Cracking the Paradox of Agility in a Digitally Disruptive Age with Arne Gast, Partner at McKinsey

January 23, 201712:53 pm2055 views

As businesses go digital, disruptive technologies will have an enormous economic impact on the world of work by 2025. Automation will be a key driver in the workplace of the future, with more than 45 percent of job roles being automated using demonstrable technology. This will have its benefits in the form of increased productivity through fewer errors, higher performance output, improved quality and speed.

It’s time for a new structures and organisational paradigms to emerge, with traditional business models going invalid and obsolete. While start-ups act quickly on the pace of change, large-established players often tend to become bureaucratic with many layers of management, to impact agility.

Through a candid conversation with Arne Gast, Partner, McKinsey & Company and Leader of McKinsey’s Organization practice in Southeast Asia, we at HR in Asia seek to understand the need for organisation redesign, why adopt a matrix structure to navigate through complexities and how to cope with destabilisation of jobs in the future. Read on…

  1. What are the transformations you foresee in the fast-paced technological era that will shape the future of workforce?

New technologies will fundamentally transform the way we work. Research from the McKinsey Global Institute shows that disruptive technologies will have enormous economic impact by 2025. One key driver will be the automation of the workplace. Our research has found that as many as 45 percent of work activities could be automated using currently demonstrable technology.

Arne Gast, Partner, McKinsey & Company and Leader of McKinsey’s Organization practice in Southeast Asia

Arne Gast, Partner, McKinsey & Co. and Leader of McKinsey’s Organization practice in Southeast Asia

The key here is that we see automation affecting activities rather than whole occupations, which would inevitably result in business processes being transformed and jobs being redefined. Interestingly, although we often think of automation primarily affecting low-skill, low-wage roles, we discovered that even the highest-paid occupations in the economy, such as financial managers, physicians, and senior executives, including CEOs, have a significant amount of activity that can be automated.

The organisational and leadership implications are enormous. The future of work could mean more meaningful opportunities, and benefits to come from raising productivity through fewer errors, higher performance output, improved quality and speed.

Other technological innovations that will also change the way we work are:

  • Big data analytics can help uncover meaningful patterns and predict future movements in performance, leadership, retention, strategic workforce planning amongst others.
  • Digital engagement building can help organisations achieve higher productivity and profitability with an engaged workforce through tools like real time surveys and new data sources, to effectively monitor employee engagement and intervene to reshape roles and communities when needed.
  • Social collaboration can be fostered by improved user interfaces and new collaborative tools that will enable organisations to internally identify both talent and expertise.
  • Digital onboarding through new social technologies, e-learning tools, tablet friendly and gamified motivational techniques are being offered by companies to onboard more effectively.
  • Continuous coaching by providing real-time, personalised coaching based on “FitBit-style” data gathering, virtual feedback and collaboration tools would mean shorter lead time between training and activity.
  • Personalised career paths could be developed by drawing on psychometric evaluations, pulse surveys, and enterprise succession plans.
  • Improved knowledge sharing to recapture time spent on information searching.
  • Smart organisation design can simulate changing scenarios which, when complemented with analytics and user interfaces, can propose effective structures to manage the situation.
  • Dynamically matched teams can be formed to deliver peak performance.

By adopting online talent platforms for hiring, onboarding, training and management, HR can look towards increasing output and reducing costs. That said, technology can only complement and not replace face-to-face interactions and other real world engagement drivers.

  1. How can companies reconcile the need for organizational stability with the reality of the technology-enabled changes in business processes?

The hallmark of an agile age is the ability to be stable and dynamic, allowing organizations to make the most of their big-company advantages, while simultaneously keeping pace with quicker-moving disruptors.

McKinsey research shows that the bedrock aspects of stability, workers’ roles and the processes that support them are the first and foremost important factors, differentiating agile companies from the rest. Most of the organisational ideas from the last half-century have been taken for granted, the underlying building block of jobs and the way people work, both individually and together.

Automation can challenge these assumptions by disaggregating jobs into their component tasks and subtasks and then hiving off those that can be automated. It will force companies to figure out how to reassemble the remaining tasks into something, that makes a new kind of sense, even as it reconceptualises the very idea of what a job is.

The early stages of these efforts might already be visible, as organizations free highly specialised knowledge workers from mundane tasks.

Once roles and tasks are redefined, the newly constructed jobs that result, must be re-aggregated into some greater whole, or “box,” on the organisational chart. These boxes then need a new relation to each other.

  1. How will the structure of companies determine their agility in the business? How will the role of HR evolve in the process?

