9 Tenets Of Future-Ready Organizational Design
Use Clarity, Empowerment and Innovation
Humans lean toward routines. They make us feel in control. Similarly, traditional companies rely on uniformity, bureaucracy and control, steadily moving along the way they have always done things. But as the Greek philosopher Heraclitus said, “The only constant in life is change.” Today’s future-ready companies are embracing change, being able to pivot to where the most value is being created, and deploying assets with speed and accountability.
The pandemic upended business, and how people view their work and future. But it also provided an unprecedented opportunity for companies to create new organizational design strategies and new systems that are flexible, creative and resilient. As mentioned in this month’s related story about leading employees in an unpredictable economy, this modern approach also bridges the disconnect between company goals and employee wants and needs that became clear during the “Great Resignation.”
Research firm McKinsey studied the most successful companies in the US across ten industries. The study focuses on the top three in each category, and is based on internal and external research to determine why experts considered them well run, with high profitability and employee satisfaction. The data shows nine key areas common to a successful, future ready company. These include:
What the company stands for- They know who they are and what they stand for.
- A bold stance on purpose
- A clear value agenda
- Unique developed culture
How the company operates- They operate with a fixation on speed and simplicity;
- In a radically flattened structure
- Accelerate decision making
- Treats talent as scarcer than capital
How the company grows- They grow by scaling up their ability to learn, innovate, and seek good ideas regardless of their origin.
- Through an ecosystem perspective
- Using data-rich tech platforms
- Accelerated organizational learning
Following is a brief explanation, including examples, of these nine tenets of future-ready company success.
A future-ready company is identified by their purpose, clearly describing why they exist. This can include social and practical points of view, as well as a historical background or emotional reasons. A purpose makes a company real in the eyes of consumers and helps employees connect to the company.
One example is Warby Parker, an eyewear company that was founded in 2010 to “offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.” Warby Parker’s purpose statement reflects the company’s unique identity as a socially conscious business, and its commitment to providing a high-quality product that is accessible to everyone. The statement is practical and emotional, as it speaks to the company’s dedication to its customers and its broader social mission.
The historical context of Warby Parker’s purpose statement is rooted in the founders’ personal experiences with the eyewear industry, and their desire to disrupt the traditional model by offering affordable and stylish options to customers. The purpose statement reflects the company’s focus on innovation and social responsibility, which have been core parts of its identity since its founding.
Being able to say what value a company provides differs from specifically identifying where value is created. What specific roles in the company drive value? What contributions created value? Did the value provide the capacity for excellent performance and future growth?
Modeling the creation of value can be a radical change in the way operations have historically expressed their value. The process involves focusing on the need the value is fulfilling, not the resources to accomplish it, then measuring this new value proposition by outcomes and costs.
The value agenda, or value map, is a visual tool that helps a company identify and analyze customers’ needs and how your company can deliver value to them. A value agenda can guide product development, marketing strategies, and overall business planning.
There are many value agenda examples in health care, used by leaders attempting to change the structure of a troubled and expensive industry.
McKinsey uses the example of tech giant, Apple, who rallies behind the need to create the best user experience. Not only is their computer design stylish and thoughtful for the user, with intuitive icons on the keys and a more ergonomic case, but that same level of customer dedication follows in other departments such as packaging, ensuring users have a wonderful experience opening the box.
With a clear value agenda, a company can achieve strategic priorities now, but also be flexible to change and shift resources as priorities change. According to McKinsey research, companies that frequently reallocate talent to high-value initiatives are more than twice as likely to outperform peers on total returns to shareholders.
Culture is what McKinsey calls “the secret sauce,” that unique set of behaviors, rituals, symbols, and experiences that together depict how a company runs things. Successful companies have a well thought out culture that provides a framework and identity for the organization. Strong employee and stakeholder buy-in to culture can triple returns over companies without this identity.
An example of a business with a successful culture is the outdoor clothing company Patagonia, known for its strong commitment to environmental sustainability and social responsibility. The company encourages its employees to be environmentally conscious and offers benefits such as on-site child care and paid time off for activism. Patagonia has also been recognized for its commitment to work-life balance, with flexible schedules and remote work options available.
4. Radically flattened structure
Markets have become more complicated, and business environments have evolved along with them. Traditionally, this resulted in a convoluted organizational structure and complex hierarchy that is difficult to navigate.
Companies that are future-ready are making their structure more streamlined and efficient so they can find new opportunities for growth. This type of flatter organizational structure minimizes the number of management layers between top-level executives and front-line employees. It seeks to empower employees by giving them greater autonomy and decision-making authority, while reducing bureaucracy and increasing agility. In this structure, a network of interconnected teams that collaborate to achieve common goals replaces traditional hierarchies. This doesn’t mean that the traditional hierarchy and top management disappear completely, but they become less important for keeping everything organized.
