Organizational evolution and getting empowerment right

Sven Houthuys and Tom Welchman, Parters at McKinsey & Co, write on how properly guided and supported empowerment offers to be the great management challenge of our times.

The 4th industrial revolution—the promise of growth and prosperity from a machine intelligence-enabled era of change—has been at the forefront of conversations about production for several years. Yet for many this promise has failed to become a reality. Why? Because the organizational models required to make technology truly work are missing.

Large industrial organizations have traditionally focused on excellence in processes, often for the mass market, such as cars rolling off an assembly line. But today, standard work is much more automated. What’s left is increasingly nonstandard, yet most industrial organizations aren’t set up for nonstandard work—leaving them unable to change at the pace innovation requires.

The experiences of exceptional organizations show that capturing technology’s opportunities means making eight mutually reinforcing shifts that strengthen structure, people, processes, and technology in tandem. We explore them in full in our recent article ‘Today’s industrial revolution calls for an organization to match‘.

Success in this transformative phase relies not only on technology, but also fostering management capabilities that empower workers to develop and change the business around them—within boundaries. Resolving this apparent dichotomy of achieving managed empowerment will enable some businesses to grow and differentiate themselves significantly faster than others. 

Independence vs prescription 

The key ingredient here is the ability of managers to embrace achievement-orientated, or ‘mission-led’ leadership—to encourage experimentation and innovation while setting clear boundaries, expectations of clear outcomes and confirming people’s understanding (exhibit). That calls for clear outcome measurement, alongside explicit, broad, and intense communication. People with highly developed inter- and intra-personal skills have a head start here. Managers who rely, or have relied, on more of a systemized, tick box approach are going to struggle. 

Exhibit

OKRs rule OK.

So, leaders and managers need to achieve strategic goals without the wasted time and effort involved in trying to dictate exactly how the goals are to be achieved—or even in laying out the precise process. Employees intuitively know this – and the perils of micromanagement for experience and effectiveness are well documented. Leaders and managers must intentionally build alternative muscles – accepting that detailed prescription is likely beyond them, even if they had access to unlimited time and effort. How are they to proceed?

Originally developed at Intel and expanded at Google, objectives and key results (OKRs) have emerged as an effective mechanism that encapsulates this balance. When employing OKRs, subunits use the strategy to articulate goals and align what they do each day with the organization’s direction. Many organizations have their own version of or language for this – the underlying principles are what matter most.

Using OKRs effectively requires clarity from senior leaders about their strategic direction for the company. Accordingly, an empowered organization requires more effort from senior management, not less. Frequent communication, confirmation, and discussion of objectives and results that enable the factory to tailor OKRs to specific circumstances. Frontline workers and managers can then make intelligent trade-offs between, say, maximizing profitability from current production and reducing potential costs for future changeovers.

Making business unusual, the day-to-day

In essence, success will come from making ways of working that might have seemed “unusual” in the past, “business as usual” today—and to move to that management mindset as quickly as possible. Our article points to the example of flipping the ratio: instead of deploying 80 percent of people in processes and 20 percent in projects, they can aim for 80 percent in projects.

Learnings from the few companies that have successfully transitioned to a project-based organizational model include the assembly of well-functioning internal talent markets, a culture and expectation for setting clear boundaries and goals, and the development of achievement-oriented leadership. Effective leadership of a project team requires different skills than those traditionally encouraged in line leadership roles.

Some parts of the journey to an achievement-orientated, project-based model are relatively uncontroversial: the democratization of data, continual re-invention alongside technological developments, and rapid skills building within workflows. Others are undoubtedly more challenging as they involve deconstructing existing ways of working. These include moving from departments to ecosystems, abandoning habitual, detailed planning, and promoting the importance of projects over processes. As a shortlist, these final three elements are perhaps a good starting point for change-oriented, strategic internal conversations, and a good place for leaders hungry for productivity growth to focus their attention.