A structure is an answer to external and internal forces – you are looking for the right fit to be successful. We see many companies being held back by their lack of structure (e.g. family firms with owner/CEO making all decisions and therefore going slow) or too rigid structure (e.g. government linked companies with many rules and processes, focusing on compliance over impact).

Some of these traditional operating models are no longer fit for purpose – it is time for a new organisation paradigm. Start-ups, while they act quickly, struggle to maintain their early momentum, whereas established companies often become bureaucratic due to many layers of management, hampering their ability to move quickly. Most thriving companies manage to crack the paradox of ‘Agility’ – to be both stable and dynamic concurrently.

These disruptive changes also mean that the role of HR moves, to something we call ‘HR 4.0’. This has been a journey from generalist HR administrators, to specialists, to business partners and now to “value creators.”

In this idea, the Chief Human Resources Officer (CHRO) is a vital part of the new G3, directly liaising with the CEO and the CFO to set the core strategy of the organisation and bringing ‘people’ value to discussions on strategy. Companies should be flexible with their human capital, and CHROs should be prepared to recommend actions that will unlock or create value.

Companies will need to embed digital and analytics into their HR processes and ensure that performance management, in the millennial age is looking “ahead” and especially “outside the company and industry” than be captive of a “traditionally trodden path”.

  1. What is organizational redesign and how can companies get it right? Why is there a need to redesign today?

Organisational redesign involves the integration of structure, processes and people to support the implementation of strategy. When the organisational redesign of a company matches its strategic intentions, everyone will be primed to execute and deliver them. Thus, the company’s structure, processes and people will support the most important outcomes and channel the organisation’s efforts into achieving this strategy.

For companies to get it right, they must holistically address every aspect of an organization from early alignment, redesign choices and reporting structures to performance metrics, the nature of effective leadership and the management of risks.

See: Agile Thinking for Business: How Can a New Mindset Enhance Engagement and Effectiveness?

  1. Would digitization of the workforce and automation trends impact and pose new challenges to organizations, “destabilization of the way people work”? How would this influence working styles and the way people communicate, employee engagement and productivity?

Digitisation of the workforce and automation offers both new opportunities as well as new challenges for organisations. We expect a tremendous increase in productivity and global interconnections.

Automation technologies such as artificial intelligence and advanced robotics can unlock higher productivity gains by amplifying the value of expertise, increasing an individual’s work capacity and freeing the employees to focus on work of higher value.

Digitisation of the workforce would also mean stronger global connections, where communication through digital social platforms, combined with virtual platforms for collaboration will remove barriers for teams, to work together on a global scale.

Knowledge across the geographical spread and functional depth of the organisation becomes more easily accessible, thus allowing employees to contribute their expertise to platforms which were once out of reach. Being better able to globally connect on topics and areas of their interest, then improved employee engagement can be expected.

  1. Would the destabilization of jobs prove powerfully liberating to organizations, making them far more agile, healthy, and high performing? Will it initiate a collapse into internal dysfunction as people try to figure out what their jobs are, who is doing what, where and why?

Destabilization of jobs is no longer a choice for organizations, but a necessity. To sustainably perform well, an organisation has to be healthy and agile. Agile organisations offer a stable backbone with core processes that employees can rely on for stability.At the same time, they offer flexibility in the way work is done, organised and delivered. This can be powerfully liberating to organizations.

During this transition, there are challenges such as internal dysfunction, ambiguity and resistance to change that organisations must carefully manage, by driving change in an agile way: through pilots and concept testing.

If managed well, an agile organization will be able to adapt quickly to the changing environment and business dynamics in the long-run, without major disruptions to be witnessed in the short-run.

  1. In this age of hyper connectivity, would it be fair to chain employees to be more controlled and encourage controlling approaches at work, rather than freeing employees to seek greater meaning and purpose in their job roles?

The era of hyper connectivity began with the Internet, extended by mobile technology and continues with the Internet of Things (IoT). The impact of this networked living is evident in how the job role of an employee has evolved over time, characterized by non-linear career paths, remote working, and prevalence of virtual teams.

The age of hyper connectivity combined with the influx of millennials in the workforce has led to gradual change in how work is done. While some companies have stuck with their traditional approaches to work design, and follow a regular path of job assignments; there are some others who have ventured to provide autonomy, in choosing projects as a lever of motivation.

Keeping pace with the rapidly changing environment, the recommended approach is to develop agile roles with some elements of structure and role clarification. This will create a fixed backbone ensuring efficiency and effectiveness.

