Striving towards organizational agility

A survey from The Economist revealed that 90 percent of executives consulted believe that organizational agility is critical for global business success. Agile companies improve response times to the market and are more effective at the time of introducing innovations, achieving a better adaptation capacity to complex business environments. (Survey from The Economist Intelligence Unit, The Economist 2009.)

Developing agility on three fronts

Don Sull, professor at London Business School, and one of the pioneers in researching this topic, points out that organizations need to develop three types of agility: strategic, portfolio and operational.

Strategic Agility

Companies in turbulent environments often face a steady stream of opportunities. These can be classified into: small and medium-sized opportunities, and “golden opportunities”. Every day we come across small improvement opportunities. Golden opportunities, on the other hand, are not frequent, but they allow a company to significantly alter its ability to create and maintain value into the future. Strategic agility is, thus, the ability to detect and quantify those golden opportunities that can change the rules of the market. This requires systems that are able to keep the organization alert and also able to create the necessary capabilities to achieve a fast strategy development and execution.

Portfolio Agility

In most large, complex organizations resource allocation follows a bottom-up scheme: frontline employees spot opportunities, middle managers lend their support to promising projects, and senior executives rubber-stamp proposals from trusted subordinates. Under this scheme, the process is usually slow and has counterproductive incentives ( managers rarely recommend killing projects that might damage their reputations or endanger the livelihoods of their subordinates)Portfolio agility is the ability to quickly shift resources (money, talent and management focus) out of less promising areas and into more promising ones.

Operational Agility

It is the organization’s ability to exploit opportunities within its core business more quickly, effectively, and consistently than their competitors. Thus, decisions have to be made at the lowest possible level, by the right people, with the right information and the necessary tools.

Striving for agility

Each company is unique and there are no magical guidelines that can be equally applied to all of them. However, there are practices that can help achieve agility in very diverse companies. At Tandem, we have developed an Organizational Effectiveness Model™ that helps diagnose each company’s situation and select the main levers that can help to improve agility. As an example, let us review five practices a company could engage in:

1) Having a clear understanding of the key decisions that create significant value. The first step is to reinforce the communication among organization’s key members, as to which decisions are the ones to excel in. When these are agile and sound, they we will give us a competitive edge.

2) Optimizing tasks and meetings in critical processes. When a process is difficult, decisions and meetings take longer than desirable. Companies with clear and effective processes enhance their execution speed and improve their organizational climate. The key is to simplify just to the right point, so as to allow for analytical, red-tape-free processes.

3) Define clearly the roles of those involved. It is important to eliminate ambiguities and role overlapping, to avoid inconvenients with the “ownership” of a decision and the veto power. When responsibilities are clear, decision-making is often faster.

4) Reviewing decision-making styles. Every organization has a particular culture for decision-making. Some firms have “inherited” styles that need reviewing and, possibly, adaptation. For example, they have a consensus style in which everyone has to agree before making a decision. This approach significantly decreases the response time.

5) Having agile planning systems. Strategic planning processes are often more focused on freeing up resources and controlling results than on making strategic decisions. The implementation of an agile planning system helps to monitore business’s uncertainties and stay alert to seize opportunities. Successful companies think of strategy development as a dynamic practice. They do not settle with the annual planning, where they define plans and then spend a significant amount of time explaining why the company was not able to stick to them.

If we articulate these five organizational abilities, we will be able to achieve a balance between the trustworthiness of a sound decision that delivers results, and the agility of a prompt decision that delivers results faster.

An agile company is strategically more effective and is able to better adapt to contextual changes. It is a less bureaucratic organization, with dynamic meetings and less team frustration. Companies that become “heavy” as they grow, lose part of their potential.

In a fast-paced, complex world, this condition is tantamount to failure. In a business environment, where opportunities come and go fast, developing agility for decision-making is critical to the creation of sustainable competitive advantages. ■

Ernesto Weissmann
Director en Tandem, Soluciones de Decisión.