Leading an Agile Organization with an Efficiency Mindset Achieving both agility and efficiency requires a new managerial mindset, new organizational structures, a dramatic shift in the nature of work, and continued adoption of tech and automation.
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All indicators seem to point to markets, organizations, and the nature of work being transformed on a massive scale and at an accelerating pace within the coming decade. During this mass transformation, up to 40 percent of the U.S. workforce will see their current jobs eliminated, requiring workers to be reassigned, retrained or upskilled as their organizations respond to the continuous challenges and opportunities of the ever-changing, hyper-competitive market.
As innovation accelerates, organizations will likely have to optimize for both efficiency and agility, driven by the relentless demand for more value per unit cost. These two often-opposing organizational goals will force us to rethink work and retool workforces. Organizations of the future will need to be agile and team-based, with access to a skills-oriented, fluid, expert workforce. They will also have to embrace automation, which will cause huge disruptions in labor markets, and to the nature of work.
Achieving both agility and efficiency requires a new managerial mindset, new organizational structures, a dramatic shift in the nature of work and the makeup of workforces, and the continued adoption of advancements in technology and automation.
Market forces demanding change.
The number of consumers, their market power, and their expectations are growing rapidly. While the expanding market is being driven by globalization, developing economies, and birth rates, the shift in expectations is being fueled by a transition in the market and workforces from Boomers to Millennials.
Global markets and competition will continue to grow. Despite recent trade tensions, the largest economies and organizations benefit economically from open trade between nations. During the past 100 years, total exports by countries have grown 40 times. Growing global markets and increasing competition (and motivations for profit and growth) will require industries and companies to continually reduce costs, improve quality and innovate in order to survive.
Manufacturers will need to respond to consumers worldwide who are demanding more every day—more products, more often, with more features, higher quality and, if possible, lower prices. A simple illustration of this accelerating trend can be seen in the adoption rates of consumer technology in the U.S. It took over 80 years for the telephone to penetrate 50 percent of U.S. households. Cell phones only needed 20 years to reach this milestone. Smart phones achieved this feat in just 10 years. Globally, we will see these trends accelerated as the world's population grows and economic development spreads.
While consumer demands are growing, so are their numbers. The world's population is approaching eight billion, a number that continues to grow at an alarming rate. Consider that in 1804, when the Industrial Age was just beginning, there were only one billion inhabitants on earth. It took 123 years to double the world population (by 1927). It only took 47 years to double again to four billion by 1974. And we have almost doubled again through 2020.
The global consumer market is growing even faster as one billion consumers are now graduating into the middle class every seven years. In fact, it was projected that over half of the world's population (four billion) would be in the middle class by 2020 for the first time ever. Another 1.2 billion consumers will join them by 2028.
Baby Boomers—those born between 1945 and 1964—have dominated the industrialized world for the past half century. The Boomers lived the American dream. They experienced a U.S. that dominated in both product innovation and production. And they created the policies, practices and norms that still govern most workplaces today. The dominance and influence of Baby Boomers is waning however, as the millennial generation establishes itself in the workforce and marketplace. Millennials—born between 1980 and 2000—will represent 50 percent of workers in 2020. And with more millennials entering the workforce and thousands of Baby Boomers retiring every day, their representation is expected to reach 75 percent of the global workforce by 2025.
Technological advancement enabling change.
The continued acceleration of knowledge and rapid technology adoption is enabling and forcing organizational change that can cause workforce disruption on a massive scale. If that's the case, workers and organizations will need to adapt or be left behind.
Although the rate-of-knowledge growth is hard to quantify, researchers in the mid-20th century believed knowledge to be doubling every 50 years. By 2004, some postulated that it was doubling every 18 months. In 2010, IBM estimated that knowledge was doubling every 18 hours. Companies will be forced to discover, accumulate and apply their increased knowledge to improve processes, products and services in order to gain or maintain a competitive advantage over their competitors.
