The stigma of asking for or being assigned an executive coach is vanishing quickly. The growth of the industry tells us so. In the U.S. alone, $1 billion was spent on business, personal and relationship coaches last year, according to IbisWorld, up about 20% from five years earlier. And the number of business coaches worldwide has zoomed more than 60% since 2007, according to one coaching association. But while executive coaches have improved the performance of many already-good managers and sanded the rough edges off many less effective ones, they aren’t a miracle cure. In fact, we have seen many companies waste considerable sums by assigning coaches to managers who just aren’t ready to be coached, no matter how effective the coaches may be.
So how do those who control the coaching purse strings — HR, talent managers, and other buyers — avoid throwing money away on uncoachable executives? Considering that a year’s engagement with a top executive coach can cost more than $100,000, it’s an important question.
From nearly 35 years of coaching hundreds of executives, our firm has noticed a pattern of red flags that indicate when a coaching investment will be wasted. Here are four things to watch out for:
1. They blame external factors for their problems.
When things go wrong, does this person always have an excuse? Maybe they point a finger at the quality of their team, a lack of resources, or even their boss.
When leaders argue about the validity of your reasons for offering coaching, or offer excuses or defenses for poor results, it can be a sign that they lack self-awareness. Before any coaching can be effective, they need to wake up to the ways their actions affect others.
One CEO we worked with was known for his smart turnarounds of a large media company. But he was struggling to get along with his executive team. Finally, several board directors suggested he should seek out a coach. After multiple sessions, he had shared little information about himself, and we were no closer to figuring out the root of the problem. Stymied, we suggested that we observe the next executive team meeting.
Suddenly, all was clear. We were shocked by how he controlled the conversation in the room. He simply spoke over other people with a volume of words that was unfathomable. When he left the room to take a call, his team members erupted with frustration. It was obvious that this CEO was completely out of touch — something that became even more apparent later on, when he asked us to tell the board how positively he was responding to coaching.
Leaders like this often ignore criticism if it doesn’t jibe with their view of themselves — and such feedback is easy to ignore if it’s buried in a performance review or mentioned briefly in a larger conversation. Conducting a non-judgmental, just-the-facts 360-degree review could help them see the reality of their situation. Until they can see what others see and why it matters, they won’t examine their behavior, and coaching will be useless.
2. You can’t get on their calendar.
Some leaders claim to be receptive to coaching but just can’t find the time. They may cancel sessions at the last minute, constantly reschedule, or, when they do show up, be visibly distracted. They lack space for coaching both in their calendar, and in their mind.
Unlike the oblivious leader, the too-busy leader is often quite likable. They will apologize for being hard to pin down, and be very direct about how busy they are. Don’t be surprised if they’re flattered to be offered coaching. But coaching can’t be crammed into the schedule of a leader who wears their busy-ness as a badge of honor. Their inability to prioritize is a sign they need coaching, but their unwillingness to make room for it suggests they won’t be a good coaching investment.
A brilliant engineer we know had been promoted three times in four years, and by the time he was nearly 30 he was a group president at a U.S. manufacturing company. Diligent, humble, and smart, he could hold a room spellbound with only a marker and a whiteboard as he worked out solutions to highly technical problems. However, as adept as he was at the technical aspects of his job, he now had 20 people reporting to him whom he had no idea how to manage.
After three months of coaching, his superiors could see it was going nowhere. The executive often rescheduled his sessions, telling his coach he didn’t have the time. He believed he couldn’t set aside the time to improve himself. That made him uncoachable.
HR managers should do some reality testing to ensure the too-busy leader is willing to make room for coaching. To benefit from coaching, too-busy leaders must make the space to be fully present, both during the coaching sessions and after, doing the difficult work of developing new mindsets, skills, and habits. Ask this person what tasks or responsibilities they’d be willing to give up or delegate, even temporarily, to make time for coaching. If they struggle to think of any, give them a gentle but firm ultimatum as part of a career planning conversation: that they have plateaued at the company and won’t go to the next level until they make time for self-development.
3. They focus too much on tips and tactics.
Some leaders eagerly agree to coaching, but then avoid the deeper inquiries required for meaningful transformation. They’re willing to modify behaviors, but not beliefs. They view coaching as medicine that, if taken regularly, will help them get ahead.
The quick-fix leader becomes frustrated when their coach asks questions that require self-reflection. They want answers, not questions. “You’re the expert, you tell me,” they’ll say in response to questions from the coach, or “What if I did this?” Everything comes back to tactics. (A related warning sign is if a leader asks how quickly the coaching can be finished — especially if they demand that the cycle be compressed.)
Although coaches sometimes offer suggestions, their real job is to help executives uncover the assumptions driving their behavior. Only then can a coach help them challenge self-limiting beliefs that block their development. However, the quick-fix leader has little interest in this process.
One CEO we worked with was leading a family business that had recently been sold to a large company. He was told by a leader in the new parent company (who himself had benefitted from coaching) that coaching would help him make the transition. The CEO gladly accepted, wanting to be seen as a peer.
However, it wasn’t long into the first coaching session that he showed his entire focus was on “doing whatever other successful people did.” The coach worked tirelessly to shift the conversation to the CEO’s purpose and goals. Each time, however, he shifted the discussion back to the “secrets of success” of other organizational leaders he wanted to emulate. Ultimately, he was passed over for a permanent role on the parent company’s leadership team, and left the organization.
To prompt this kind of leader to be open to self-reflection, remind them of all the other times they vowed to change but were unsuccessful. They then might realize they need to work on more than just changing their game plan. Or, introduce them into a preliminary mentoring conversation with one of the leaders they admire. Tell the mentor to share their experience of struggling to develop.
4. They delay getting started with a coach to “do more research” or “find the right person.”
To be sure, it’s important to have a good fit between a leader and his coach. But a continual rejection of qualified coaches should give you pause. A related red flag is if the person is acting confused, and asking repeatedly why coaching has been suggested. Assuming you’ve clearly explained why coaching is necessary, this could be a defense mechanism and a signal that the person is not ready to confront their shortcomings. It usually stems from insecurity.
Being coached can be daunting, and not everyone is ready to take it on. We remember a physician leader who was hired to turn around a business unit of a large medical center. When his staff challenged him, he became emotional. Told by his boss that he needed a coach to help him control his emotions, he was hurt and angrily asked “Why?” — failing again to control his emotions. He was too full of hidden fears for the coaching to be useful. His boss eventually reassigned him, and ultimately he left the organization.
Reframe coaching as an investment the organization is making in their development rather than a personal fix. Tell them your firm provides this resource for high-potential, top performers to accelerate their success. If this leader can view coaching as something positive to help them achieve their goals, they may warm up to the process.
When Going Coach-Less Is Not Viable
After hearing us say that a certain leader is not a good candidate for coaching, an executive who brought us in will often say a variant of this: “Well, he must be coached. We can’t let him continue to manage others the way he has, but we can’t fire him easily either because we need his skills badly.” But imposing coaching on someone who just can’t handle it at the moment isn’t going to help anyone. Companies are better off directing their people development investments elsewhere — skills training or academic programs are often better options.
