BEST PRACTICES REPORT

Strategic Planning and Implementation Best Practices for

Achieving Organizational Agility

By Holly Lyke-Ho-Gland
 TABLE OF CONTENTS

Report Section Page Number

3
INTRODUCTION
3
IMPORTANCE OF ORGANIZATIONAL AGILITY
3
THE BUSINESS ENVIRON MENT’S ROLE

5
WHAT DRIVES ORGANIZATIONAL AGILITY?
5
STRATEGIC RESPONSIVE NESS

9
ORGANIZATIONAL FLEXI BILITY

15
OBSTACLES TO ORGANIZATIONAL AGILITY
15
OPERATIONAL SILOS

17
ORGANIZATIONAL RESIS TANCE

18
SPEED OF DECISION MA KING

20
UNALIGNED BUSINESS P ROCESSES

21
POOR KNOWLEDGE MANAG EMENT

22
WHERE TO FOCUS

23
CONCLUSION

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 INTRODUCTION
More than half of CEOs responding to a PWC 2016 CEO survey believe their organizations are now facing more
threats and opportunities than three years ago (thanks to disruptive technologies, the internet of things, more de-
manding customers, growing regulations, etc.) Yet most of the CEOs are concerned that their organizations lack the
skills and flexibility necessary to identify and deal with new opportunities and threats. Organizational agility allows
organizations to overcome such obstacles.

In February 2016, APQC and its research partner Strategic and Competitive Intelligence Professionals (SCIP) con-
ducted a survey to gauge organizations’ agility and what strategic planning practices (i.e., planning activities, inter-
nal and external assessments, and implementation practices) affect that agility. There were 91 respondents to the
survey.

IMPORTANCE OF ORGANIZATIONAL AGILITY

Organizational agility is the ability to quickly identify and execute initiatives to respond to opportunities and risks
that align with overall strategy. Organizations have to keep pace with the opportunities and threats created by
growing customer demands and disruptive changes such as big data and the internet of things. This means that or-
ganizations must not only track changes in their business environments but also nimbly change direction and imple-
ment new initiatives in order to avoid risks or achieve competitive advantages.

In its survey, APQC asked respondents to indicate how important organizational agility was to their ability to stay
competitive in today’s market. An
overwhelming majority of organiza-
tions consider organizational agility Importance of Organizational Agility
“important” or “extremely im-
portant” (Figure 1).

However, given that not all business

environments are the same, do all
organizations need to focus on organ-
izational agility to the same degree?

THE BUSINESS ENVIRO N-

MENT’S ROLE
According to Navigating the Dozens
of Different Strategy Options by Mar-
tin Reeves, Knut Haanaes, and
Janmejaya Sinha, there are four ar-
chetypal business environments
based on two environmental spec-
trums: predictability and malleability.
Predictability indicates how easy it
for the organization to see changes in
Figure 1

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 the environment ahead of time, while malleability refers to how much the organization can directly change its busi-
ness environment. Furthermore, which archetypal business environment an organization falls into aligns with its
strategic approach. The four business environment archetypes follow.

1. Classic—the environment is predictable and unmalleable. Organizations in this environment gain competi-
tive advantages through economies of scale and differentiation, both of which require comprehensive anal-
ysis and planning.

2. Adaptive—the environment is unpredictable and unmalleable. Such organizations achieve competitive ad-
vantages through continuous awareness of shifts in the business and ongoing improvement and experimen-
tation.

3. Shaping—the environment is predictable and highly malleable. Organizations in this environment create
competitive advantages by working collaboratively with other organizations to shape their respective mar-
kets.

4. Visionary—the environment is unpredictable and highly malleable. Organizations in this environment

achieve competitive advantages through comprehensive analysis and by being first to the market or
through disruption.

APQC posits a similar relationship between organizational agility and business environment; that is, not all organiza-
tions require the same level of agility, since not all business environments require the same level of speed and flexi-
bility. Hence, APQC asked respondents which of the archetypal business environments represent their environ-
ments.

Most of the respondent or-

ganizations are either classic
Business Environment’s Predictability and Malleability or adaptive, with little ability
to shape their business envi-
ronments. As indicated in
Figure 2, most organizations’
business environments are
predictable (which can in-
crease organizations’ ability
to identify opportunities and
risks) but are unmalleable
(which can inhibit their ability
to exploit that information).

Figure 2

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To understand which environmental factor most influences the need for organizational agility, APQC looked at the rela-
tionships between business environments and the importance of organizational agility (Figure 3).

Business Environment’s Predictability and Malleability

Figure 3

The findings indicate that there is a relationship between business environment and the importance of organizational
agility. Organizational agility is more imperative for organizations that work in highly malleable environments, such as
shaping or visionary ones. This makes sense given that organizations have a better competitive advantage by reacting
to and acting on opportunities and risks in malleable environments, which ultimately enables them to shape their busi-
ness environments.

