Organizational Agility is the capability of an organization to successfully adapt or change rapidly in response to an expeditiously turbulent environment. A large presence of agility in an organization can help them react favorably to the development of new technologies, the emergence of new competitors, or unexpected shifts in the market. Although agility can help a company be resilient, responsive, and quick to mobilize, the risks of pursuing organizational agility can end up endangering the company because of the inextensible and jeopardous allocation of resources.
What are the components of Organizational Agility?
In order for organizational agility to be successfully implemented, the company in question needs to have 2 key components: Dynamic Capability and Stability.
Dynamic capability is the ability for companies to move with flexibility and nimbleness. Start-ups, for instance, are the most well-known for acting quickly. They adapt easily to the market because of their chaotic, frenetic environment. However, once they grow beyond a certain point, start-ups struggle to maintain the same momentum they had earlier in their business cycle.
Stability, on the other hand, involves maintaining the status quo or growing in a methodical but slow manner. A stable, bureaucratic company commonly follows a risk-averse oriented strategy without implementing any major changes in its current operations. Resources in these big companies are allocated into existing operations to achieve moderate, incremental growth. Large and well-established companies often become bureaucratic because of the development of management layers, policies, and other rules. As a result, bureaucratic organizations become efficient and reliable, but inelastic and slow.
What are the risks of pursuing Organizational Agility?
Dynamic capability and stability, as you may have guessed, are not compatible—in fact, quite the contrary. Organizational agility is not possible without stability, and well-established, stable companies were once dynamic and flexible. Generally, the risks surrounding the pursuit of organizational agility is that bureaucratic companies are inductile and inflexible:
For big, successful companies, it’s very difficult and risky to become agile. These companies have grown comfortable; they have a legacy. When stable companies try to implement initiatives to change and become more agile, they struggle. When companies are faced with uncertainty, they go back to what worked in the past. They exert control and add processes, rules, and structure. As a result, companies end up with a managerial structure even more convoluted than before.
If companies move too quickly and deviate from stability, they start losing any sense of centralization, risk management, quality control, or even the ability to realize economies of scale. The result for large companies is that they try to act like a start-up. As a result, they run into all kinds of problems such as decentralizing and delegating too many critical decisions, taking unnecessary risks, underutilizing their scale, and needlessly reinventing processes. Though moving fast could work in a 10 person start-up, it won’t work on a larger, global scale. Conversely, there are companies who move too slowly and become very rigid. Subsequently, these organizations get stuck and can’t move fast enough to keep up with customer trends, competitors, new technologies, and overall changes to the market.
Companies have to think about what’s dynamic and what’s stable when it comes to people. Large companies have a culture that’s ingrained, stable, and very difficult to change. A healthy culture takes a long time to build and requires a lot of planning. What some companies don’t realize is that company culture is interconnected throughout all aspects of the organization. An abrupt change to a company’s culture greatly affects other parts of its operations, decision making, strategy, processes and performance, which makes it exceptionally difficult to facilitate. An organization’s culture and core competencies are key sources of competitive advantage and uniqueness that are typically resistant to change. Attempting to experiment with organizational agility by developing a new culture without considering the effects on other facets of the organization can easily cause internal distress and turmoil.
Amidst all the ambiguity, fear, and uncertainty, it’s important to realize that there is a dark side to organizational agility. Inelasticity, poor pacing, and resistance to culture change are all quintessential reasons why attempting to implement agility is not worth the risk.
How Can WGA Help?
WGA Consulting is a global management consulting firm, helping clients make and execute the big decisions on strategy, operations and transformation. The firm focuses on solving areas of senior management concern, creating enduring value and delivering impactful results. We serve our clients in the areas of strategy consulting, management consulting and business transformation.
Our experience allows WGA to offer singular and unique objective recommendations and execution services that will give companies the ability to adapt, renew, and prepare themselves to succeed in a turbulent environment. We provide Business Transformation and Culture Change services that can help your organization prepare for the expected and unexpected. Our services provide the benefits of organizational agility without the risks of employee sabotage, revolt and management mutiny.