Invest your coaching budget in people who have shown the willingness and the capacity to change, and you’ll get a much better return on your investment.
Agile organizations—of any size and across industries—have five key elements in common.This article was written collaboratively by the McKinsey Agile Tribe, a group of over 50 global colleagues bringing expertise from the digital, operations, marketing, and organization disciplines. They integrate their deep experience and thought leadership to extract the best from McKinsey’s global experience as it helps organizations transform themselves into agile organizations.
Experience and research demonstrate that successful agile organizations consistently exhibit the five trademarks described in this article. The trademarks include a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and a common purpose that co-creates value for all stakeholders.
The old paradigm: Organizations as machines
A view of the world—a paradigm—will endure until it cannot explain new evidence. The paradigm must then shift to include that new information. We are now seeing a paradigm shift in the ways that organizations balance stability and dynamism.
What is an agile organization?
The dominant “traditional” organization (designed primarily for stability) is a static, siloed, structural hierarchy – goals and decisions rights flow down the hierarchy, with the most powerful governance bodies at the top (i.e., the top team). It operates through linear planning and control in order to capture value for shareholders. The skeletal structure is strong, but often rigid and slow moving.In contrast, an agile organization (designed for both stability and dynamism) is a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and that is guided by a powerful common purpose to co-create value for all stakeholders. Such an agile operating model has the ability to quickly and efficiently reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities. An agile organization thus adds velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions. First, the old paradigm. In 1910, the Ford Motor Company was one of many small automobile manufacturers. A decade later, Ford had 60 percent market share of the new automobile market worldwide. Ford reduced assembly time per vehicle from 12 hours to 90 minutes, and the price from $850 to $300, while also paying employees competitive rates.1 1.“100 years of the moving assembly line,” Ford Motor Company, ford.com. Ford’s ideas, and those of his contemporary, Frederick Taylor, issued from scientific management, a breakthrough insight that optimized labor productivity using the scientific method; it opened an era of unprecedented effectiveness and efficiency. Taylor’s ideas prefigured modern quality control, total-quality management, and—through Taylor’s student Henry Gantt—project management.Gareth Morgan describes Taylorist organizations such as Ford as hierarchical and specialized—depicting them as machines.2 2.Gareth Morgan, Images of organization, Beverly Hills, CA: Sage Publications, 1986. For decades, organizations that embraced this machine model and the principles of scientific management dominated their markets, outperformed other organizations, and drew the best talent. From Taylor on, 1911 to 2011 was “the management century.”
Disruptive trends challenging the old paradigm
Now, we find the machine paradigm shifting in the face of the organizational challenges brought by the “digital revolution” that is transforming industries, economies, and societies. This is expressed in four current trends:
- Quickly evolving environment. All stakeholders’ demand patterns are evolving rapidly: customers, partners, and regulators have pressing needs; investors are demanding growth, which results in acquisitions and restructuring; and competitors and collaborators demand action to accommodate fast-changing priorities.
- Constant introduction of disruptive technology. Established businesses and industries are being commoditized or replaced through digitization, bioscience advancements, the innovative use of new models, and automation. Examples include developments such as machine learning, the Internet of Things, and robotics.
- Accelerating digitization and democratization of information. The increased volume, transparency, and distribution of information require organizations to rapidly engage in multidirectional communication and complex collaboration with customers, partners, and colleagues.
- The new war for talent. As creative knowledge- and learning-based tasks become more important, organizations need a distinctive value proposition to acquire—and retain—the best talent, which is often more diverse. These “learning workers” often have more diverse origins, thoughts, composition, and experience and may have different desires (for example, millennials).
When machine organizations have tried to engage with the new environment, it has not worked out well for many. A very small number of companies have thrived over time; fewer than 10 percent of the non-financial S&P 500 companies in 1983 remained in the S&P 500 in 2013. From what we have observed, machine organizations also experience constant internal churn. According to our research with 1,900 executives, they are adapting their strategy (and their organizational structure) with greater frequency than in the past. Eighty-two percent of them went through a redesign in the last three years. However, most of these redesign efforts fail—only 23 percent were implemented successfully.
The new paradigm: Organizations as living organisms
The trends described above are dramatically changing how organizations and employees work. What, then, will be the dominant organizational paradigm for the next 100 years? How will companies balance stability and dynamism? Moreover, which companies will dominate their market and attract the best talent? McKinsey’s article “Agility: It rhymes with stability” describes the paradigm that achieves this balance and the paradox that truly agile organizations master—they are both stable and dynamic at the same time. They design stable backbone elements that evolve slowly and support dynamic capabilities that can adapt quickly to new challenges and opportunities. A smartphone serves as a helpful analogy; the physical device acts as a stable platform for myriad dynamic applications, providing each user with a unique and useful tool. Finally, agile organizations mobilize quickly, are nimble, empowered to act, and make it easy to act. In short, they respond like a living organism (Exhibit 1).Exhibit 1
When pressure is applied, the agile organization reacts by being more than just robust; performance actually improves as more pressure is exerted.4 4.We include in our sense of agile the idea—coined in the work of Nicholas Taleb—that it is “anti-fragile.” Research shows that agile organizations have a 70 percent chance of being in the top quartile of organizational health, the best indicator of long-term performance.5 5.Michael Bazigos, Aaron De Smet, and Chris Gagnon, “Why agility pays,” McKinsey Quarterly, December 2015. Moreover, such companies simultaneously achieve greater customer centricity, faster time to market, higher revenue growth, lower costs, and a more engaged workforce:
- A global electronics enterprise delivered $250 million in EBITDA, and 20 percent share price increase over three years by adopting an agile operating model with its education-to-employment teams.
- A global bank reduced its cost base by about 30 percent while significantly improving employee engagement, customer satisfaction, and time to market.
- A basic-materials company fostered continuous improvement among manual workers, leading to a 25 percent increase in effectiveness and a 60 percent decrease in injuries.
As a result agility, while still in its early days, is catching fire. According to the results, few companies have achieved organization-wide agility but many have already started pursuing it in performance units. For instance, nearly one-quarter of performance units are agile. The remaining performance units in companies lack dynamism, stability, or both. However, while less than ten percent of respondents have completed an agility transformation at the company or performance-unit level, most companies have much higher aspirations for the future. Three-quarters of respondents say organizational agility is a top or top-three priority, and nearly 40 percent are currently conducting an organizational-agility transformation. High tech, telecom, financial services, and media and entertainment appear to be leading the pack with the greatest number of organizations undertaking agility transformations. More than half of the respondents who have not begun agile transformations say they have plans in the works to begin one. Finally, respondents in all sectors believe that more of their employees should undertake agile ways of working (on average, respondents believe 68 percent of their companies’ employees should be working in agile ways, compared with the 44 percent of employees who currently do). The rest of this article describes the five fundamental “trademarks” of agile organizations based on our recent experience and research. Companies that aspire to build an agile organization can set their sights on these trademarks as concrete markers of their progress. For each trademark, we have also identified an emerging set of “agility practices”—the practical actions we have observed organizations taking on their path to agility (Exhibit 2).Exhibit 2
The five trademarks of agile organizations
While each trademark has intrinsic value, our experience and research show that true agility comes only when all five are in place and working together. They describe the organic system that enables organizational agility.Linking across them, we find a set of fundamental shifts in the mind-sets of the people in these organizations. Make these shifts and, we believe, any organization can implement these trademarks in all or part of its operations, as appropriate.