WHAT DRIVES ORGANIZATIONAL AGILITY?

To get a better understanding of what drives organizational agility, APQC asked respondents to rate their competency
on two components of organizational agility: strategic responsiveness and organizational flexibility.

STRATEGIC RESPONSIVE NESS

Strategic responsiveness involves identifying opportunities and threats, assessing their value to an organization, and
developing a plan to respond to them quickly. Hence, strategic responsiveness is closely related to organizations’ stra-
tegic planning practices and the internal and external inputs that support those planning activities.

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Organizational Characteristics and Responsiveness
To understand what organizational characteristics improve or deter strategic responsiveness, APQC ran correlation
analysis against strategic responsiveness and organizational characteristics including revenue, number of regions of
operation, number of hierarchal layers, and employee tenure. None of the organizational characteristics correlate to
improved strategic responsiveness.

Role of Strategic Planning on Responsiveness

Because strategic planning and strategic responsiveness relate to an organization's ability to quickly respond to oppor-
tunities, APQC conducted correlation analysis on frequency of planning activities, governance of planning activities,
functions involved in planning activities, and types of planning activities. Although governance practices are not statisti-
cally significant, the frequency of planning activities, functions involved, and types of activities, and inputs increase or
decrease an organization’s strategic responsiveness competency.

Frequency of Planning Activities

To test what rate improves strategic responsiveness, APQC ran correlation analysis on strategic responsiveness compe-
tency against the frequency of corporate and business line planning activities (Figure 4) and internal (e.g., inputs on the
organizations people, process, tools, and performance) and external (e.g., business environment and competition) as-
sessments used during the strategic planning process (Figure 5).

Frequency of Planning Activities on Strategic Responsiveness

Figure 4

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Strategic responsiveness competency generally increases with the frequency of corporate strategic planning activities.
Though ongoing corporate planning has the highest level of strategic responsiveness competency, there is negligible
improvement between ongoing planning and annual planning with quarterly rolling plans frequencies. Organizations
that use an annual planning cycle with quarterly rolling plans have the ability to balance long- and short-term goals.

Organizations that conduct business line planning either continuously or every two years report higher levels of strate-
gic responsiveness competency. A general delay between the frequency of corporate and business line planning makes
sense given that business line planning activities should be led by and act as an extension of the corporate strategy.

Frequency of Internal and External Assessments on Strategic Responsiveness

Figure 5

The internal and external input assessments tracked in Figure 5 are typically conducted at intervals that align with the
regularity of strategic planning activities and reviews conducted by the implementation team. Internal assessments
include information on performance and trends of the organization’s people, process, systems, and performance,
whereas external assessments include information on performance and trends from outside an organization (e.g.,
business environment and competition) to support the strategic planning process.

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 Organizations that conduct internal and external assessments on a continuous or quarterly basis tend to have the
highest levels of strategic responsiveness. Continuous assessments allow organizations to make decisions based on
real-time information, although they're not always the best fit with their decision-making practices. Organizations
have to ensure they are not overwhelmed by real-time data and that they include context for decision makers.
Providing context entails taking a broader look at what external factors affect the data. For example, adoption
curves might decrease in the short term if there is an organizational change or someone new takes over a role. This
context is important and must be communicated to stakeholders to set expectations for what they are monitoring.
The communication on context ensures that the stakeholders are aware of what the shift in their dashboards
means so that they can track it and take corrective actions if the issue persists.

Functions Involved
Although APQC analyzed all the core functions' involvement in strategic planning activities, the inclusion of only one
function, market/ business intelligence, has a positive impact on strategic responsiveness. This makes sense given
market/business intelligence’s role in monitoring internal performance and external inputs for decision making.

Planning Methodologies
To further explore the role of strategic planning practices, APQC looked at which strategic planning methods im-
prove strategic responsiveness. Most of the survey respondents use either budget-based planning or balanced
scorecard planning. Although these two practices are not statistically significant, the following two less prevalent
practices are.

Scenario planning has a positive impact on strategic responsiveness. Scenario planning is a methodology that some
organizations use to develop flexible long-term strategies. It requires organizations to:

 collect inputs (e.g., social and market trends, political or regulatory changes, and financial or operational
performance data),

 draft scenario situations around potential opportunities or risks,

 disseminate the scenarios to the participants,

 facilitate a discussion on the various scenarios,

 pinpoint the scenarios’ implications, and

 ultimately create outputs (e.g., scenario triggers and mitigation or action plans).

Scenario planning, by its very nature, supports strategic responsiveness. It’s a structured practice that ensures that
decision makers are looking at future opportunities and risks, assessing them against organization’s needs, identify-
ing early warning triggers, and developing contingency plans they can execute quickly.

