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Five equations for organisational success

Five equations for organisational success

With strategy being replicable and capital being abundant, an organisation is the only real source of competitive advantage.

organisations have been attempting to modify how they organise and operate more than ever before. organisations have been attempting to modify how they organise and operate more than ever before.

"It is riskier to stand still than to experiment." 
 
Change is in the air. While it is a truism, in degrees, at all times across all organisations, it is especially so at this time, when the pandemic has upended the meaning of normal, and normal course of business.  
 
To respond, organizations have been attempting to modify how they organise and operate more than ever before. With strategy being replicable and capital being abundant, organisation is the only real source of competitive advantage.  
 
Having worked with multiple organisations over the years, I have formulated five equations that I believe offer insights into driving change and agility towards creating the organization of the future.

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These equations deal with the mindsets and undercurrents that are typically seen in organisations and address some of the structural and behavioural changes needed. They are a guide, a clue - and not meant to be comprehensive in any way.  
 
Leaders and people managers could use these equations to run through where they believe their organisation is on each of them. Equations alone, highlighting the issue, would be meaningless. Therefore, apart from the equations, I have also included suggestions for actions linked to each equation.  
 
1. Organisational agility < Summation of Individual agility
2. Empowerment=Radical alignment+Autonomy
3. Accountability= (Personal conviction x Courage x System nudges)/Cynicism
4. Decision Velocity= ((Empowerment x Accountability))/((No of handovers x No of multitaskers) )
5. Tipping point= (>30% active adopters + >5 Irreversible moves )/(Time for rollout)  


1. Organisational agility < Summation of Individual agility

The nature of an organisation is not the sum of how individuals behave. Individuals are resilient, creative, passionate, organisations are not! 
 
As humans, we show a lot of adaptability. We face massive changes in our lives (both sad and happy) and deal with them. We manage complex relationships, illness, grief. We change jobs, countries and homes. The list goes on. Most of us are passionate- about issues and causes that we are excited about or concern us. Yet, put the same group of individually resilient, creative, passionate people in the context of an organization- and as a group, they struggle with the very same things.  
 
So, what is it that makes the organisational agility "less than the sum of individuals?" Two factors cause this. One is bureaucracy. The other is the system or group dynamics. 

Bureaucracy is inevitable. Power to change gets vested in a few people. Deep change is very hard. There are few incentives to those inclined to challenge the status quo.  

"Bureaucracy defends the status quo long past the time when the quo has lost its status." 
 
The other reason is system dynamics. We don't realise that organisations and groups have a 'subconscious'. There are powerful unconscious laws that determine and drive how groups work that is hidden. Everything is in some way connected to everything else - we cannot pinpoint a single root cause to every effect.  
 
Starting sparks of action: 

  • Bust bureaucracy using a dual approach- top-down and bottom-up. A 'bureaucracy busters' program can be opened up to the whole organization for identifying hundreds of areas where bureaucracy can be busted. Simultaneously, it is helpful to take a top-down view and make a few big moves (e.g., removing the need for employees to mark attendance, devolving certain decisions). 

 

  • Don't look for individual root causes and try to solve them piecemeal. This is because, in a system, there is not always a direct relation between cause and results. Take the time to understand the system deeply. What lies beneath. This requires evolved practice. Don't try and do it on your own. 

 
2. Empowerment = Radical alignment + Autonomy 

Empowerment: Eventual success depends on hundreds of people (or teams) working independently, making decisions quickly without constantly looking up for guidance or getting mired in complicated processes. Contrary to popular belief, simply changing delegation of authority or 'empowering' people will not yield results and can in fact lead to chaos. Alignment and autonomy must work together.  
 
Autonomy: This is about freedom for individuals to choose what they want to do, how they want to do it, with who and when. It would also include giving additional decision rights when needed. 
 
Radical Alignment: Alignment is the most important and yet most overlooked dimension of agility. It is the safety net that allows autonomy to bloom. We use the word 'radical alignment' because it requires clarity across the organisation on (i) what precisely will be done over the next time period, (ii) what will NOT be done, (iii) who will do what and dependencies, (iv) resources required. 