1. North Star embodied across the organization
Mind-set shiftFrom:“In an environment of scarcity, we succeed by capturing value from competitors, customers, and suppliers for our shareholders.”To:“Recognizing the abundance of opportunities and resources available to us, we succeed by co-creating value with and for all of our stakeholders.” Agile organizations reimagine both whom they create value for, and how they do so. They are intensely customer-focused, and seek to meet diverse needs across the entire customer life cycle. Further, they are committed to creating value with and for a wide range of stakeholders (for example, employees, investors, partners, and communities).To meet the continually evolving needs of all their stakeholders, agile organizations design distributed, flexible approaches to creating value, frequently integrating external partners directly into the value creation system. Examples emerge across many industries, including: modular products and solutions in manufacturing; agile supply chains in distribution; distributed energy grids in power; and platform businesses like Uber, Airbnb, and Upwork. These modular, innovative business models enable both stability and unprecedented variety and customization. To give coherence and focus to their distributed value creation models, agile organizations set a shared purpose and vision—the “North Star”—for the organization that helps people feel personally and emotionally invested. This North Star serves as a reference when customers choose where to buy, employees decide where to work, and partners decide where to engage. Companies like Amazon, Gore, Patagonia, and Virgin put stakeholder focus at the heart of their North Star and, in turn, at the heart of the way they create value. Agile organizations that combine a deeply embedded North Star with a flexible, distributed approach to value creation can rapidly sense and seize opportunities. People across the organization individually and proactively watch for changes in customer preferences and the external environment and act upon them. They seek stakeholder feedback and input in a range of ways (for example, product reviews, crowd sourcing, and hackathons). They use tools like customer journey maps to identify new opportunities to serve customers better, and gather customer insights through both formal and informal mechanisms (for example, online forums, in-person events, and start-up incubators) that help shape, pilot, launch, and iterate on new initiatives and business models. These companies can also allocate resources flexibly and swiftly to where they are needed most. Companies like Google, Haier, Tesla, and Whole Foods constantly scan the environment. They regularly evaluate the progress of initiatives and decide whether to ramp them up or shut them down, using standardized, fast resource-allocation processes to shift people, technology, and capital rapidly between initiatives, out of slowing businesses, and into areas of growth. These processes resemble venture capitalist models that use clear metrics to allocate resources to initiatives for specified periods and are subject to regular review.Senior leaders of agile organizations play an integrating role across these distributed systems, bringing coherence and providing clear, actionable, strategic guidance around priorities and the outcomes expected at the system and team levels. They also ensure everyone is focused on delivering tangible value to customers and all other stakeholders by providing frequent feedback and coaching that enables people to work autonomously toward team outcomes.
2. Network of empowered teams
Mind-set shiftFrom:“People need to be directed and managed, otherwise they won’t know what to do—and they’ll just look out for themselves. There will be chaos.”To:“When given clear responsibility and authority, people will be highly engaged, will take care of each other, will figure out ingenious solutions, and will deliver exceptional results.” Agile organizations maintain a stable top-level structure, but replace much of the remaining traditional hierarchy with a flexible, scalable network of teams. Networks are a natural way to organize efforts because they balance individual freedom with collective coordination. To build agile organizations, leaders need to understand human networks (business and social), how to design and build them, how to collaborate across them, and how to nurture and sustain them.An agile organization comprises a dense network of empowered teams that operate with high standards of alignment, accountability, expertise, transparency, and collaboration. The company must also have a stable ecosystem in place to ensure that these teams are able to operate effectively. Agile organizations like Gore, ING, and Spotify focus on several elements:
- Implement clear, flat structures that reflect and support the way in which the organization creates value. For example, teams can be clustered into focused performance groups (for example, “tribes,” or a “lattice”) that share a common mission. These groups vary in size, typically with a maximum of 150 people. This number reflects both practical experience and Dunbar’s research on the number of people with whom one can maintain personal relationships and effectively collaborate.7 7.Drake Bennett, “The Dunbar Number, From the Guru of Social Networks,” Bloomberg, January 2013, bloomberg.com. The number of teams within each group can be adapted or scaled to meet changing needs.
- Ensure clear, accountable roles so that people can interact across the organization and focus on getting work done, rather than lose time and energy because of unclear or duplicated roles, or the need to wait for manager approvals. Here, people proactively and immediately address any lack of clarity about roles with one another, and treat roles and people as separate entities; in other words, roles can be shared and people can have multiple roles.
- Foster hands-on governance where cross-team performance management and decision rights are pushed to the edge of boundaries.8 8.David S. Alberts and Richard E. Hayes, “Power to the Edge: Command and Control in the Information Age,” Command and Control Research Program Publication Series, April 2005 reprint, dodccrp.org. It is at this interaction point that decisions are made as close to relevant teams as possible, in highly-productive, limited-membership coordinating forums. This frees senior leaders to focus on overall system design and provide guidance and support to responsible, empowered teams that focus on day-to-day activities.
- Evolve functions to become robust communities of knowledge and practice as professional “homes” for people, with responsibilities for attracting and developing talent, sharing knowledge and experience, and providing stability and continuity over time as people rotate between different operating teams.
- Create active partnerships and an ecosystem that extends internal networks and creates meaningful relationships with an extensive external network so the organization can access the best talent and ideas, generate insights, and co-develop new products, services, and/or solutions. In agile organizations, people work hands-on and day-to-day with customers, vendors, academics, government entities, and other partners in existing and complementary industries to co-develop new products, services, and/or solutions and bring them to market.
- Design and create open physical and virtual environments that empower people to do their jobs most effectively in the environment that is most conducive to them. These environments offer opportunities to foster transparency, communication, collaboration, and serendipitous encounters between teams and units across the organization.
Like the cells in an organism, the basic building blocks of agile organizations are small fit-for-purpose performance cells. Compared with machine models, these performance cells typically have greater autonomy and accountability, are more multidisciplinary, are more quickly assembled (and dissolved), and are more clearly focused on specific value-creating activities and performance outcomes. They can be comprised of groups of individuals working on a shared task (i.e., teams) or networks of individuals working separately, but in a coordinated way. Identifying what type of performance cells to create is like building with Lego blocks. The various types (Exhibit 3) can be combined to create multiple tailored approaches. Exhibit 3
The three most commonly observed agile types of performance cell today include:
- Cross-functional teams deliver ‘products’ or projects, which ensure that the knowledge and skills to deliver desired outcomes reside within the team.These teams typically include a product or project owner to define the vision and prioritize work.