Systems analysis has a negative impact on strategic responsiveness. Systems analysis is a method to deconstruct a
business or procedure into its component parts in order to understand the overall system's effectiveness and role of
each component in accomplishing goals. Systems analysis supports understanding core competencies, interactions
between component parts, and root causes, but it is also complex; and its multiple iterations of analysis to verify
results are time-consuming. So it makes sense that the method would prolong decision making and the overall stra-
tegic responsiveness of an organization.

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Planning Inputs
APQC also tested which internal and external inputs affect organizations' strategic responsiveness. APQC found that
three internal inputs and one external input improve strategic responsiveness (Figure 6).

Relevant Inputs to Improve Strategic Responsiveness

Figure 6

Two of the relevant internal inputs that improve strategic responsiveness, customer retention and perceptions of an
organization, are leading indicators of organizational performance. Leading indicators are measurable factors of perfor-
mance that indicate a change is happening before it occurs. Leading indicators help organizations pinpoint issues early
and provide an opportunity to understand an issue's root cause and develop a contingency plan.

The other two inputs serve additional purposes. Core competency assessments help organizations objectively under-
stand their strengths and strategic or marketplace advantages. This information helps organizations objectively deter-
mine if an opportunity is a good fit. And monitoring social trends allows organizations to look externally for new oppor-
tunities and risks.

ORGANIZATIONAL FLEXI BILITY

Organizational flexibility is the ability to shift execution to a new initiative rapidly. This includes organizations’ ability to
put in place or adjust processes and organizational structures. Hence, organizational flexibility relates to organizations’
strategy implementation practices.

Organizational Characteristics and Flexibility

To understand what organizational characteristics improve or worsen organizational flexibility, APQC ran correlation
analysis against organizational characteristics including revenue, number of regions of operation, number of hierarchal
layers, and employee tenure. Only one characteristic correlates with organizational flexibility: the number of manage-
ment layers in the hierarchy.

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As the number of management layers between front-line workers and the CEO increases, organizational flexibility de-
creases (Figure 7).

Number of Management Layers and Organizational Flexibility

Figure 7

Organizations with eight or more layers are almost four times as likely to indicate their organizational flexibility is
"underdeveloped" compared to their peers in organizations with three or fewer layers of management. In other
words, the more layers of hierarchy there are in an organization, the more engagement and steps there are to change
directions or implement an initiative, which ultimately worsens an organization’s flexibility.

Role of Strategy Implementation on Flexibility

Strategy implementation and organizational flexibility both relate to organizations' ability to execute initiatives effec-
tively and in a timely manner. To understand the relationship between implementation practices and organizational
flexibility, APQC conducted correlation analysis on frequency of strategy implementation activities, governance of im-
plementation, success measures, communication and incentive practices for implementation, and staffing responsive-
ness to changes in initiatives. Although governance and measures of success are not statistically significant, the fre-
quency of planning and implementation activities, communication and incentive practices, and staffing practices do
have an impact on organizational flexibility.

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Frequency of Implementation Activities
The idea behind organizational flexibility is how quickly an organization can change directions and execute new initia-
tives. For most of the respondents, managing strategy implementation is either within the purview of its strategy de-
partment or a cross-functional implementation team.

To understand the appropriate frequency for implementation reviews, APQC ran correlation analysis on organizational
flexibility competency against frequency of implementation team meetings (to review and revise a plan) and frequency
of implementation teams meeting with senior management for review and revision of a plan (Figure 8).

Frequency of Implementation Reviews on Flexibility

Figure 8

The frequency of reviews, both of the implementation team and with senior management, directly improves organiza-
tional flexibility. APQC has found that regular reviews are a best practice for any strategy implementation; reviews pro-
vide organizations with a structured process to understand performance and adjust the implementation plan and asso-
ciated resources as needed. However, organizational flexibility is at its highest when an implementation team meets
monthly to review and revise a plan and meets quarterly with senior management for reviews.

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Communication and Incentives
Rather than redesign plans, implementation and related change management practices are typically the source of frus-
tration for organizations enacting changes. Most changes require a culture shift, and that means changing the norms
and behaviors of employees through communications and incentives during implementation.

To understand which level of communication and incentives provide the most value and improve organizational agility,
APQC ran correlation analysis on communications about responsibilities in implementation and incentives—by role
within an organization—against organizational flexibility.

Organizations are typically good at communicating senior management’s role in changes; as seniority level increases,
so does the frequency of communication about the individual’s role in implementation (Figure 9). However, organiza-
tions tend to under-communicate front-line employees’ role in implementation, be it quarterly or annually.

Communication on Role in Strategy Implementation

Figure 9

When comparing the frequency of communication against organizational agility, the frequency for supervisors and
managers improves organizational agility. That does not mean that organizations should change their communication
patterns with executive and senior management; those are already effective. Many organizations should reassess their
communication frequencies for employees in middle management roles.