Over the next decade, it has been estimated that industrial robots will displace over 1.5 million jobs in the U.S. manufacturing industry. Millions of additional jobs will be replaced by bots in the agriculture, warehousing and transportation sectors. The proliferation of robots is the result of their rapidly expanding capabilities at a time when their costs are plummeting. How fast are costs falling? Consider the cost of computing power, a critical element enabling all robots. In the 1960s, when the US manufacturing sector was the envy of the world, the cost of the computing power needed to run the equivalent of an iPad cost over one million times more than it does today.
As this downward trend in the cost of automation continues, companies will replace many lower-level blue and white-collar jobs with bots and software that will take over low skilled, repetitive work. This transformation will be driven by every organization's need to deliver efficiencies, lower costs, improved quality and predictable capacity.
The number one problem shared among entrepreneurs today is finding, vetting, hiring, and retaining expertise.
Leading an agile organization with an efficiency mindset.
Business leaders will be challenged to develop increasingly agile and efficient organizations. To do this, they will need to approach management very differently from their mentors. In fact, all of us that want to survive in the new Digital Era will need to throw out old paradigms and invent new ones—new paradigms that will afford agility and reward efficiency.
Fortunately, I've had an exciting 20 year career as a turn-around CEO, a role that has demanded the application of novel management techniques to deliver massive organizational changes. Many of the companies I've led began their transformational journey with their backs against the wall—hemorrhaging cash with near empty bank accounts, and with only a few weeks or months to change before bankruptcy.
I applied the following managerial approach to organizational transformation in every company I joined. My suggestion, to businesses leaders wanting to prosper in these extremely challenging times, is to follow these 10 steps:
1) Choose measurable outcomes that will propel your organization forward, and the core processes that will produce those successful results.
2) Define and refine those core processes with the goal of simplification and efficiency. Consider creating a version of an assembly line with clearly defined hand-offs between each unit of work, or team. Continue to refine each process until it can be drawn so that it is continually moving forward towards its desired outcome.
3) Deconstruct the work being done in each process, breaking the work down into component parts.
4) Define the required capabilities for each unit of work by determining the skills and skill level needed, and then calculate the amount of work required per unit of outcome.
5) Describe the positions required for each portion of work, and hire the experts suited for the defined work based on their specific expertise and skill level.
6) Rebuild the organization around teams of experts focused on delivering defined outcomes in a common process, and not with the old departmental structure.
7) Empower your teams to self-manage. Give them their goals, measure their results regularly, and adjust their composition as often as needed.
8) Build an agile culture and workforce by celebrating successful completions, and then disassembling and reassembling teams as new projects or outcomes are defined, or requirements change.
9) Continually improve processes and replace redundant tasks by automating them with software or robots that drive efficiencies.
10) Only hire, as employees, that portion of your workforce that matches the expertise and capacity required by your organization on a consistent basis. Use freelancers, consultants and fractional experts to augment your core as needed. This will allow you to build and sustain a strong culture and an energized core that will be stimulated and learn from the continual injection of fresh experts.
Each of these steps will be difficult to embrace holistically, but I suspect that many of them are already being practiced on the fringes in many of your many organizations. Although most managers will want to skip to steps 9 and 10, which will augment organizational agility and efficiencies in the short term. Only those organizations that implement all 10 steps, and rebuild their organization's core, will survive and thrive.
The ideal workforce for the future of work.
Every organization should retain a coveted, core workforce that is the heart and soul of the company. The kinds of workers that will build and maintain the culture, mission and overall sound of the organization.
It is beneficial to add external experts into the mix, as needed, to fill out teams tasked with specific outcomes. These experts might be made up of individual freelancers that operate like independent consultants, or integrated into corporate processes like fractional employees. The organization might also hire complete groups of freelancers for a project that are assembled on short notice and for short periods of time, like a flash team of experts.
For workers and freelancers to succeed in the future, like musicians, they will need to continually hone their craft. They should be upskilling, experimenting with, and learning new technologies, as well as networking on a continual basis. Individuals will need to be agile, efficient, self-motivated, but also be team players.
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