- Self-managing teams deliver baseload activity and are relatively stable over time. The teams define the best way to reach goals, prioritize activities, and focus their effort. Different team members will lead the group based on their competence rather than on their position.
- Flow-to-the-work pools of individuals are staffed to different tasks full-time based on the priority of the need. This work method can enhance efficiencies, enable people to build broader skillsets, and ensure that business priorities are adequately resourced.
However, other models are continuously emerging through experimentation and adaptation.
3. Rapid decision and learning cycles
Mind-set shiftFrom: “To deliver the right outcome, the most senior and experienced individuals must define where we’re going, the detailed plans needed to get there, and how to minimize risk along the way.”To: “We live in a constantly evolving environment and cannot know exactly what the future holds. The best way to minimize risk and succeed is to embrace uncertainty and be the quickest and most productive in trying new things.”Agile organizations work in rapid cycles of thinking and doing that are closely aligned to their process of creativity and accomplishment. Whether it deploys these as design thinking, lean operations, agile development, or other forms, this integration and continual rapid iteration of thinking, doing, and learning forms the organization’s ability to innovate and operate in an agile way. This rapid-cycle way of working can affect every level. At the team level, agile organizations radically rethink the working model, moving away from “waterfall” and “stage gate” project-management approaches. At the enterprise level, they use the rapid-cycle model to accelerate strategic thinking and execution. For example, rather than traditional annual planning, budgeting, and review, some organizations are moving to quarterly cycles, dynamic management systems like Objectives and Key Results (OKRs), and rolling 12-month budgets.The impact of this operational model can be significant. For example, a global bank closed its project-management office and shifted its product-management organization from a traditional waterfall approach to a minimal viable product-based process. It moved from four major release cycles a year to several thousand-product changes monthly; it simultaneously increased product development, deployment, and maintenance productivity by more than 30 percent.There are several characteristics of the rapid cycle model:
- Agile organizations focus on rapid iteration and experimentation. Teams produce a single primary deliverable (that is, a minimal viable product or deliverable) very quickly, often in one- or two-week “sprints.” During these short activity bursts, the team holds frequent, often daily, check-ins to share progress, solve problems, and ensure alignment. Between sprints, team members meet to review and plan, to discuss progress to date, and to set the goal for the next sprint. To accomplish this, team members must be accountable for the end-to-end outcome of their work. They are empowered to seek direct stakeholder input to ensure the product serves all the needs of a group of customers and to manage all the steps in an operational process. Following this structured approach to innovation saves time, reduces rework, creates opportunities for creative “leapfrog” solutions, and increases the sense of ownership, accountability, and accomplishment within the team.
- Agile organizations leverage standardized ways of working to facilitate interaction and communication between teams, including the use of common language, processes, meeting formats, social-networking or digital technologies, and dedicated, in-person time, where teams work together for all or part of each week in the sprint. For example, under General Stanley McChrystal, the US military deployed a series of standardized ways of working between teams including joint leadership calls, daily all-hands briefings, collective online databases, and short-term deployments and co-location of people from different units. This approach enables rapid iteration, input, and creativity in a way that fragmented and segmented working does not.
- Agile organizations are performance-oriented by nature. They explore new performance- and consequence-management approaches based on shared goals across the end-to-end work of a specific process or service, and measure business impact rather than activity. These processes are informed by performance dialogues comprised of very frequent formal and informal feedback and open discussions of performance against the target.
- Working in rapid cycles requires that agile organizations insist on full transparency of information, so that every team can quickly and easily access the information they need and share information with others. For example, people across the unit can access unfiltered data on its products, customers, and finances. People can easily find and collaborate with others in the organization that have relevant knowledge or similar interests, openly sharing ideas and the results of their work. This also requires team members to be open and transparent with one another; only then can the organization create an environment of psychological safety where all issues can be raised and discussed and where everyone has a voice.
- Agile organizations seek to make continuous learning an ongoing, constant part of their DNA. Everyone can freely learn from their own and others’ successes and failures, and build on the new knowledge and capabilities they develop in their roles. This environment fosters ongoing learning and adjustments, which help deliverables evolve rapidly. People also spend dedicated time looking for ways to improve business processes and ways of working, which continuously improves business performance.
- Agile organizations emphasize quick, efficient, and continuous decision making, preferring 70 percent probability now versus 100 percent certainty later. They have insight into the types of decisions they are making and who should be involved in those decisions.9 9.Aaron De Smet, Gerald Lackey, and Leigh Weiss, “Untangling your organization’s decision making,” McKinsey Quarterly, July 2017. Rather than big bets that are few and far between, they continuously make small decisions as part of rapid cycles, quickly test these in practice, and adjust them as needed for the next iteration. This also means agile organizations do not seek consensus decisions; all team members provide input (in advance if they will be absent), the perspectives of team members with the deepest topical expertise are given greater weight, and other team members, including leaders, learn to “disagree and commit” to enable the team to move forward.
4. Dynamic people model that ignites passionMind-set shiftFrom:“To achieve desired outcomes, leaders need to control and direct work by constantly specifying tasks and steering the work of employees.”To:“Effective leaders empower employees to take full ownership, confident they will drive the organization toward fulfilling its purpose and vision.” An agile organizational culture puts people at the center, which engages and empowers everyone in the organization. They can then create value quickly, collaboratively, and effectively.Organizations that have done this well have invested in leadership which empowers and develops its people, a strong community which supports and grows the culture, and the underlying people processes which foster the entrepreneurship and skill building needed for agility to occur.Leadership in agile organizations serves the people in the organization, empowering and developing them. Rather than planners, directors, and controllers, they become visionaries, architects, and coaches that empower the people with the most relevant competencies so these can lead, collaborate, and deliver exceptional results. Such leaders are catalysts that motivate people to act in team-oriented ways, and to become involved in making the strategic and organizational decisions that will affect them and their work. We call this shared and servant leadership. Agile organizations create a cohesive community with a common culture. Cultural norms are reinforced through positive peer behavior and influence in a high-trust environment, rather than through rules, processes, or hierarchy. This extends to recruitment. Zappos, the online shoe retailer acquired by Amazon changed its recruiting to support the selection of people that fit its culture—even paying employees $4,000 to leave during their onboarding if they did not fit.10 10.David Burkus, “Why Amazon bought into Zappos’s ‘pay to quit’ policy,” Inc., June 2016, inc.com. People processes help sustain the culture, including clear accountability paired with the autonomy and freedom to pursue opportunities, and the ongoing chance to have new experiences. Employees in agile organizations exhibit entrepreneurial drive, taking ownership of team goals, decisions, and performance. For example, people proactively identify and pursue opportunities to develop new initiatives, knowledge, and skills in their daily work. Agile organizations attract people who are motivated by intrinsic passion for their work and who aim for excellence. In addition, talent development in an agile model is about building new capabilities through varied experiences. Agile organizations allow and expect role mobility, where employees move regularly (both horizontally and vertically) between roles and teams, based on their personal-development goals. An open talent marketplace supports this by providing information on available roles, tasks, and/or projects as well as people’s interests, capabilities, and development goals.