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APQC also assessed the effectiveness of incentives by role (Figure 10). Typically, implementation incentives for execu-
tives are twice as effective as those for front-line employees. Similar to communications on role in implementation,
organizations tend to prioritize incentives for senior and executive management.

When comparing the effec-

tiveness of incentives against Effectiveness of Implementation Incentives by Role
organizational flexibility, the
general trend is that incen-
tives do, in fact, matter
(Figure 11). The effectiveness
of the incentives improves
organizational flexibility, re-
gardless of the role within an
organization.

However, the greatest impact

of improving the effectiveness
of incentives is for managers,
supervisors, and front-line
workers. As incentive effec-
tiveness increases organiza-
tional flexibility competency Figure 10
improvements from "not
effective" to "very effective"
incentives of 1.9 (managers), 1.3
(supervisors), and 1.3 (front-line
Effectiveness of Incentives on Organizational Flexibility workers) improvements on the
competency scale.

Middle management (i.e., man-

agement and supervisors) can
be the greatest barriers to the
implementation of new initia-
tives. As APQC reports in Unrav-
eling Buy-In, middle managers
have the greatest potential to
act as change agents. In many
ways, middle management has
the most to lose from new initi-
atives. They are not typically
responsible for sponsoring the
new initiatives (as senior and
executive management are),
Figure 11
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and they have built their careers on behaviors and norms that reflect the current direction and goals of an organiza-
tion. To overcome middle management’s resistances to change, organizations adopt several techniques including com-
munication, training, and incentives. Hence, it makes sense that organizations that have effective incentives for middle
management see the largest gain in organizational agility.

To ensure successful implementation of a change initiative, front-line workers have to adjust how they accomplish
work on a day-to-day basis. This requires engaging them in the change process and working with them to adopt new
behaviors. APQC reports in Transformational Change—Making It Last that best-practice organizations combine re-
wards with ongoing training and mentoring to ensure enterprise-wide adoption of new behaviors. These organizations
track and use incentives for the adoption of new behaviors and use the new behaviors as key performance indicators in
performance reviews and promotions.

Staffing Changes
Organizational flexibility may require reallocating resources (e.g., budget, staff, and time). To understand the impact of
staffing reallocations, APQC conducted correlation analysis between organizational flexibility competency and how re-
sponsive staffing changes
are (Figure 12).
Responsiveness of Staffing Changes on Organizational Flexibility
Organizational flexibility
tends to improve with the
ability to reallocate staff as
needed. More importantly,
of all the factors tested by
APQC, increasing the re-
sponsiveness of staffing
changes has the greatest
net gain on organizational
flexibility. It moves an or-
ganization from underdevel-
oped to very strong on the
competency scale. To en-
sure responsive staffing
shifts, strategy and imple-
mentation teams need to
work closely with HR and
management in the affected
business units to assess Figure 12
qualifications and capacity
of needed staff.

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OBSTACLES TO ORGANIZATIONAL AGILITY
Organizational agility can help businesses stay competitive, take advantage of opportunities, and mitigate risks. This
requires organizations to have well-developed mechanisms to identify and plan for risks and opportunities, as well as
change focus quickly and effectively. To understand the common challenges associated with organizational agility,
APQC asked respondents to identify their top obstacles (Figure 13).

Top Five Obstacles

Figure 13

The rest of this report looks at each obstacle in detail and how to address the obstacles.

OPERATIONAL SILOS
In many organizations employees are driven to meet individual, team, or functional objectives without un-
derstanding how this supports organizational objectives and what similar or related initiatives are running in parallel
around the company. This approach ultimately results in overlooked efficiencies, siloed efforts, and a lack of cross-
functional communication.

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What Drives the Obstacle?
To understand what factors influence the occurrence of operational silos as an obstacle to organizational agility, APQC
conducted correlation analysis on functions involved in strategic planning, the frequency of planning and implementa-
tion activities, incentives effectiveness by role, and communications frequency by role. Only one of the categories test-
ed directly influences the likelihood of citing operational silos: the functions involved in strategic planning.

Organizations that involve knowledge management, procurement, and quality management teams in strategic plan-
ning are less likely to indicate that operational silos are an obstacle to their organization’s agility. All of these functions
have one thing in common: they are holistic in nature and their purpose spans across an organization. In other words,
these groups help reduce operational silos because their purpose is to connect information across the functions.
Knowledge management’s primary purpose is to capture and share information, procurement manages resources
across all functions, and quality management ensures that all functions involved in the development of a product or
service work effectively to create customer value.

How to Address the Obstacle

There are many sources of operational silos. However, the most common sources include functional-focused thinking,
unaligned or conflicting measures, and a lack of cross-functional communications.