This approach is believed to improve communication, speed up decision-making, and foster a culture of innovation and continuous improvement. Here are a couple of examples of companies with flattened organizational structures.
Zappos is an online shoe and clothing retailer known for its unique company culture and flatter organizational structure. Instead of traditional managers, Zappos has “coaches” who support and guide teams but do not have direct authority over them. The company also uses a “holacracy” system, which distributes decision-making power and authority across self-organizing teams.
W.L. Gore & Associates, maker of Gore-Tex waterproof and breathable fabric, as well as a wide range of products, from medical devices to guitar strings, has used a flat, team-based structure that emphasizes collaboration and individual initiative since the company founding in 1958. There are no formal managers or titles, and employees are encouraged to take ownership of their work and develop their own ideas and projects.
The success of flat organizational strategies often depends on their ability to create a supportive and collaborative environment that empowers employees and promotes innovation. Self-managed structures may require significant investment in training and development to ensure employees have the skills and knowledge they need to succeed in a collaborative environment.
5. Accelerated decision making
Even though McKinsey data shows companies that make fast decisions are twice as likely to also make high-quality decisions, vs companies that make slow decisions, only one in three top companies frequently make fast, high-quality decisions.
Overall, prioritizing speed in a future-ready organization requires a combination of strategies that involve people, processes, and technology. By embracing agile methodologies, empowering cross-functional teams, implementing DevOps practices, fostering a culture of innovation, investing in technology and tools, and measuring performance, companies can stay ahead of the curve and deliver value to their customers faster.
Top companies use several acronyms to describe their “bias of action,” an embedded value that helps decide faster and with better results.
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6. Treating talent well
Companies are struggling to find workers in every sector across the country. As covered in this month’s article on leading employees in an unpredictable economy, labor shortages have been growing for years. The problem was just exasperated by the pandemic. See that article for tips to recruit top talent.
Since good talent is a scarce resource, companies should assess the most important qualifications needed to meet the top priorities of their value agenda.
Savvy prospects will research a company thoroughly. It is important for companies to be an attractive place for talent to land. Changing priorities for the workforce include an inclusive employee experience. Companies with more diversity at the executive level are up to 36% more likely to be profitable and attract top talent, according to McKinsey
There is a growing recognition that employees are looking for more than just financial rewards. Many people want to be part of something larger than themselves and seek purpose, meaning, and a sense of belonging. Creating a strong purpose and culture will help attract employees that are a good match.
7. An ecosystem view
Traditional company thinking involves gaining leverage and controlling the supply chain. However, future thinking companies realize value is created through building a network where partners can build related businesses because the core company has made their code open source, they share data and knowledge.
One example is Square, a financial technology company that provides payment processing and other services to small businesses. The company has taken an ecosystem view by creating an open platform that allows developers to build apps and services that integrate with Square’s payment processing system. This has led to the creation of a range of third-party products and services that support Square’s core business.
As sources of value continue to shift in the future, expanding beyond a company’s core business by blurring the boundary lines creates a larger, fluid systems view. This is a way to expand growth while minimizing risk. Each company plays a supportive role, while focusing on what they do best individually.
8. Build data-rich tech platforms
Lawsuits and legislation continually hit the news about use of our personal data, which should give you an indication of data’s extreme value. The Brookings Institute stated that privacy protection is a losing game (but suggests changing the game). Data collection may change, but it is not going away. It is at the core of business, from simple contact management systems to an entire business centered around years of data gathering on user preferences.
Data and technology drives business, allowing companies to network and scale, develop new products and services swiftly.
Data is key in decision making, but it is also complex and ever-changing. Digital transformation is essential for even the smallest companies, but handling data becomes more complex as the organization grows in size. In addition to typical tasks like feeding data to apps that drive processes, it takes continuous focus to keep technology current or tap into scalable cloud-based solutions while maintaining strong data governance policies and allocating budget resources.
9. Accelerated organizational learning
Future-ready companies promote a mindset of continuous learning, and encourage employees to seek out opportunities for development and growth. Internal knowledge sharing platforms, gamification of learning programs to teach new skills, and personalized learning tailored to an employee’s specific needs and style, are some of the approaches that can be deployed.
Incorporating many of the other tenets of modern organizational design into learning- continuously incorporating new data and technology, fast decision making, autonomy- also requires an openness for experimenting and failing. McKinsey quoted Microsoft CEO Satya Nadella, describing continuous learning as hypothesis testing. “Instead of saying ‘I have an idea,’” Nadella observes, “what if you said, ‘I have a new hypothesis, let’s go test it, see if it’s valid, ask how quickly we can validate it.’ And if it’s not valid, move on to the next one.”
Future-ready organizational design engages stakeholders in new, flexible ways with the nature of a company, how they operate, and how nimbly they can adapt and grow.
In the words of John F. Kennedy, “Change is the law of life. And those who look only to the past or present are certain to miss the future.”