5. Next-generation enabling technology
Mind-set shiftFrom:“Technology is a supporting capability that delivers specific services, platforms, or tools to the rest of the organization as defined by priorities, resourcing, and budget.”To:“Technology is seamlessly integrated and core to every aspect of the organization as a means to unlock value and enable quick reactions to business and stakeholder needs.” For many organizations, such a radical rethinking of the organizational model requires a rethinking of the technologies underlying and enabling their products and processes, as well as the technology practices needed to support speed and flexibility.Agile organizations will need to provide products and services that can meet changing customer and competitive conditions. Traditional products and services will likely need to be digitized or digitally-enabled. Operating processes will also have to continually and rapidly evolve, which will require evolving technology architecture, systems, and tools. Organizations will need to begin by leveraging new, real-time communication and work-management tools. Implementing modular-based software architecture enables teams to effectively use technologies that other units have developed. This minimizes handovers and interdependencies that can slow down production cycles. Technology should progressively incorporate new technical innovations like containers, micro-service architectures, and cloud-based storage and services.In order to design, build, implement, and support these new technologies, agile organizations integrate a range of next-generation technology development and delivery practices into the business. Business and technology employees form cross-functional teams, accountable for developing, testing, deploying, and maintaining new products and processes. They use hackathons, crowd sourcing, and virtual collaboration spaces to understand customer needs and develop possible solutions quickly. Extensive use of automated testing and deployment enables lean, seamless, and continuous software releases to the market (for example, every two weeks vs. every six months). Within IT, different disciplines work closely together (for example, IT development and operations teams collaborate on streamlined, handover-free DevOps practices).
About the author(s)
Wouter Aghina is a partner in McKinsey’s Amsterdam office; Aaron De Smet is a partner in the Houston office; Gerald Lackey is a senior expert in the Washington DC office; Michael Lurie is a senior expert in the Los Angeles office, and Monica Murarka is a senior knowledge manager in the San Francisco office. The authors would like to thank the following contributors: Karin Ahlbäck, Clemens Fahrbach, Christopher Handscomb, Olli Salo, Elizabeth Seem, and Jannik Woxholth.MeasureMeasure
The authors of the recent HBR article Agile at Scale make compelling arguments for why executives at leading enterprises should push their companies to become more agile.
In our experience working with leaders at 30% of the Fortune 1000, we’ve seen the importance of leaders reflecting agile principles in their own work, resourcing critical business initiatives with silo-busting teams, and thoughtfully sequencing agile rollouts as critical ingredients for success.
1. This isn’t just about innovation—it’s about how your company works.
The article focuses on agility to drive innovation, and innovation teams are indeed promising places to pilot. We believe that this transformation to a more agile workforce need not center on innovation. It’s about getting work done faster, better, and more efficiently. Companies we see deploying an agile workforce effectively take the most important initiatives at the organization and use agile workforce concepts to deploy the best resources against them, regardless of where those resources are. This is consistent with the authors’ notions of removing bureaucracy and breaking through silos, and not just for innovation — indeed, for the most important work at the company. One leader at a Fortune 50 company framed it this way to us: agile lets his business operate more like a nimble flotilla of ships than like a large and lumbering tanker, which is especially important in rapidly-changing business conditions. It’s about prioritizing speed.
2. The days of Talent Acquisition are over. It’s time to think about Talent Access.
The article touches on the importance of changes in talent acquisition and motivation needed to support agile at scale. Reconsidering incentives, the role of managers, and performance management are all key. And we believe that this is just the tip of the metaphorical iceberg. Companies where we see successful agile workforce roll-outs stop building their talent strategy and infrastructure around talent acquisition (synonyms: purchase, possession, procurement) and instead build a competency in talent access (synonyms: connection, approach, introduction). This fits well with the idea of agile—which rests on the notion of engaging the right quantity of the right talent for a specific, well-defined mission. That does not always require a full-time employee—it just requires the right person with the right skills at the right time. Yes, talent will always include some portion of people with a company badge, and an agile workforce enables companies to engage employees in a more effective way. But it also includes the broader world of talent available to a company—freelancers, alumni, consultants. An organization should consider those options alongside employees and engage the best skills for the job to be done.
3. Ignore labor demographic trends at your own peril.
Shifting from talent acquisition to talent access is consistent with the way the world is already working. People beyond the borders of your company are working in a more agile way, and leveraging technology tools that make it possible. You’ve probably noticed many of your colleagues are choosing to work more in a more agile fashion outside your organization. This isn’t just about commoditized work; in fact, many of the very best people — think those with the most niche skill sets — are choosing a different way of working. For enterprises with skills gaps across their organization, losing these talented people is untenable. To maintain access to them (which may include keeping them full-time, or may not), you need to change how you do work inside the company to provide a similar experience to what exists outside.
4. Invest in the proper infrastructure, or agile won’t work at scale.
As the article highlights, modularizing workstreams is important. That is difficult to do without technology. How are you modularizing work? How are you accessing and matching the right skills at the right time? How are you tracking outcomes? How will you do that across your entire organization? Without the right enabling technology, you may miss the mark. When you bring those tools into your company and allow people to engage projects they otherwise didn’t have access to, value results.
Imagine an internal version of the gig economy that enables you to discover and engage the skills and interests of your employees across the far-flung reaches of the company… What would it mean to your high-performers—and to your company—for them to be able to raise their hand and apply their talents on projects across your business? What would it mean for your organization to better understand the competencies that exist within the company, and to have visibility into the skills your colleagues go outside the company to engage?
5. Start small, think big, move fast.
As the article mentions, starting with a full-scale transformation to become radically agile is unlikely to lead to success. Starting small is critical. We also believe that small pilots must be designed with the end in mind. As you roll out tests in your organization, consider what you need to learn about what it would take at scale. We’ve seen companies start with pilots and think they’ve learned what it takes to scale, without realizing that there are fundamentally different implications for a scaled solution that can’t be tested in a smaller, controlled environment. If you’re still reading this and have ideas we haven’t considered, we’d love to hear your thoughts! And if you want to discuss further, we’re always happy to talk.Read more aboutCatalant’s take on workforce agility or download our recent research,Reimagining Work 2020.
Imagine an internal version of the gig economy that enables you to discover and engage the skills and interests of your employees across the far-flung reaches of the company…
What would it mean to your high-performers—and to your company—for them to be able to raise their hand and apply their talents on projects across your business? What would it mean for your organization to better understand the competencies that exist within the company, and to have visibility into the skills your colleagues go outside the company to engage?