It’s easy to understand why most organizations rely on functional thinking. It provides a specialized competency, and
performance measurement is relatively easy. But there are limitations to functional thinking. Primarily, it doesn’t in-
clude the complete value chain, which:

 makes it easy to lose sight of the impact on the customer,

 increases the difficulty of implementing or improving processes, and

 results in siloes and placing blame when things go wrong.

On the other hand process, process thinking involves focusing on the value chain and conceptualizing groups of activi-
ties as processes. Such thinking reveals how all of the processes in an organization collectively take inputs and produce
products, services, and profits. More advantages of process thinking include the ability to align measure across func-
tions and focus measures on the long-term goals of the business.

For example, Syngenta used a process framework and balanced score card to align its process key performance indica-
tors with the organization’s objectives. This approach helps Syngenta align measures at all levels of the organization.
Ultimately using process to frame performance allows Syngenta to roll up the measures to provide a perspective on the
overall performance of an organization or drill down into root causes for variance in performance. It also helps Syngen-
ta communicate business goals and strategic objectives across the functions in terms that are meaningful for front-line
workers in order to establish buy-in and communicate how employees provide value.

Underwriters Laboratory (UL) also addressed operational silos during a recent organizational transformation. Address-
ing business silos required a combination of collaboration-focused programs, standardized measures, and training.
First, UL established a set of performance measures that cut across business units and aligned with the corporate per-
formance goals. Second, it established methods to provide transparency on priority projects and tasks (across business
groups and regions). Transparency was improved through a set of governance processes that evaluated business and
technology projects against a set of strategic criteria for the company’s success. The executive team then regularly re-

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viewed the selected projects to ensure performance and strategic alignment. Finally, project status—success and fail-
ure—was communicated broadly throughout an organization using scorecards and intranet articles. Additionally, UL
used leadership training programs to have leaders in the different businesses work collaboratively on projects.

ORGANIZATIONAL RESIS TANCE

There is the common adage that if there is no resistance, then there is probably no change. Change is diffi-
cult, and during any change effort organizations will face some level of resistance; the goal is to minimalize
the amount of resistance.

What Drives the Obstacle?

To understand what factors influence the citation of operational silos as an obstacle, APQC conducted additional corre-
lation analysis on the functions involved in strategic planning, the frequency of planning and implementation activities,
incentive effectiveness by role, and communications frequency by role. Only one of these categories directly influences
the likelihood of citing organizational resistance: a few of the functions involved in strategic planning (Figure 14).

Organizations that include the IT and

Functions that Increase or Decrease Organizational Resistance finance functions in the strategic
planning process are more likely to
cite organizational resistance as an
obstacle. That is not to say that
these functions should not be in-
cluded in strategic planning. Both
finance and IT play pivotal roles in
managing the business and its fu-
ture. However, they should be bal-
anced by other functions that under-
stand traditional change manage-
ment practices such as communica-
tions and engagement.

Organizations that include HR, mar-

keting insights, corporate develop-
ment, and information services are
less likely to indicate that organiza-
Figure 14 tional resistance is an obstacle to
their organization’s agility. These
functions either have access to the information and insights that support the changes (information services and market
insights) or have expertise in change management practices such as effective communication and engagement
(marketing, HR, and corporate development). Both relevant information and change management skills can help organ-
izations communicate the value of the changes, in a way that is meaningful for employees throughout the organization;
ultimately increasing buy-in and reducing resistance.

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APQC found that organizations with operational silos also cite organizational resistance as an obstacle. This finding is
not surprising because organizations that suffer from operational silos tend to have disjointed change efforts and strug-
gle with understanding the interdependence among functions which is necessary to support organizational goals.

How to Address the Obstacle

Best practices in APQC’s Transformational Change—Making it Last indicate that combining engagement and communi-
cation plans to manage the change help reduce the amount of organizational resistance. Key lessons on using commu-
nications and engagement to develop buy-in and overcome resistance follow.

 Use a combination of cascading and cross-functional approaches to communications. Provide leadership with
the information it needs to communicate to their direct reports and lead by example. It’s also important to
manage the dissemination of information; because if it is left alone, it will break down.

 Keep communications open and honest. Be transparent, even when conveying bad news. Employees respect
the honesty, and that in turn creates the trust necessary to facilitate change.

 Be deliberate about the purpose and target of the communications. All information will not be relevant to eve-
ryone within an organization, and over-communication can result in people ignoring important information.

 Leverage peer catalysts. Identify and leverage natural centers of influence within an organization who are natu-
ral change agents. These agents are not always managers. They help communicate information and create buy-
in from the bottom up.

 Close the loop. Always provide updates on what is done with people’s questions or feedback. This serves two
purposes: it lets employees know an organization listens to them and respects their thoughts, and it answers
similar questions that other employees have.

