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Our 2018 Annual Review

Design for simplicity

In 2018, we showed the power of ingenuity to build a positive human future in a technology-driven world. And we highlighted how organisational agility unlocks this power. Our research found a key aspect to agility is creating simple systems, processes and structures.
 

Design for simplicity

Innovative, dynamic and effective

Organisations today are under pressure to quickly adapt to changing customer needs, changing competitor landscapes and changing technologies. There isn’t time to be held back by complexity – the alternative is too unpalatable. Yet we continue to see it everywhere. In fact, 60 per cent of organisations we surveyed cite ‘complex organisational structures with too many layers of management’ as a barrier to being fast enough to respond to market change. We can all think of areas of our business that feel overcomplicated or inefficient, and we have experienced how this complexity stifles a business’s ability to innovate and deliver on its plans.

Typically, when organisations respond to change, they build on to their existing business design – bolting on new capabilities, adding to teams’ accountabilities, creating new propositions or channels to market, or adopting new technologies. And they manage it all through new (often more complex) governance. The bottom line: the act of changing has unwittingly created a more complex business.

60% of organisations are hindered by complexity

Finding your trapped innovation

There’s a paradox here: to be agile enough to succeed in a changing world, you need to design your organisation to be simple, effective and dynamic. However, if you’re in a rapidly changing environment, it’s likely your organisation has become more complex as you’ve sought to accommodate change.

Today’s top-performing organisations are breaking this paradox, creating simpler businesses that respond faster and progress further towards success, and unlocking the innovation trapped inside their teams.

By flattening hierarchical layers, aligning teams around what really creates value and empowering people to make business decisions from lower levels, this group are able to outperform their competitors by up to 30 per cent. We refer to these organisations as ‘the Agile Cohort’ because they have greater clarity in how they deliver on their commitments and can make change happen faster.

Unlocking the value of simplicity can be challenging, especially for established organisations. So, what can we learn from the Agile Cohort to help us overcome these hurdles?

Decentralise and delayer your organisational structure

The traditional approach to driving change is for top teams to puppeteer the change from on high. But to truly embrace a quicker pace, it’s important the people who are first presented with that change feel confident responding themselves. Not everything needs to be flagged to the top – decentralisation can unlock your business’s ability to deliver change.

To be confident in your people’s ability to make tactical decisions, you must be certain they’re clear on their accountabilities and how they contribute to customer outcomes and business performance.

A radical example is the online retailer Zappos. The company has been using Holacracy, an approach that promotes self-management and self-organisation. As Zappos originally grew, they became slower to respond to customer feedback due to the many layers employees needed to go through to get things done. By using Holacracy, every employee can quickly act on customer feedback using guides and checklists. All new employees at Zappos, no matter what their area of expertise, go through customer service training to ensure great customer service flows through their entire organisation.

This approach tends to go hand in hand with removing unnecessary layers of management. Focused management is powerful, but excess management is debilitating. In our Agile Cohort, 47 per cent empower decision-making from anywhere in the organisation.

The same group have created flatter organisational structures, with few layers of management.

Structure teams around what creates value for your customers and your business

Organisations have tended to organise around technical or operational functions, based on theories of division of labour and specialisation of tasks. However, we find this approach limits an organisation’s ability to respond to change quickly when it’s needed most.

Today’s agile leaders think differently about the set-up of teams and the roles individuals play. The most successful organisations have decided to organise their people around what’s most valuable for customers. Over half of the Agile Cohort have concluded that in their business this means organising around their products and services. In these cases, they have grouped people to work in teams focused on similar products and services, regardless of their specialist skills and competencies.

This makes operational sense – it helps simplify and bring clarity to how work is delivered, but it does mean a significant change to what it means for your team leaders. Instead of being the most senior functional experts, leaders in this new world need to be able to get the best out of multidisciplinary teams.

These teams are already well established in agile project teams, but they are now proving valuable in creating simpler organisations. A large UK bank is forming multidisciplinary teams including software engineers, customer contract personnel, business analysts and proposition developers to drive new service experience (for example, home buying). A large medical diagnostics business is pulling different business and technical skills into common teams to drive faster product development and build more valuable customer solutions.

Teams organised around customer value, along with clear accountability, delayered management hierarchies and more decentralised decision-making, create businesses that are more capable of understanding the need to change and delivering on those changes at pace.

The alternative, the traditional top-down approach, adds complexity to the business, compounding the problems and making life tougher for the business and everyone in it.

Our client work in action

Picture of Schroders

Schroders

Transforming into an agile global organisation

Schroders

Transforming into an agile global organisation

We led an Agile transformation programme for Schroders’ global IT organisation. That included training more than 600 IT and business professionals in Agile techniques. We also developed a new operating model for the IT organisation to bring focus and structure to the way it serves the business. We helped bring people on board with the changes through a global network of change champions.

Now that they’re using Agile methods, the IT organisation is completing projects faster – over nine months the speed of release went up by 20 per cent. They’re creating more user-friendly systems and there’s a closer, more productive relationship between the IT organisation and the business. This will support Schroders’ ambitions for the future.

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2018
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PA Consulting Group Half Year Report - September 2019

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