5. Start small, think big, move fast.
As the article mentions, starting with a full-scale transformation to become radically agile is unlikely to lead to success. Starting small is critical. We also believe that small pilots must be designed with the end in mind. As you roll out tests in your organization, consider what you need to learn about what it would take at scale. We’ve seen companies start with pilots and think they’ve learned what it takes to scale, without realizing that there are fundamentally different implications for a scaled solution that can’t be tested in a smaller, controlled environment.
Leadership traits and the new talent ecosystem: What are we speaking about? What do we mean by new talent ecosystem?
First things first: an ecosystem is a community made up of living organisms and nonliving components such as air, water, and mineral soil. Ecosystems can be studied as structured systems and communities governed by general rules (Wikipedia).
The notion of a talent ecosystem is one in which everything on the people side of the business is connected – attracting and acquiring talent, managing, connecting and developing talent, understanding and planning talent. It is about the way an organization is and will manage critical capabilities to gain a competitive edge. In the new context of complex changes, executives and organizational leaders are facing unknown situations that may generate enormous puzzlement.
The complexity increases with the new way of sourcing and onboarding talent and building organizations. If, within this context, we react using established, obsolete strategies, skills and methods, seeking to obtain quick fixes in the short term, we may be putting the survival of our organization at risk.
According to most of the major consulting firms, automation, cognitive computing, and crowdsourcing are paradigm-shifting forces that reshape the workforce and the way people are managed and interact. This is a great opportunity to rethink the way the C-suite leads and engages people to achieve results and create values. We will explore what type of leadership characteristics will be most beneficial in this new social and corporate environment.
According to Deloitte the top companies in those new paradigm-shifting forces are built around structures that encourage teams and individuals to meet, share information transparently and move from team to team, depending on the issue to be tackled. Organizations that empower their teams to make decisions and create this ability to move between teams without risk are critical characteristics of today’s high-performing and agile companies.
The successful organization would be the one empowering their people to make decisions and make them accountable for results. If people need freedom to act, think, perform, then organizations need their people to be accountable for results. In our world, one comes with the other. Before proposing what we think could be the right leadership traits in this new ecosystem, let us pause for a moment on those two critical characteristics in the workplace.
Empowerment and Accountability
According to the Cambridge dictionary, empowerment “is the process of gaining freedom and power to do what you want or to control what happens to you”.
Empower comes from the Latin noun “posse” meaning power, force, “to be able”, “have power”. It is someone armed with legal authority. Empowerment in the workplace is a philosophy and strategy that businesses use to entrust their employees with the power they need to make decisions and behave according to their understanding of business goals (Wiktionary).Empowering people to make decisions and relying on networks of interactions does not mean that people are no longer accountable for results.
‘Accountable’ comes from Medieval Latin imputabilisand from Modern Latin imputare “to charge, ascribe” (etymonline.com). Accountability (charging someone to deliver result) becomes more transparent as organizations use goal-setting to support success. It is then easier to measure and track. The sense of accountability this can create is critical to team and corporate effectiveness, and is among the top drivers of outstanding financial outcomes.If empowerment and accountability are two critical organizational traits, what type of leadership characteristics do we need for a dynamic new ecosystem?
Key leadership traits to triumph in the new environment
Facilitating the transition to the new paradigm requires executives and leaders to develop a set of attributes critical to engage and mobilize the new talent ecosystem.
There is no magic stick to engage people, especially when speaking about crowdsourcing. Nevertheless, if not all-embracing, there are key characteristics: authenticity, enthusiasms and resilience, creativity, and empathy and compassion.
“If you are your authentic self, you have no competition”Anonymous
Authenticity comes directly from Medieval Latin authenticus, from Greek authentikos “original, genuine, principal,” from authentes “one acting on one’s own authority” (online ethymology dictionary). In the modern world, authenticity means “true to one’s own personality, spirit, or character” (Merriam-Webster).
Janet Louise Stephenson, an American writer, teacher and social activist who wrote in the areas of civil rights, the women’s movement, the peace movement, the environment and the arts, said: “Authenticity requires a certain measure of vulnerability, transparency, and integrity.” Authenticity, with integrity, and a certain measure of vulnerability, would go a long way in engaging and mobilizing people around business vision and its execution. Humans can relate to one another more easily if the relationship is ingrained in honesty. Authenticity enhances credibility and reputation, as a positive differentiation to achieve effective leadership.
Enthusiasm and Resilience
“The happiest, most interesting people are those who have found the secret of maintaining their enthusiasm, that God within.”Earl Nightingale.
“The word ‘enthusiasm’ comes from the Greek word ‘entheos’ which means the God within. It is a great adjective for describing anything you do cheerfully.” Because it is vital to engaging the hearts and minds of all talent in the new ecosystem, enthusiastic leaders have the spark that can foster commitment and determination in people. They are the strong believers that inspire passion and the belief that we have the ability to achieve the unimaginable and create enchantment.As explained in a previous post by Jean-Luc’s, resilience is coming from the Latin verb “resilio”, literally “jump back,” “rebound, resist”. In physics, resilience is a term that characterizes the energy absorbed by a body during deformation (Test of Charpy). According to the French neuropsychiatrist Boris Cyrulnik, “Resilience is the ability of an individual to generate biological, psychological and social factors to resist, adapt and fortify himself in the face of a risk situation”. As a result, resilience generates individual, social and moral success. In a time of rapid and complex changes, a leader without resilience will drown in the midst of complexity and chaos.
“Once we believe in ourselves, we can risk curiosity, creativity, wonder, spontaneous delight or any experience that reveals the human spirit”. E. E. Cummings
We often think about creativity as making something, but in fact the root meaning of the word means ‘to grow’. Though we’re tempted to think of creativity as having ties to the aesthetic world, creativity is a business tool as well – as leaders learn to look at challenges from different perspectives and find new opportunities emerge as a result.
According to the World Economic Forum, creativity is one of the fundamental skills toward 2020. It moved from the #10 skill set in 2015 to # 3 in 2020. It contributes, among other things, to the construction of an organizational culture to generate ideas and initiatives that will enrich the organization’s value, produce magic and rally people.
Empathy and Compassion
“Love and compassion are necessities, not luxuries. Without them humanity cannot survive”. Dalai Lama
Empathy is the capacity to understand or feel what another person is experiencing from within. The English word empathy is derived from the Ancient Greek word empatheia, meaning “physical affection or compassion”.
According to Paul Ekman, an American psychologist and professor emeritus at the University of California, San Francisco who is a pioneer in the study of emotions, the term “empathy” is used to describe a wide range of experiences. It is generally defined as the ability to sense other people’s emotions, coupled with the ability to imagine what someone else might be thinking or feeling.The importance of empathy in business is rooted in data. 92% of HR professionals note that an empathetic workplace is a major factor for people retention.
Being empathetic in the workplace provides meaningful, concrete returns, it pushes people to listen to each other and care for one another. Coupled with compassion, it motivates people to go out of their way to help other people in the workplace which in return has a positive impact on business performance. Leading people to connect to one another helps sustain blooming companies built for the long term.