 Engage employees in the process. Use interactive communication tactics such as focus groups, war games, so-
cial media, crowdsourcing, and employee-led training. This engagement approach not only helps create buy-in
but also allows an organization to tap into the expertise and ideas of its employees for the transformation.

Furthermore, organizations need to keep in mind that resistance can also be helpful and that organizations need to
acknowledge the fear or concerns that might be valid. Most organizations tend to push back and demand compliance.
If organizations instead take a step back and ask resistors why the new process won’t work, they might find that the
resistors have the potential to identify unforeseen roadblocks. Furthermore, by engaging resistance, an organization
has a chance to communicate the value of the changes and develop change champions to drive buy-in from the
bottom.

SPEED OF DECISION MA KING

One of the main components of organizational agility is the ability to identify opportunities and risks and
develop a plan of action quickly. However, the speed of decision making in organizations is often tied to
access to timely and reliable information, the layers of hierarchy involved in decision making, and the presence of a risk
-averse culture.

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What Drives the Obstacle?
To understand what factors influenced the citation of speed of decision makings as an obstacle, APQC conducted corre-
lation analysis on functions involved in strategic planning, the frequency of their planning and implementation activi-
ties, incentive effectiveness by role, and communications frequency by role. Only one of the categories tested directly
influences the likelihood of citing speed of decision making: the functions involved in strategic planning.

Organizations that include a strategic planning department in the strategic planning process are more likely to cite slow
decision making as an obstacle. Similar to the involvement of the IT and finance functions, this finding indicates that
organizations have to stay cognizant of the role of facilitators in planning activities and build agility into their processes
as well.

APQC found that organizations that indicate speed of decision making is an issue also cite organizational resistance as
an obstacle. This is unsurprising given the interrelation between organizational resistance and the time it takes to over-
come traditional roadblocks such as risk aversion and engage decision makers.

How to Address the Obstacle?

Again, the speed of decision-making is affected by risk aversion and access to trusted and relevant information. To in-
crease the speed of decision making, organizations need to change the comfort level for potential risk through tools
like predictive analysis and scenario planning, which help organizations think through potential options before they
actualize or through changing the norms and behaviors tied to risk aversion.

For example, UL was faced with risk aversion and slow speed in decision making during recent transformation efforts.
Its change efforts were stymied due to risk aversion and operational silos, both of which were culture-driven. To
change the comfort level of the organization, it needed to embed new behavioral norms. Overcoming risk aversion was
a multisided problem because employees were not comfortable going outside of their role (which would be needed for
the new organizational alignment), the management structure punished failure, and its engineers were trained to ana-
lyze things for faults. The speed with which change occurred was important, so UL took multiple approaches to em-
brace risk.

 Establish a safe environment to take risk—UL felt that when employees feel secure they are more likely to be
comfortable taking risks. So UL created a secure environment through process improvement and standardiza-
tion efforts and by establishing a common language throughout the organization.

 Reward those that take risks—UL acknowledged people that take risks (to make decisions and try new ideas)
and provided opportunities to try new things. For example, when UL created seven new businesses, it looked
for people enthusiastic to try something new in addition to their leadership and business acumen.

 Promote a culture of continuous learning—UL made it acceptable to fail. It promoted the idea that people will
learn from their failures and get better; part of this includes not publically chastising people for their failures.

Simply put, organizations have to ensure employees feel comfortable with risk, can fail fast, and learn from mistakes.
Innovation and agility requires having employees complete a task quickly, make a decision, and move on. Mistakes are
going to happen; but if the environment focuses on the efforts and the learning aspect of failure, employees will feel
comfortable with experimentation and try again.

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 UNALIGNED BUSINESS P ROCESSES
Business process alignment refers to how well an organization’s objectives link to its process manage-
ment. Strategy and process management activities should intertwine and inform each other. Process
management activities and measures help decision makers track progress toward goals and determine where to make
strategic changes.

What Drives the Obstacle?

To understand what factors influence the citation of unaligned business processes as an obstacle, APQC conducted cor-
relation analysis on functions involved in strategic planning, the frequency of planning and implementation activities,
incentive effectiveness by role, and communications frequency by role. Unlike the previous obstacles, the functions
involved in strategic planning have no direct influence. However, the frequency of internal assessments and communi-
cations and the effectiveness of incentives decreases the likelihood of citing unaligned business processes as an obsta-
cle. Specifically:

 Frequency of internal assessments—As the frequency of internal assessments decreases, the likelihood of this
being an obstacle increases.

 Front-line employees’ incentives—As incentive effectiveness for front-line employees support for strategy im-
plementation increases, the likelihood of unaligned business processes as an obstacle decreases.

 Supervisors’ incentives—As incentive effectiveness for supervisors’ support of strategy implementation in-
creases, the likelihood of unaligned business processes as an obstacle decreases.