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Starting sparks of action: 

  • Force real discussions on alignment and make them formal at the highest level. Get people to debate/discuss all elements as stated above. "Once decided, no complaining." 
  • Use a formal quarterly process to drive alignment across the organisation- what can we do, what can't we do. Do not dilute it. 
  • Ensure the CEO/top team is willing to arbitrate where resources need to go and make tough calls. 
  • Once aligned, be specific about what autonomy, teams have to do what. Write it down. 

3. Accountability =  (Personal conviction x Courage x System nudges)/Cynicism

Accountability: Is the ownership individuals take towards trying out new things and getting them done. It is the extent to which people do things of their own volition versus being asked or ordered. It is when they put their foot forward even if it is not their direct formal responsibility. 
 
Accountability is mainly an inherent trait. Some people have a higher propensity to step up and take charge. It depends on four things. 

Personal conviction: This is the personal belief individuals have in something. It means they are convinced to give it a try. It does not mean they have all the evidence it will work.  

Courage: To put a foot forward requires courage. Leaders who are afraid of failing and worried about what everyone will say about them are unlikely to show accountability. Courage can be built through personal work and vulnerability. 

System nudges: The system and senior leaders can nudge people towards accountability. This can be in direct ways such as incentives or more subtle ways. 

Cynicism: Cynicism creeps into organisations often. That 'whatever we do does not matter'. Or that what is being proposed is useless. This has to be dealt with. 
 
Starting sparks of action: 

Facilitate building personal conviction by understanding what would inspire each individual. There are four sources of personal conviction we can tap into - (i) Creation- "I want to build/deliver/create something great/bigger than myself", (ii) Curiosity- "This looks very interesting-I would love to play around with it and learn more", (iii) Connection- "This can create a better environment for me and my team", (iv) Calm- "This can make my work easier". 

  • Create the environment where people are willing to dare. This can be done through a workshop(s) that create vulnerability (through personal exercises) followed by raising the energy so people feed off each other. Vulnerability leads to courage. 
  • Put in place nudges - from the more straightforward (CEO direction, formal KPIs) to more nuanced- e.g. making the default behaviour a new one, preventing certain ways of working, hardwiring a few small things, call out bad behaviours. 
  • Three-pronged approach to deal with cynicism (i) introduce growth mindset to a core group of people - give them feedback on it, coach, (ii) learn and see from other credible people/ organisations who have done something similar, (iii) make cynicism and "it won't work" a taboo in the organisation- not a cool thing to be. 

  
4. Decision Velocity =  (Empowerment x Accountability))/((No of handovers x No of multitaskers)

Empowerment and Accountability have been defined previously. 
No. of handovers: The more the number of levels of approval OR handovers between departments/ divisions, the slower the pace of work. 
No of multitaskers: It is amply evident that multitasking reduces effectiveness and speed. As far as possible, people need to be dedicated to a single objective.


Starting sparks of action: 

  • Refer previous for empowerment and accountability. 
  • Build platforms/ tribes/ squads to reduce handovers. These should be end to end empowered and accountable and involve all people and decision rights as needed. The platform should have shared goals.  
  • Ruthless prioritisation to ensure minimal multitasking by people driving important objectives. A 90-day rhythm can be established to re-orient people as needed. 

5. Tipping point =  (>30% active adopters + >5 Irreversible moves )/(Time for rollout)  
 
The tipping point is the point at which a series of small changes becomes significant enough to cause a larger, more important change. It is the critical point in a system beyond which a significant and often unstoppable effect or change takes place.  

At this point, the organisation has the commitment and capacity to keep going. The system creates its own energy- exothermic vs endothermic. 

Active adopters: Are people who believe in the change (even if there is no evidence as of yet). They are votaries of a new way of working.  

Irreversible moves: Are structural moves (strategic, people, process) that are hardwired and not easy to reverse. 

Time for rollout: Pace of rollout. Typically, 18 months to 3 years. 
 
Starting sparks of action: 

  • Build commitment and capacity in the top 100 people. Commitment can be built.
  • through a combination of (i) co-creation- the single biggest lever, (ii) top-down directives, (iii) learning and seeing from others. 
  • Ensure all important initiatives are hardwired - hard to undo. 
  • Set a blazing pace. 


(Faridun Dotiwala is a Partner at McKinsey & Company's Mumbai office, he leads the firm's talent management practice in Asia.) 

Published on: Dec 15, 2021, 1:59 PM IST
Posted by: Manali, Dec 15, 2021, 1:32 PM IST