With the rise of millennials in the workforce, flexibility and autonomy is the key to freeing employees, allowing them to seek greater meaning and purpose in their job roles. This will in turn propel creativity and innovation at work.

  1. Do you think many job roles today would go extinct in the near future? Would agile companies with fluid structure replace traditional hierarchies and alter how matrix organizations work? 

We do not see many jobs going extinct. Our research shows that activities, rather than whole occupations, will be automated in the near future. To manage complexity better, organisations need to adopt a matrix structure which will enable them to respond more flexibly, break silos to unlock resources and talent, and also deliver “horizontal” end-to-end work effectively, thus leading to higher engagement.

A key area of strength for matrixed organizations lies in collaboration. Relationships and collaboration among employees in matrixed organizations, and their peers and superiors are better than in non-matrixed organizations. Critics’ however assert that the matrix structure can slow decision making, blur lines of communication, stifle productivity, and hinder organisational responsiveness and agility.

Organisations can mitigate the complexity associated with matrices through:

  • Clarifying accountability and targets for individuals: Higher levels of ownership mentality predict higher levels of collaboration, organisational commitment, and corporate citisenship, as well as reduced levels of behaviour that deviate from workplace norms. Re-clarifying expectations as work demands change is compounded in matrix organizations, but a system of clear accountability is important for highly engaged employees to thrive in.
  • Addressing the role of ambiguity: Leaders should help employees by continually setting clear expectations aligned with the direction of the business. This clarity should cascade into frequent conversations with managers, and  direct reports about the specific role each person plays in advancing the company objectives. Also, all employees need to understand whom they answer to and the duties for which they are responsible.
  • Maintaining day to-day lines of communication: This helps to root out and dispel ambiguity by ensuring that everyone is consistently on the same page, not just at the organisational level but also at the team level.
  1. How can organisations in this changing business environment overcome the challenge of talent retention and attraction to ensure that they are more stable, agile and dynamic? 

Managing talent in an uncertain environment is challenging, given greater diversity and the fast pace of change in business. Ensuring that the talent strategy is aligned with the business strategy is a key for organizations to achieve their goals and objectives.

This calls for organizations to adopt an agile approach to defining their strategy and managing their talent. It includes splitting responsibilities between working teams and also shaping the skill pool to act as a ‘guild’, which serves as a stable home for a group of professionals with a shared set of competencies.

As digital platforms remake organisational structures, companies must be careful to provide stability for more permanent “homes” of their employees working lives, such as the business segments they know best, their functional areas of expertise and the geographies where they live.

More importantly, a dynamic internal market, in which the most talented and sought-after workers receive the highest compensation, helps people find new and more meaningful ways to commit themselves to their roles, even as the organisation finds new ways to assess, develop and reward them.

  1. How can companies reallocate their labour forces quickly when priorities and directions shift? 

The traditional reactive approach of many companies to plan and allocate supply of employees to meet business needs and strategic goals no longer works in the current dynamic business environment. It is hardly surprising that companies who follow this approach find it difficult to anticipate skill changes thus leading to gaps in their workforce and ultimately poor hiring decisions. 

Instead, companies should adopt a more dynamic approach and take strategic part in shaping broad corporate goals and planning initiatives to support their employees. By extending its scope, participating in joint planning with business units, using current data to model multiple scenarios, and making detailed quantitative and qualitative assessments of proposed actions, it could mean a dramatic leap forward in effectiveness, speed, and flexibility.

When dealing with the challenge of reallocating resources, companies need to consider:

  • Modelling an existing personnel base to map employees on their background and skill groups.
  • Modelling personnel evolution to understand how the workforce will evolve over the next two to three years by taking into account natural evolution and behavioural factors.
  • Assessing strategic scenarios that the organization is planning to pursue and then build a target skills footprint to match and identify potential labour gaps or surpluses.
  • Optimizing measures to close gaps by managing mobility and addressing any mismatches in staffing.
  1. How will the organizations of the future look like – Vision 2020?

The organisation of the future will have:

  • Fewer layers
  • More decentralised decision-making
  • More partnerships inside
  • Powerful data and digital tools
  • Extreme fluidity
  • Network of collaborative external partnerships

Also with digitization of the workforce and the powerful economics of automation will require a sweeping rethink of organizational structures, influence, and control. The current premium on speed will continue even as a new organizational challenge arises: ‘The destabilization of the way people work.’

Also read: Strategic Partnerships and Big Data will be the Keys to Business Success and Sustainable Growth

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