Author: Andrew Karpie
Organizations are increasingly being driven by market and competitive demands, new technology and other environmental factors to become more responsive to rapidly changing opportunities, challenges and threats — to become, in effect, more agile.
The question of specifically how an organization can become agile is still being answered by executives, management consulting firms, framework creators and academic researchers. But what we do know is that how human capabilities are engaged, organized and used is a big part of the answer to the question.
In this brief, we explore how workforce agility is connected to organizational agility, where most organizations actually are on the road to organizational agility and why the drive to agility is both urgent and incremental.
The Agile Workforce — Not So Fast
The “agile workforce” — or what we prefer to call “workforce agility” — is a term heard more frequently in discussions about trends of how organizations increasingly engage and use contingent workers and blend them into projects and operations. At one end of the spectrum, the term narrowly refers to the sourcing, management and integration of external workforce in an organization (this usage is effectively synonymous with contingent workforce, generally-speaking or sometimes specifically with respect to highly skilled, non-employee talent). At the other end of the spectrum, it is used to refer to a much broader concept of “human capabilities management” within today’s organizations that are evolving to respond to a new business environment characterized by rapidly changing — frequently global — markets, hyper-competition, digitization, advanced technology and, last but not least, talent/skills insufficiencies (e.g., supply shortages, sourcing effectiveness and suboptimization of an organization’s internal and externally accessible talent/skills).
We believe that workforce agility should be understood in this broader context of an “organization becoming more agile.” Otherwise it means little more than an advanced form of “staff aug” — even if it is “on-demand” freelancers/contract workers who are being directly sourced. Placing the pursuit of workforce agility in the broader context of an organization that is evolving its models, practices/processes, culture and infrastructure in response to broad, persistent and challenging environmental challenges (specified above) is important. It ensures that workforce agility and what it involves are not misunderstood, over-simplified or underestimated in terms of what is at stake or what it will take to achieve.
Workforce agility and organizational agility are inseparable in the same way going on a trip is inseparable from the specific mode of transportation. Today, workforce agility and organizational agility are hoped-for destinations for most organizations. Though some organizations have begun their journeys and others are ready to embark, many organizations have not yet come to terms with the need to travel somewhere else (potentially leaving them in the wrong place at the wrong time).
Organizational Agility (aka Agile Organization)
Organizational agility is a big concern of executives. A 2016 PwC survey of 1,150 CEOs, 76% said ability to adapt to change would be a key source of competitive advantage in the future. An early study by McKinsey — one of several consulting firms focusing on organizational agility — found that 9 out of 10 executives said organizational agility was critical to business success and growing in importance over time.
A 2017 McKinsey article, How to Create an Agile Organization, noted that “rapid changes in competition, demand, technology and regulations have made it more important than ever for organizations to be able to respond and adapt quickly.” However, according to a recent McKinsey Global Survey, “organizational agility — the ability to quickly reconfigure strategy, structure, processes, people and technology toward value-creating and value-protecting opportunities — is elusive for most.” Nevertheless, it was found that respondents in agile performance units (for example, a functional team, cross-functional team or business unit that is responsible for the delivery of specific performance outcomes) “reported better performance than all others do, and companies in more volatile or uncertain environments are more likely than others to be pursuing agile transformations.”
Other specific findings reported included:
- Only 4% of all respondents say their companies have fully implemented organization-wide agile transformations, though another 37% say company-wide transformations are in progress.
- When asked where their companies apply agile ways of working, respondents most often identify activities that are closest to the customer: innovation, customer experience, sales and servicing, and product management.
- At least 4 in 10 respondents say their companies are applying agile ways of working in processes related to operations, strategy and technology, while roughly one-third say they are doing so in supply chain management and talent management.
The article noted that while “few companies are yet reaping these benefits … the results also indicate that organizational agility is catching fire.” And, it continued, “for many respondents, agility ranks as a high strategic priority in their performance units,” their “companies are transforming activities in several parts of the organization — from innovation and customer experience to operations and strategy — to become more agile” and, lastly, “respondents in all sectors believe more of their employees should be working in agile ways.”
