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Organizational Agility Has Tangible Benefits

Posted By Administration, Thursday, January 21, 2016

By Michael Bazigos, Ph.D.

 

No one would expect sluggish companies to thrive. It’s equally reasonable to assume that success achieved through breakneck speed, without stabilizing processes and structures underfoot, will be hard to sustain over the long term. Yet some executives might not only reasonably maintain that speed and stability pull in opposite directions but also hypothesize that they may be negatively correlated. Our latest research, however, confirms that the opposite is true.

We’ve long inquired into the processes and structures that reinforce organizational stability. But from November 2013 to October 2014, we added questions, for the first time, on speed and flexibility. Our goal was to discover how often leaders and managers moved quickly when challenged and how rapidly organizations adjusted to changes and to new ways of doing things.

 

Taken together, these two sets of questions, old and new, provided the foundation for a simple matrix, comprising a speed axis and a stability axis. The matrix turns out to be a surprisingly strong

predictor of organizational health[1] and, ultimately, of performance. (Organizational health predicts total return to shareholders (TRS) and the key performance indicators (KPIs) that businesses use to manage their operations[2].)

 

We describe companies that combine speed and stability as agile. The findings were robust, based on over 375,000 employee observations from 165 surveys. (For more on our methodology, see sidebar, “A word on methodology” in the online version of the full article here.) Agile companies were 14 times as likely to have top quartile health as companies which were “Trapped” (low speed and low stability.)



 

Probing further, we discovered that of 37 management practices measured by the OHI, the ‘Top 10’ that distinguished agile companies from those that were trapped included role clarity (top practice) three innovation practices of four possible (top-down innovation, capturing external ideas, and knowledge sharing) and two motivational practices of four possible (meaningful values and inspirational leaders), supplemented with a number of “hard” ones like process-based capabilities and people performance review. These are displayed in the following table.



This blog post was adapted from “Why Agility Pays” by Dr Bazigos, Dr. Aaron De Smet and Dr. Bill Schaninger, Dec. 2015. The full article is posted on the McKinsey Quarterly’s website, and includes rich multimedia: http://www.mckinsey.com/insights/organization/why_agility_pays 


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Michael N. Bazigos, Ph.D., is a vice president at McKinsey & Co., with global responsibility for organizational science, located in the firm’s New York office. 



 

[1] We define health as an organization’s ability to align, execute, and renew itself faster than the competition does and thus to sustain exceptional performance over time.

[2] Organizations in the top quartile of health as measured by McKinsey’s Organizational Health Index (OHI) earn triple the total return to shareholders (TRS) of their unhealthy peers. For detail, please see “Securing lasting value through organizational health” by Bazigos, M., De Smet, A., & Schaninger, B. in People + Strategy Journal, Jan. 2015.


 

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Tags:  human resources  organizational agility  organizational effectiveness 

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