As the world of business grows increasingly complex and volatile, it has never been more important for companies to embrace organizational agility.
Doing things because “it’s the way we’ve always done it” no longer works. Instead, to find success in the current economic landscape, organizations must follow the lead of Apple, Philips, ING Bank, and other companies that have traded traditional managerial hierarchies for new, more dynamic approaches.
Below, we’ll take a look at four reasons why agility matters for contemporary companies. And, because embracing agility is easier said than done, we’ll also explore how a continuous performance management process can help companies achieve sustainable organizational agility:
1. Agile Organizations Deconstruct Traditional Structures
The standard hierarchical organization has a pyramid-like structure in which the CEO sits at the top, presiding over the entire business. Managers occupy the next layer, and at the bottom reside the value-creating employees. This top-down structure concentrates power at the top, and decisions and directions are dispersed among the various layers as required.
In contrast, an agile organizational structure emphasizes autonomous, cross-functional groupings, and the role of the manager is transformed. No longer dictating from above, managers trust the judgment and expertise of their teams. This structure results in a more holistic and functional work environment with fewer roadblocks to transformation and innovation.
Agile performance management complements and supports this way of working. Employees can take ownership of their performance and development, and they can collaborate with managers on their goals rather than having goals dictated from above. As a result, the manager can take on a more supportive coaching role focused on real-time performance conversations and feedback.
2. Agility Allows You to Be Both Dynamic and Stable
One of the most difficult challenges organizations face is being continuously innovative while maintaining a culture built on disciplined execution. Contrary to popular perception, an agile organization does not trade reliability for dynamism. Instead, effectively agile organizations rest on a structure of both stability and dynamic innovation.
To understand how this is possible, we should first look more closely at what is meant by the terms “dynamic” and “stable”:
- Dynamic: Practices that respond quickly to new challenges and opportunities with an attitude of experimentation and an emphasis on iterative processes.
- Stable: A reliable and efficient backbone that works over long periods and is maintained through the use of shared digital tools and standardized processes and language.
To become fully agile, your business needs to be both dynamic and stable. This is a difficult balance to strike, and all too often, organizations respond to the rapid pace of change today by encouraging an attitude of experimentation and innovation without cultivating the stability necessary to make innovation sustainable.
When you start building a house, you may not know how the rooms will be laid out, but you ensure the foundations are solid. With a solid base to build upon, you’re able to design the interior as you like and expand as needed. The same principle applies to organizational agility: Without strong initial foundations, it is impossible to sustain and scale over time.
Innovation and dynamism can only grow from a solid and stable foundation, and a strong culture of ongoing, focused communication and meaningful discussion provides this stable foundation. Once again, companies can look to continuous performance management for help here, as this approach to performance is built upon ongoing communication between managers and employees.
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3. Agile Organizations Create a Strong Shared Purpose
Much like agility requires a stable foundation, it also requires a strong purpose shared across the entire organization. The whole company needs to be on board with the same objectives and engaged in a collective effort to translate purpose into clearly defined actions.
Informational transparency is key to the creation and perpetuation of a shared purpose, and this transparency can be supported through a continuous approach to performance reviews. In a continuous performance management system, information is more readily and more quickly disseminated throughout the organization, and employees have the opportunity to share ideas, knowledge, and insights to contribute to the growth of the entire business.
You can go one step further by encouraging employees and managers to collaborate on SMART objectives. Using an upward-aligning process, you can ensure that each individual employee’s milestones support the achievement of the organization’s long-term goals. Because performance management is continuous rather than occasional, employees’ goals can be updated at any time to respond to the reality of a fast-moving organization.
4. Agility Realigns Decision-Making Processes
Bureaucracy is a huge hurdle for many large organizations. As a company grows, so do its structure and hierarchy. More middle managers are hired and the senior management team expands — but rather than promoting efficiency, this bloated bureaucratic system stifles innovation by reinforcing that pyramidal structure and downplaying employee initiative.
The fundamental sluggishness of bureaucratic structure undercuts agility and prevents an organization from adapting quickly to new realities of the market or industry. An agile structure, in contrast, promotes a more dynamic and collaborative approach to work, which is vital to sustained organizational success. According to Deloitte, organizations that work collaboratively are twice as likely to outgrow their competition and four times more likely to grow their bottom lines.
Continuous performance reviews can help replace bureaucracy with agility by introducing a performance management model based on iterative work cycles and direct feedback. The emphasis here is on self-organization and self-management. Employees collaborate with managers to set and reach goals, rather than having goals assigned from the top of the pyramid. This system is more conducive to delegation as well, which means organizational processes and innovations can bypass the middlemen who may otherwise hold them up.
As outlined above, the companies that succeed in today’s economy and beyond will be those that embrace organizational agility.
However, the larger the organization, the more difficult it is to sustain the kind of ongoing conversations agility requires. By switching from outdated annual reviews to regular check-ins and continuous performance management, organizations can take a powerful step toward tearing down the pyramid and putting a more agile structure in its place.
Stuart Hearn is CEO and founder of Clear Review.