Into a New Adventure
As we move towards new organizational models with new types of interaction and networks, leaders need to embed in their fabrics simple human characteristics that shape the future, foster genuine engagement of people and in return, impact positively the bottom line.
Those key characteristics: authenticity, enthusiasm and resilience, creativity, and empathy and compassion are the lifeblood of brilliant possible outlooks. The more we tend to dehumanize our world, the more we need the cleanliness of the real self and the vibrant intensity of genuine encounters and relationships. The workplace isn’t different!
Talent ecosystem is the new paradigm of people bringing and creating value for the organization from the most traditional form of being an employee to the most agile practice of crowdsourcing.
At a Stanford symposium, experts discuss shifting education expectations, technology’s impact, and new worker demands.
By Louise Lee
In the future, a traditional college degree will remain useful to build fundamental skills, but after graduation, workers will be expected to continue their education throughout their careers.
Workers, for instance, may increasingly pursue specific job-oriented qualifications or applied credentials in incremental steps in flexible, lower-cost programs, says Jeff Maggioncalda, chief executive of online learning company Coursera.
Maggioncalda, who received his MBA from Stanford Graduate School of Business in 1996, spoke at “The Future of Work,” an all-day symposium held at Stanford’s Frances C. Arrillaga Alumni Center on August 30.
Speakers explored the changing workplace, new possibilities for higher education, and technology’s impact on careers and industries.
Embracing the Liberal Arts
Students are hesitating to major in the humanities and social sciences out of fear that those degrees will lead only to low-wage jobs, says Harry Elam, Jr.., Stanford’s senior vice provost for education. Yet those fields remain crucially important to industry, which needs liberal arts students for countless tasks, such as to help understand biases in data, facilitate collaboration, bring insight, provide historical perspective, and “humanize technology in a data-driven world,” he says.
For instance, machines should not only function but should also optimize human welfare. What if a self-driving car needs to go faster than the speed limit to avoid an accident? Should that car be allowed to break the law? These kinds of questions of the new digital economy “all require diversity of thought, diversity of approach, and diversity of background to address these complex issues,” Elam says.Those who major in the humanities or social sciences, especially fields like philosophy and public policy, can easily develop transferable skills that employers value, says Trent Hazy, a current student at Stanford GSB and co-founder of MindSumo, a firm that connects college students with employers by inviting students to submit solutions to challenges that companies post online.
Because many employers seek candidates comfortable with data and data analysis, humanities majors who also learn some quantitative skills by taking classes in, say, statistics or logic will have an advantage over those who don’t, says Hazy.
Learning Throughout Life
Speakers generally agreed that the traditional brick-and-mortar college campus will certainly remain because the face-to-face encounters in and outside the classroom are educationally and socially valuable. After graduation, though, employees will increasingly need continuing education to stay competitive, and companies recognize that, says Julia Stiglitz, vice-president at Coursera who earned her Stanford MBA in 2010. Already, some large firms such as AT&T use online learning in a “massive reskilling effort” to re-train workers. “There are all of these educational opportunities that are open to anyone who has the will and desire and ability to go through it, and as a result I think we’re going to see all sorts of new people come into fields they otherwise wouldn’t have access to,” she says.Anant Agarwal, professor at Massachusetts Institute of Technology and chief executive of online learning firm edX, adds that workers may think of continual training and education through online classes as earning “micro-credentials” that could garner credit toward a full degree at a traditional institution. Individuals could earn multiple micro-credentials over years, perhaps beginning even with a “micro-bachelor’s” in high school as a head start on an undergraduate degree, he says.Michael Moe, co-founder of GSV Asset Management, notes that over the course of their careers, people will augment “the three R’s” of reading, writing, and arithmetic that they learned early in life with “the four C’s” of critical thinking, communication, creativity, and cultural fluency.
Restructuring Roles and Workweeks
Research suggests that by 2030, about half of today’s jobs will be gone. Speakers agreed that automation will perform many current blue-collar and white-collar jobs, while independent contractors will fill a large fraction of future positions. Robots and other automation in the short term will displace individual workers, but technology over the long term is likely to create new economic opportunity and new jobs. “While automation eats jobs, it doesn’t eat work,” says Moe.Future workers’ attitudes toward employment will be different from those of today’s workers, forcing companies to change how they recruit and retain. In a survey of college students, respondents indicated that they highly value work-life balance and are interested in working from home one or two days a week, says Roberto Angulo, chief executive of AfterCollege, a career network for college students and recent graduates. “Students are switching from living for their work and shifting more toward making a living so they can actually enjoy life,” he says.Other shifts in demographics will force employers to rethink how they structure work and benefits. Many aging “baby boomers,” for instance, are remaining in the workforce past the traditional retirement age of 65 and may demand fewer hours or shorter workweeks. “There are different things people value at different ages,” says Guy Berger, economist at LinkedIn.
Aiming for Equity
Companies are committing to a diverse workforce for varying motivations. Some believe that diverse teams are just “smarter and more creative,” says Joelle Emerson, adjunct lecturer at Stanford GSB and founder and chief executive of diversity strategy firm Paradigm. Other firms, especially technology companies, believe that they’re disproportionately responsible for designing the future and therefore it’s simply wrong to leave entire communities out of their teams, Emerson says.Overall, Emerson adds, companies must understand that the same strategies that increase diversity also boost a range of other positive outcomes as well. For instance, “When people feel like they belong at work, they perform significantly better,” she says. They take fewer sick days and less time off.Speakers cited various initiatives designed to increase inclusion, such as reacHire, which trains and supports women re-entering the workforce, and Stanford’s Distinguished Careers Institute, which brings individuals with 20 to 30 years of career experience to campus for a year of “intergenerational connection” and learning with undergrads and graduate students. “There are so many people who are not 18- to 22-year-olds who are still interested in being alive, alert, connected, and contributing,” says Kathryn Gillam, the institute’s executive director.“Diversity is a fact, inclusion is a practice, equity is a goal,” says Dereca Blackmon, Stanford associate dean and director of the Diversity and First Generation Office.
Jun 19, 2017: Weekly Curated Thought-Sharing on Digital Disruption, Applied Neuroscience and Other Interesting Related Matters.
By Rob Biederman, Catalant
Curated by Helena M. Herrero Lamuedra
Digital disruption is forcing companies to think about talent in radically new ways. Even the longest-lived brands are finding that new technologies and changing consumer preferences have compelled them to access talent in ways that were unrecognizable a decade ago.
Companies will not succeed in today’s rapidly changing business environment if they rely solely on full time employees. Companies must now focus less on the fixed supply of in-house people and more on the capabilities they need to get work done. Those that are able to easily access and manage skilled, independent workers will be able to unleash fresh energy and thinking inside their organizations.
Flexible talent-access platforms are enabling this new world of work, making it easier than ever before to bring in the right skills for the right project at the right time. These platforms can connect highly skilled people with the companies that need work done.