 Frequency of communications with front-line employees—As communication frequency with front-line em-
ployees on their role in strategy implementation increases, the likelihood of unaligned business processes as an
obstacle decreases.

 Frequency of communications with supervisors—As communication frequency with supervisors on their role
in strategy implementation increases, the likelihood of unaligned business processes as an obstacle decreases.

 Frequency of communications with managers—As communication frequency with managers on their role in
strategy implementation increases, the likelihood of unaligned business processes as an obstacle decreases.

Organizations that conduct frequent internal assessments are less likely to cite unaligned business processes as an ob-
stacle to organizational agility. Again, organizations that conduct internal assessments—gauging core competencies,
financial measures, and operational performance factors such as process performance—on a continuous or quarterly
basis tend to have the highest levels of strategic responsiveness. In other words, organizations that monitor and meas-
ure the performance of their processes are more likely understand their improvement needs and operational strengths
better, which clarifies the strategic fit of opportunities based on competency and prioritizes opportunities based on
need.

Furthermore, organizations that effectively communicate and provide incentives for front-line workers and middle
management are less like to report unaligned business processes. One of the key practices in APQC’s Seven Tenets of
Process ManagementSM is that effective process management requires engaging employees and developing an under-
standing of their role—and consequently the processes they use—in an organization’s goals.

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How to Address the Obstacle
Best-practice organizations understand that the business model should describe and support an organization’s pur-
pose, identify what’s important, and feed into how work gets accomplished.

To achieve this, best-practice organizations ensure that their strategic plans link to business and operational plans. Fur-
thermore, best-practice organizations make line managers play a key role in strategy creation and do not limit strategic
planning to the corporate level. As a result, best-practice organizations have well-defined and well-executed strategic
processes at the business-unit level that align with the enterprise level.

For example, Northrop Grumman Aerospace Systems (NGAS) uses two key tools to ensure strategic alignment: a strate-
gic alignment map and a system of performance management dashboards and technical tools. The strategic alignment
map displays the nature of NGAS’s business from the most strategic to the most tactical aspects, as well as shows how
process management activities coordinate with strategy. The broad vision provides parameters for the overall process
management strategy. The performance management dashboard tracks business unit performance against targets and
depicts the integration of Aerospace Systems processes within the larger Northrop Grumman enterprise.

APQC’s Seven Tenets of Process Management indicates that best-practice organizations also categorize their processes.
Not all processes, however, require the same amount of attention, investment, and optimization. Organizations should
identify which processes provide differentiation and/or competitive advantages. These processes are strategic in na-
ture and should be prioritized for optimization to ensure they are best-in-class while retaining their unique characteris-
tics. The rest of an organization’s processes (sometimes referred to as “core” or “commodity” processes) should be
designed based on industry practices. Prioritizing processes into these categories can also involve using value stream
analysis to align process measures with strategic objectives.

POOR KNOWLEDGE MANAG EMENT

Knowledge management is the application of a structured process to help information and knowledge flow to
the right people at the right time so they can act more efficiently and effectively to find, understand, share,
and use knowledge to create value. Without effective knowledge management, organizations may not know what in-
formation is important or have a strategy that ensures people can access the information they need when they need it.

What Drives the Obstacle?

To understand what factors influence the citation of poor knowledge management as an obstacle, APQC conducted
correlation analysis on functions involved in strategic planning, the frequency of planning and implementation activi-
ties, incentive effectiveness by role, and communications frequency by role. Only one of the categories tested directly
influences the likelihood of citing poor knowledge management: the functions involved in strategic planning.

Organizations that include market insights and information services in the strategic planning process are less likely to
cite poor knowledge management as an obstacle to organizational agility. One thing both functions have in common is
that they are knowledge workers; they are responsible for the generation of knowledge and insights and ensuring ac-
cess to knowledge throughout an organization. By involving knowledge workers in the strategic planning process, deci-
sion makers have access to the foundational information they need to identify, plan, and execute quickly.

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How to Address the Obstacle
To ensure effective knowledge management, organizations have to create a strategy to manage the capture of, ensure
accessibility to, and engage employees in using the captured knowledge. There are several best practices that organiza-
tions can consider when improving their knowledge management capabilities.

The first consideration is the best way to engage an organization and set up a plan to manage knowledge capture.
APQC’s Engagement and Participation for Knowledge Sharing and Collaboration found that organizations with a well-
defined business need and value proposition have more successful knowledge management programs. So an organiza-
tion has to clearly outline the purpose of knowledge management and link it directly to value for employees. Common
value propositions for knowledge management include: improving productivity, establishing objectivity through data
and insights, retaining at-risk or critical knowledge, and supporting a collaborative and innovative culture. Once the
purpose is outlined, an organization can develop its engagement plan and structure its knowledge management pro-
gram around that value.
APQC’s Transferring and Applying Critical Knowledge indicates that best-practice organizations leverage business lead-
ers to identify critical knowledge because they have insight into the strategic outlook of their departments and func-
tions, including which knowledge domains are critical to support short- and long-term goals and which areas have the
most urgent needs due to retirement, attrition, internal churn, or other factors. Hence, management should work with
knowledge workers (e.g., those conducting knowledge management, business intelligence, and market insights) to
identify critical information and pinpoint the most effective method and frequency of dissemination.

