Insights to guide organizations in 2021, part 1

Dealing with uncertainty may be a certainty for leaders as they approach 2021. To help guide them and their organizations in this new year, we’ve gathered some of the leading insights and observations from McKinsey’s Organization Practice.

2020 accelerated many existing organizational trends, from the adoption of new, speed-enhancing operating models to a growing emphasis on values and purpose. In the first post of this three-part series, we’ll explore key takeaways focused on organization design and culture and change.

Organization design

In 2020, organization design centered around models that facilitated fitter, flatter, and faster operations and decision making, fast-tracked by the COVID-19 pandemic. The following trends remain top of mind for organizations in the new year.

  1. Adopting new organization models for speed. Among the many challenges of 2020, organizations had to rapidly adopt and scale new operating models. Tech-enabled and helix or full agile operating models helped organizations speed up and thrive during these high-stakes times. In addition, organizations have and will continue to embrace a hybrid-remote operating model to unlock value during the crisis and beyond.
  2. A focus on decision making. In today’s business landscape, a delayed decision can be worse than a wrong decision—and during the pandemic, we saw organizations making decisions faster than ever. As companies organize for the future, we’ve built on our pre-pandemic research with additional actions to sustain rapid decision making. Organizations and their leaders benefit from empowering others to make decisions and enabling an efficient, informed decision-making process through technology.
  3. An increased shift toward organizing for the future. Who are we? How do we operate? How do we grow? These are three pressing questions leaders are asking as they prepare their organizations for the first true information revolution. The winners of this paradigm shift will be distinguished by their flexible operating models based around networks of teams, unprecedented industry collaboration, and more human companies defined by purpose.

Additionally, we’ve noted increasing interest in global shared expertise and project pools—enabling more flexible talent reallocation globally—and lean, efficient corporate centers in the age of digitalization. Expect to read more from the Organization Practice about these topics in the coming year.

Culture and change

In measuring the organizational health of companies during the COVID-19 pandemic, we’ve identified four primary themes that differentiate the healthy from the unhealthy. Organizations should continue to prioritize the following:

  1. Grounding work in values and purpose. While we’ve seen a noted increase in employee motivation during the pandemic, only one lever truly distinguished healthy organizations: meaningful values. Organizations driven by values and purpose have been able to lock in high levels of motivation by design, versus in reaction to some of the adrenaline-fueled change we’ve observed over the past months.
  2. Setting the innovation agenda from the top. The ability to do things differently and adapt—already important pre-pandemic—has proven especially critical now. Organizations should set a clear innovation agenda from the top, and leadership should source improvement ideas from all employees through a culture of creativity and entrepreneurship.
  3. Increasing the flow of information and transparency. Much of the literature about management during crisis situations centers on access to information and a sense of agency. Most employees outside of leadership positions don’t have access to relevant information, thus exacerbating their anxiety during a crisis. Sharing knowledge across the organization and encouraging transparency about company performance may not alleviate all employee concerns, but it’s a far better practice than keeping them in the dark.
  4. Creating stability through discipline, quick codification, and clear roles. Although everyone talks about the herculean efforts of employees during the crisis, these alone didn’t help organizations sustain momentum. Rather, the ability to establish a stable backbone is what guaranteed sustainable organizational health. Operational discipline and codified approaches can reduce frustration and help to avoid re-inventing the wheel. Clarifying roles ensures that employees understand what is expected of them as well as their contributions to the bigger picture. Lastly, practicing responsible financial management—while perhaps a bit obvious—deserves a callout as a hallmark of healthy organizations.

Be sure to read the second part of this series, which offers insights focused on inspiring individuals, strengthening talent management, and enabling reskilling.

Learn more about our People & Organizational Performance Practice