Unlocking the flexible organization

Modernizing to compete

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).

Four steps to unlocking flexible design

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.

Protect the core and disrupt at the edge

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:

• Pronounced technology/market disruption
• Intense competition from both large players and new entrants aggressively trying to grab market share
• Discrete work that is sufficiently separate from broader business processes where incubation can actually work

Unleash the networked teams

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.

Adopt a collaborative systems mindset

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.

Create the conditions for a flexible organization

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:

• Purpose creates a common vision and shared culture
• New leadership mindset makes the model work
• The new workforce provides the right talent that scales
• Collaboration and technology platforms bring the new design to life
• Processes should allow for the opportunity to fail

Next steps

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.

1. Understand the formal and informal networks in your business.
2. Make organization design decisions based on systems thinking and avoid seeing your company as an organization chart.
3. Look for initiatives that would benefit from incubating at the edge.
4. Identify opportunities to break functional silos while organizing around outcomes and flattening your structure as much as possible.
5. Have a clear vision and vocal executive commitment to making the new model work, driving culture change.
6. Enhance transparency and empower employees to be autonomous to improve decision making.
7. Use data and tools to increase visibility to the networks of complex organization interactions.

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.