Want organizational health? Embrace the agility paradox
Leaders across industries are embracing agility, an approach that enables organizations to be responsive, nimble, and poised to seize opportunities in an era of seemingly constant change.
And no, it’s not just another fad. Agility pays. In fact, McKinsey research finds that agile companies—those with both speed and stability—have a 70% chance of being ranked in the top quartile of organizational health. That’s a far higher proportion than we found among companies that focus on only one of those traits.1 In other words, healthy companies are generally agile companies, with both a firm backbone and the flexibility to adapt quickly.
That backbone consists of those critical few things that don’t change much over time, providing a stable platform on which to overlay highly dynamic capabilities. The agile organization is efficient and lean, while at the same time, nimble and quick. It’s a paradox—a paradox healthcare organizations must embrace if they expect to compete.
Few healthcare organizations are truly agile. That must change. Healthcare is turbulent and complex, and the pace of change continues to accelerate. Payors and providers must organize themselves to respond effectively.
It comes down to this stark choice: Be agile or be left behind.
We find it’s useful to use an S-curve to illustrate the path toward agility (Exhibit).
- First, lay the foundation. Crystallize and articulate the strategic rationale for agility, align leadership, and create a lean corporate backbone built around value creation. Design a flat, easy-to-navigate organizational structure, with clear roles and processes. Kill unnecessary bureaucracy, develop an accountability model that empowers lower levels, and untangle your decision making. Firm up your commitment to flexibility; senior and mid-level managers need to be prepared to trade in some of their control for speed.
- Next, build and test your models. Launch multiple prototypes. Refine. Repeat. Don’t wait for all the foundational elements to be in place to start piloting new, agile ways of working; launch agile pilots and develop your stable backbone concurrently. That’s what successful organizations do.
- Third, scale up. Formalize successful prototypes. Make any necessary adjustments to the backbone. Upgrade capabilities and mind-sets to support agile ways of working. Be sure to formalize in the least rigid and bureaucratic ways possible—e.g., working norms instead of rules, capabilities and best practices instead of structural solutions, etc.
- Finally, achieve agility and keep going. Congratulations! You have arrived at the new normal: an agile organization. Your job now is to sustain it. Use agility as a catalyst for continuous performance improvement as you navigate the shifting landscape.
Payors and providers: Pulling the levers
What does this look like in practice? We’ve identified four core organizational areas where balancing this tension between stability and flexibility is critical for payors and providers: strategy, organizational structure, processes, and people. Within each, we’ve identified “agility levers.” Keep in mind that all these levers do not need to be pulled at once. However, to make meaningful progress toward agility, you’ll need to pull multiple levers, considering both the stable and dynamic elements of each.
Area 1: Strategy—The lever here is a strategic platform—one that incorporates clear targets and milestones, but allows flexibility in how to meet those targets.
Area 2: Structure—Finding the right balance in organizational structure is crucial. We’ve identified three levers:
- Boxes and lines: Create a permanent supporting infrastructure to enable autonomous crosscutting teams to form, dissolve, and re-form in response to market demands.
- Governance: Establish and communicate clear decision-making processes and rights, but delegate authority and leverage external partnerships. Charter your key governance bodies around making, approving, and executing decisions as fast as feasible; eliminate unnecessary information-sharing and coordination activities that can clog meeting agendas; and be willing to reduce the number of decision makers to the critical few.
- Location: House core processes and capabilities centrally and manage them consistently. Ensure they can be adapted quickly as the business or regulatory environment changes. Increasingly, agile companies find value in co-location to facilitate collaboration—often physically moving people and teams more frequently (sometimes within the same building).
Area 3: Process—Successful organizations leverage standard core processes to be dynamic. We identified two levers:
- Processes and decision making: Remove the guesswork: Develop lean, standardized core processes, allowing for stable day-to-day management. At the same time, be able to deploy (and dissolve!) teams, bringing key stakeholders into decision making as needed. Design key interfaces and decision points for speed.
- Performance management: Have clearly defined performance management metrics in place to minimize uncertainty. Find ways to facilitate more rapid-cycle goal setting, feedback, and performance reviews; annual cycles are simply too slow for today’s dynamic business environment.
Area 4: People—This area is often most critical to making organizational change and achieving agility. We’ve identified two closely related levers:
- Culture: To strengthen the backbone, communicate clear top-down expectations about “how we run this place.” Identify the behaviors that matter most, and emphasize them consistently in everything you do. Foster strong shared values and purpose, focusing on accountability and ownership. To cultivate flexibility, be willing to give control of important decisions to those closest to the problem. Use feedback, accountability, and development processes to help leaders learn from their mistakes.
- Talent and capabilities: Ensure employees have the capabilities required to support a stable backbone and the overlay of key dynamic capabilities over time. For example, provider organizations need to develop clear recruiting strategies and long-term succession plans.
Embrace the paradox
A final word: Agility requires healthcare organizations to be dynamic and stable, quick and steady. Listening to some of the conversations about agility, you’d think it’s all about speed. It’s not: You must master both elements. Do that, and you’ll be ready to meet the demands of a turbulent healthcare environment.
For a deeper dive—and a simple tool to assess your organization’s agility—see:
- Berlin G, De Smet A, Sodini M. “Why agility is imperative for healthcare organizations.” McKinsey white paper. May 2017.
For more information about how organizations are becoming agile, see these two articles:
- Aghina W, De Smet A, Weerda K. “Agility: It rhymes with stability.” McKinsey Quarterly. December 2015.
- Bazigos M, De Smet A, Gagnon C. “Why agility pays.” McKinsey Quarterly. December 2015.
- Bazigos M, De Smet A, Gagnon C. “Why agility pays.” McKinsey Quarterly. December 2015, drawing on data from a 2015 analysis of McKinsey’s Organizational Health Index.