McKinsey’s data indicates that organizations are increasingly motivated by environmental realities to become more agile, that agile organizational transformation often starts in specific areas of an organization and then may spread, and finally, that workforce agility (“agile ways of working”) is inherent in organizational agility. Perhaps more importantly, while agile transformation is necessary for organizations, most face a challenging and complicated road ahead.
‘Agility-Ability’ Gaps Are Real
It is clear that most organizations are far from true agility and suffer from what we might call “agility-ability” gaps. Catalant — a solution provider that helps “companies build an agile workforce with technology and programs that enable access to talent they need, when they need it, wherever it is” — recently surveyed its Reimagining Work Summit attendees, a group consisting of enterprise executives interested in or concerned about achieving organizational and workforce agility. When asked about the “importance” of the following “agility drivers,” the following average scores (on a 1-10 scale) were tabulated:
First, it is notable that all average scores were very high, ranging from 8.13 to 9.75 (with a 1 being Least Concern and a 10 being Mission Critical). The three drivers with the highest scores were “the right people, skills and expertise,” “rapidly adapting to new demands from the market and the business” and “keeping high-potential employees engaged.” “Cross functional collaboration” and “workforce planning and deployment” were not far behind. Interestingly, the driver with the lowest score (about 1.6 points below the highest) was “determining internal skills and expertise vs. external ones.”
The survey participants also were asked about their current capabilities with respect to the same agility dimensions. In the chart below, the orange bars reflect the average scores of current capabilities (on a scale of 1-10 from Poor to World Class), while the orange/blue hatched bars represent the average scores of the importance of the same dimensions (1 = Least Concern and 10 = Mission Critical):
The differentials ranged from the highest of 3.6 for “cross-functional collaboration” to the lowest of 1.8 for “determining internal skills and expertise vs. external ones,” with an average differential of 3.0 across all dimensions.
At a minimum, what the Catalant data suggests is that some organizations are aiming for more workforce and organizational agility and becoming more aware of the challenges and opportunities they will face in achieving it.
What Does It All Mean?
As noted at the outset, we prefer the term workforce agility over agile workforce — largely because workforce agility suggests that it is a property of an organization and not a thing in itself (an agile workforce).
The goal of organizations is not just having a workforce that is flexible, fungible and fast. The goal is for the whole organization — the constituent models, practices/processes, culture and infrastructure — to be adaptive and responsive to a new business environment characterized by rapidly changing global markets, hyper-competition, digitization, advanced technology and talent/skills insufficiencies.
But, it is important to understand that workforce agility is a necessary component of the organizational agility and organizational performance that is ultimately measured in sales, market share, adaptiveness to market and competitive changes, product innovation, and customer value, satisfaction and retention.
Looking at it this way not only clarifies that workforce agility is a part of and key enabler organizational agility. It also makes it clear that achieving workforce agility is a much more heavily burdened process than simply sourcing and managing external and internal workforce in new ways. One could say that workforce agility must carry the whole concrete organization on its back; that is, the benefits of workforce agility (versus mere staff aug) are gated by the state of the organization and all of what it consists of.
Data indicate that most organizations do not have sufficiently developed capabilities to achieve workforce and, more importantly, organizational agility — despite the fact that doing so will be necessary to succeed, if not survive, in the coming years. It is therefore necessary for executives to be realistic and appreciate the magnitude and scope of the challenge, while at the same time not succumbing to defeatism. That said, it is important for executives to understand that the path to workforce and organizational agility is an incremental one — and one that may very well start at a small scale in specific functional units in the organization. As measurable results are achieved, the possibility of shared models and practices across the organization can arise.
Today, despite the efforts/progress of management consulting firms, framework creators and researchers, it is not clear that there is a roadmap and defined route to “scaled,” organization-wide agility. No doubt, as more and more organizations strike out, pioneer the frontier and approach their own destinations, maps will be drawn. But many organizations — particularly those in markets/industries that are changing quickly — cannot wait, and they must become one of the pioneers or suffer the consequences. Finally, while organizational agility cannot be mandated from the top down, executive leadership and vision will be needed to encourage and support local change within the organization by making permission and resources available to inspired functional managers so they explore new agile approaches.
- This article first ran on Spend Matters here: http://spendmatters.com/2018/11/28/making-it-real-workforce-agility-in-context/