(From McKinsey & Company)

The June, 2023 edition of the “Hub” is highlighting a research report from McKinsey & Company. The report explore the various trends which business leaders are facing to address a range of organizational shifts that have significant implications for structures, processes, and people. These shifts are both challenging and harbingers of opportunity, depending on how organizations address them.

The research report, which is an ongoing initiative, pinpoints the most important people, procedural, and structural shifts that organizations are grappling with and seeks to provide some ideas and suggestions about how to approach them. It suggests an integrated approach to achieving organizational change at scale. It comprises developing a clear perspective about the extent of the organizational changes that are truly needed, cultivating talent, investing in leadership, and responding—at scale—to changing circumstances, new challenges, and new opportunities.

The research highlights the ten most important shifts that organizations are currently facing-
 

1. Increasing speed, strengthening resilience
Volatility is a feature, not a bug, in today's organizations, yet half the respondents say their organization is unprepared to react to future shocks. Those able to bounce forward—and quickly—out of serial crises may gain significant advantages over others. To be able to do so requires organizing for speed of response, giving power to your people, and developing a culture of continuous learning.  

2. 'True hybrid': The new balance of in-person and remote work
Since the pandemic, about 90 percent of organizations have embraced a range of hybrid work models that allow employees to work remotely from off-site locations (including home) for some or much of the time. What's important is that organizations provide structure and support around the activities best done in person or remotely. By remaining open to the entire universe of options for how, when, and where employees work, including with a reset of performance expectations, “true hybrid” organizations can distinguish themselves as destination workplaces.

3. Making way for applied AI
AI doesn't just have the potential to supercharge a company's operations; it can also be used to build better organizations. Companies are already using AI to create sustainable, long-term talent pipelines; drastically improve ways of working; and make faster, data-driven structural changes to their organizations. As organizations embrace the opportunities offered by AI, they need to focus on embedding its use in corporate culture, hiring and developing AI-savvy leaders, and being thoughtful about AI-related risks and ethical concerns.

4. New rules of attraction, retention, and attrition
People are revising their attitudes both toward work and at work. Employees who quit (or who are “quiet quitting”) say it isn't just money, work–life balance, professional development, or purpose that will bring them back to work in 2023: it's a combination of all those things. In Europe, for example, 35 percent of people leaving jobs cite unsustainable performance expectations. Organizations can respond by tailoring employee value propositions to individualized preferences in ways that can help close the gap between what today's workers want and what companies need.

5. Closing the capability chasm
Companies across sectors often announce technological or digital elements in their strategies without necessarily having the right capabilities in place to integrate them. To achieve a competitive advantage, organizations need to build institutional capabilities—that is, an integrated set of people, processes, and technology that creates value by enabling an organization to do something consistently better than its competitors do. That means plugging gaps in their core activities, which are often the result of insufficient resources or inconsistent commitment.

6. Walking the talent tightrope
Business leaders have long walked a talent tightrope—carefully balancing budgets while retaining key people. In today's uncertain economic climate, organizations need to focus more on finding ways to match top talent to the highest-value roles. The idea isn't new, but it's the right one in this era of hybrid work models, increased employee mobility, and skill shortages. McKinsey research shows that, in many organizations, between 20 and 30 percent of critical roles aren't filled by the most appropriate people.

7. Leadership that is self-aware and inspiring
Leaders these days are necessarily focused on short-term responses to crises, but they also need to think longer term and cultivate fit-for-purpose behaviors. They need to be able to lead themselves, they need to be able to lead a team of peers in the C-suite, and they need to have the leadership skills and mindset required to lead at scale, coordinating and inspiring networks of teams. That requires leaders to build a keen awareness both of themselves and of the operating environment around them.

8. Making meaningful progress on diversity, equity, and inclusion
Many organizations are focusing on diversity, equity, and inclusion (DEI), but in many cases, the initiatives aren't translating into meaningful progress. What's often missing is a clear link between DEI strategy and the business strategy. One path forward is for leaders to be more systematic early on, considering the objectives and desired level of impact from their programs. To realize DEI aspirations, leaders will need to identify opportunities for making progress within their organizations, as well as for improving their external communities and society.

9. Mental health: Investing in a portfolio of interventions
Nine of ten organizations around the world offer some form of well-being program. But global health and well-being scores remain poor, despite well-intended interventions. Research highlights the link between reports of poor mental health and well-being and organizational issues, including attrition, absenteeism, lower engagement, and decreased productivity. In 2023, organizations need to refocus their efforts on addressing the root causes of mental-health and well-being challenges in a systematic way; one-off and incremental fixes won't be enough.

10. Efficiency reloaded
In today's uncertain business climate, companies are refocusing attention on efficiency measures—more than one-third of respondents in our survey list efficiency as a top three organizational priority. Boosting efficiency is about more than managing immediate crises or getting the same work done with fewer resources. Deploying resources more effectively to where they matter the most promises substantial benefits, including improved organizational health, higher shareholder returns, and better and faster decisions. Being efficient often means placing more trust in your organization and empowering employees.

It isn't surprising that some organizational leaders feel disoriented amid all these developments and unsure about how to adjust to them. What's needed is an integrated approach. Every organization first needs to develop an appropriate perspective on the extent of the changes that could be required—whether fine-tuning or full transformation—and then focus on strengthening talent and leadership before tying it all together to ensure that change can take place at scale.

Companies that have successfully transformed their operating models have been able to boost customer satisfaction scores, work more efficiently, make decisions faster, and raise employee engagement scores.

If talent is the lifeblood of organizations, leaders are the heartbeat. Researches show that an organization is 2.4 times more likely to achieve performance targets if it has a focus on developing leaders.

Click here to access the Research Report – PDF File
(IICA duly acknowledge the authorship/ownership of the research report and republishing the same only for educational purpose)