and their weaknesses are magnified. The result is that they will become less productive, thereby making the organization less productive as a result.
One of the characteristics of a flexible organization is that it is prepared for uncertainty. By having its workforce distributed among different places and working using different media, the organization is better able to handle uncertain conditions that would make it difficult for a centrally located organization to cope. Such things as storms, tornadoes, and other natural disasters make it difficult for rigid organizations to adapt and maintain continuity.
A flexible organization will also be able to deal with uncertainty in economic and technological environments. Such a company should have measures in place, in the event of changes in technology, regulation, or even the economy.
When you install flexible work schedules and you leverage the power of the internet to enable your employees to work remotely, you have fewer buildings to maintain. Your employees also have to do a lot less commuting to and from work, which means your organization's carbon footprint will also be reduced.
Another thing about flexible organizations is that they use technology, which is electronic, so that they do not have much paperwork. They also reduce the amount of office supplies they use. This also reduces the carbon footprint of the organization, thereby making it more environmentally friendly.
Of course, when your organization is flexible, it will accommodate your employees' needs and schedules, which means that they will have a healthier work-life balance, and they will be more satisfied with their jobs. Such satisfied employees will be more likely to stay with your company.
You will get to hold on to your best employees and enjoy increased productivity from them. Also, you won’t have to deal with a high turnover, which happens when employees aren’t satisfied with an organization, so you will not need to fill vacant positions as frequently, so you will save on hiring costs.
A more-flexible organization will grow more quickly than a rigid organization, because it is always seeking processes and methods that work better than those it currently has. Such an organization will also utilize technology, which will enable its employees to work remotely and to collaborate virtually. Such teamwork tends to be more productive than other work structures, while also costing much less to maintain.
A flexible organization will also identify more opportunities in the environment and will take advantage of these opportunities, thereby enabling itself to profit in environments in which more-rigid companies wouldn’t be able to prosper.
There are too many benefits of a flexible organization to list, but these are most of them. When you enable your company to become adaptable, it is able to evolve with the times, and it will survive longer, becoming continually more prosperous. |
What organizational structure would you choose if you were interested in promoting flexibility adaptability and innovation?
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