The next consideration is how to structure the information and ensure access. Typically, access to information—the
substance, format, and organizational structure—aligns with an organization’s focus. For example, if an organization is
product focused, then information revolves around and is structured by product lines. If an organization is process-
focused, then information aligns with an organization’s process map. APQC’s research on Connecting People to Content
found that best-practice organizations clearly define the internal and external audiences for content and then base de-
cisions about content management processes, tools, and improvements on the needs of those audiences.

Another key lesson is that content has to be embedded in employees’ flow of work. It’s important to deliver infor-
mation when, where, and how employees need it. To accomplish this goal, organizations need to focus on the daily
needs of the users and think about how to put knowledge in the path—or business process—of the users. Demand-side
knowledge management focuses on the end user and is similar to a kiosk. Users go to the kiosk, enter what they are
“trying to accomplish,” and receive an outline of the process, including activities, tasks, steps, a list of necessary tools
and content and their locations. Content is organized by process, so users only have to know what they are trying to
accomplish and can get a map to guide them. In other words, this approach focuses on who the users are, where they
are, and what they are doing.

WHERE TO FOCUS
Although all five obstacles are important, the first two obstacles—operational silos and organizational resistance—are
common issues that organizations can address through design and change management practices. The last three obsta-
cles—slow decision making, poor knowledge management, and unaligned business processes—directly correlate to
lower organizational agility. Slow decision making decreases strategic responsiveness. The presence of unaligned busi-
ness processes decreases both strategic responsiveness and organizational flexibility. And poor knowledge manage-
ment directly correlates to lower organizational flexibility. If organizations want to optimize their efforts, then they
should establish effective process and knowledge management practices and reduce risk aversion in order to help has-
ten decision making.
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CONCLUSION
Organizational agility is an important characteristic that helps organizations stay competitive and take advantage of
opportunities and risks. Although organizational agility is a two-part concept, most organizations are more competent
in strategic responsiveness than in organizational flexibility. This finding parallels general trends in strategic planning
and transformational change. Over the past few years, an increasing number of companies have embarked on transfor-
mational changes, but only about 30 percent of those organizations are happy with their change program’s success. It’s
typically not the redesign plans that are the source of the frustrations but instead the implementation practices.

However, not all organizations need to optimize their strategic responsiveness or organizational flexibility. The business
environment that an organization works in directly influences its required level of agility. Organizations that work in
highly malleable environments, such as shaping or visionary ones, tend to require a greater level of agility. Organiza-
tions in these environments tend to gain competitive advantage through their ability to react to changes in the market
or identifying opportunities and bring those disruptive concepts to market quicker than their peers.

Regardless of the business environment, organizations can reap some benefits from improving their ability to plan and
execute changes quickly, such as improving their ability to implement strategic plans. Organizations that want to im-
prove their agility should consider the following recommendations:

 Use planning methodologies such as scenario planning create a structured for organizations to anticipate fu-
ture changes and establish contingency plans.

 Move to a quarterly schedule for planning activities, be it corporate planning, internal and external assess-
ments, or implementation reviews. Quarterly planning activities keep plans flexible and allow organizations to
adapt to new opportunities and changes in their business environment.

 Don’t focus only on lagging and financial measures. Organizations that include honest assessments of core
competencies combined with leading indicators such as customer satisfaction, social trends, and brand percep-
tions can identify opportunities and risks earlier and assess their fit quickly.

 Invest in incentives and communications with front-line and middle management. Organizations that engage
front-line and middle management employees create buy-in throughout an organization. Include those who
will execute the new behaviors on a daily basis.

 Address risk aversion. Encourage employees to take risks and fail fast in order to hasten decision making.

 Develop a firm foundation of process and knowledge management practices. These two disciplines help organi-
zations overcome other challenges such as operational siloes. They also incorporate the mechanisms organiza-
tions need to change how work is accomplished and ensure the adoption of new practices throughout an or-
ganization.

ABOUT APQC
APQC helps organizations work smarter, faster, and with greater confidence. It is the world’s foremost authority in
benchmarking, best practices, process and performance improvement, and knowledge management. APQC’s unique
structure as a member-based nonprofit makes it a differentiator in the marketplace. APQC partners with more than
500 member organizations worldwide in all industries. With more than 40 years of experience, APQC remains the
world’s leader in transforming organizations. Visit us at www.apqc.org, and learn how you can make best practices your
practices.
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