But making the most of flexible talent-access platforms is not as simple as adding a solution into an existing organization. Organizations must be built with this new world of work in mind. Old ways of thinking and working designed to support an internal-only workforce need to change. Winning in the future will require a rigorous approach to accessing and managing independent workers.
It’s a fact: Most great people, ideas and capabilities lie outside the walls of any individual organization.
Companies will simply not succeed in today’s rapidly changing business environment if they rely only on the relatively small number of people who happen to wear that company’s employee badge. Organizations need to develop an “outside-in” lens on talent.
Many organizations still look at talent the old-fashioned way: a job description, a search, an internal hire for a full-time position. Increasingly, however, smart executives are viewing talent as a much more flexible and connected resource. For a particular deliverable, need, or project, their default way of thinking focuses less on the fixed supply of in-house people who can handle the work and more on the capabilities they need to get the work done and how they can best access those capabilities.
Companies that adapt to this new mindset will be able to take advantage of capabilities wherever they are located. They will access new markets more readily than in the past. They will enjoy newfound agility in seizing strategic opportunities. They will quickly tap into new ideas and unleash fresh energy and thinking inside their organizations. In short, they will win. Those companies The Organizational Mindset of the Future that don’t capitalize on changes in the workforce will miss out on new opportunities, take too long to seize existing opportunities, and ultimately fail to innovate. Winning in the future will require a deliberate and systematic approach.
Independent work is no longer confined to certain professions like writing, accounting, and graphic design. Now a range of highly qualified and specialized workers are finding it attractive to work whenever and wherever they want. These elite workers are experiencing many of the same privileges that freelancers have long enjoyed: increased flexibility, more dynamic work lives, higher take-home pay. And in turn, many large companies are seeing the advantages of accessing this on-demand talent pool whenever and wherever they want.
Researchers have looked at the size of the independent workforce in different ways. The U.S. Government Accountability Office estimates that 40% of the workforce has contingent jobs—defined as those workers without traditionally secure jobs, such as freelancers, temps, and contract workers. Today, one-third of the U.S. workforce does some freelance work, according to a survey commissioned by the Freelancers Union and Upwork. An Intuit study estimated that by 2020, 40% of American workers, or 60 million people, will work independently.
Economists Lawrence Katz and Alan Krueger found that American workers in alternative work arrangements, including temp workers, increased by 9.4 million from 2005 to 2015, or a 67% jump. Significantly, that’s the entire net growth in employment over that period.
Independent workers represent 22% of the workforce of the 200 largest companies, according to a survey by the Aberdeen Group. Half of executives plan to increase their use of freelancers over the next three to five years, An Intuit study estimated that, by 2020, 40 percent of American workers will work independently.
Nearly a third of HR professionals surveyed by PwC plan to hire a diverse mix of people on an affordable, ad hoc basis based on the concept of working multiple part-time jobs in a “portfolio career.”
A growing number of independent workers are highly qualified, often highly experienced professionals like business consultants, marketing executives, financial experts, and lawyers. Many are people in or nearing retirement, as well as people who want to enjoy more control over their lives and take advantage of new and interesting opportunities. Twenty-nine percent of employees in China, Germany, India, the U.K., and the U.S. surveyed by PwC want the chance to take control of what they do, and when they do it.
Independent professionals are increasingly being engaged to do strategic, high-value-add work requiring deep expertise. Realistically, the key experts that many companies need to remain competitive are unwilling or unable to work in many standard corporate settings.
They change jobs frequently, every three years on average. They have different goals, such as greater flexibility and less rigid workplaces. At the same time, and for the first time, five generations are working together.
As the workforce ages, companies will need to get organized and creative about how they continue to tap into this highly experienced population.
Companies are accessing the supply of independent workers because of challenges they face in finding the talent they require. They are also responding to rapid changes in the workforce. Forty percent of U.S. companies can’t fill the positions they need, estimates the McKinsey Global Institute. Analytical, engineering, and management roles are the hardest to fill. By 2025, 2 million manufacturing jobs will go unfilled, according to a study by the Manufacturing Institute and Deloitte Consulting. The Boston Consulting Group found that labor shortages will be common across 25 major economies from 2020 through 2030. As a result, $10 trillion in GDP will be lost because companies cannot fill the jobs available or create enough jobs for their workers.
Using independent workers can feel complicated and onerous. Managers aren’t sure they can find the quality they need from external workers. They believe—often correctly—that talented independent workers are difficult to locate. They don’t know how to best assemble the right mix of internal and external resources. They worry that independent workers will be difficult to manage, and that their investment in getting them up to speed will be lost. When they do try to use external resources, managers struggle to define a good scope of work, reach contracts with people, and get them paid.
In the workplace of the future, however, there will be little difference between “us”—that is, “our” employees—and “them”—people who do not work in-house for the company. The “war for talent” will be transformed. Acquiring and developing the best in-house talent will not be the only goal—accessing and making great use of talent, wherever it exists, will also be vital.
Organizations that focus on systematically moving to this new world of work will see its benefits more quickly than those that move in this direction piecemeal or in response to competitive pressures. As with any such change effort, it is best to approach the initiative with a well-defined, leader-driven, intentional plan – a purposeful “future of work” initiative.
Measured against the tremendous variety of unique talent that exists around the world, every business, no matter how successful, has limited and narrow capabilities. There are simply not enough skilled employees inside a company (or for workers interested in permanent positions) to accomplish everything that an organization wants to do—even if it creates a fun-filled working environment and offers great salaries, benefits, and perks. Indeed, even the most forward-thinking “future of work” initiatives will prove ineffective at alleviating the root causes of employee discontent: a lack of flexibility and personal meaning.
In addition, with talent shortages in many fields and many parts of the world, even the biggest firms can’t acquire enough workers through the usual hiring channels, or even through “acquihiring,” or buying emerging companies for their people rather than their products or services.
Finally, demographic changes are altering how people view their lives and careers. Those individuals who can offer the most to a company often want to work when they want, where they want, and with whom they want—and they also want to work on varied and interesting projects. They are motivated more by what they are working on and less by the organization they work for.
Smart companies will become more agile at accessing labor pools outside their four walls. But doing so requires a shift in both mindset and operations. Ultimately, the new world of work requires executives to completely revise their relationship with talent.
For those companies that navigate this transformation, the payoff will be substantial—not just in terms of new growth opportunities, but also in terms of new efficiencies. Those that successfully navigate this change will be able to think more broadly about the business.
They will be exposed to best practices from people who have thought about tough problems in different contexts. They will be surrounded by fresh external ideas that energize internal people and push their thinking. They will be free to move into new areas of the world that they otherwise couldn’t have considered if they had been focused on trying to find the perfect worker located near their offices. As a result, they will enjoy more flexibility and a greater number of strategic options.
With the right approach and leadership, the world of on-demand talent promises to bring these aspirations much closer to reality.