To Create a Digital Organization, Disrupt the One You Have
By Michael Gretczko, Principal, Deloitte Consulting LLP, and Emily Scott, Manager, Deloitte Consulting LLP
Many business leaders suspect that their organization is lagging or outdated - but they're not sure how to respond. In Deloitte's 2017 Global Human Capital Trends report, 88 percent of respondents told us that "building the organization of the future" is important or very important. However, only 11 percent believed they understand how to build such an organization.
What explains the gap?
Leaders see the organization of the future as digital, but we tend to judge 'digital-ness' by outward appearance. Is the company paperless? What does its mobile app or website look like? How active is it on social media?
Such signals can be misleading. Creating a digital organization takes more than just buying and implementing tools or telling employees to be more digital. Rather, it requires the raising of a collective 'digital IQ'-where organizing, operating, and behaving in a culturally digital way becomes the real mark of a Digital Organization. This new organization is self-organizing, flexible, collaborative, innovative, and willing to experiment.
Being able to fully embrace a Digital Organization of the future means adopting a new mindset that focuses on investments in people and time, to determine the best processes for your workforce. According to Deloitte's 2017 Global Human Capital Trends report, "as digital transforms the business landscape, the successful organizations of the future will likely be those that can move faster, adapt more quickly, learn more rapidly, and embrace dynamic career demands."
How can leaders start to create a truly Digital Organization?
Disruption is an important starting point. Specifically, leaders should disrupt their own companies. Let's examine why self-disruption matters and how questioning processes, norms, and policies supports improving digital IQ, ultimately enabling the creation of a successful Digital Organization.
Recent research from Deloitte and MIT Sloan Management Review found that "vice president-level executives who don't feel they have access to sufficient digital development opportunities are 15 times more likely to say they are planning to leave in one year or less than executives who have those chances."
That staggering number speaks to the role of digital culture in attracting and retaining talent. VPs are among the most experienced, dedicated, and proven leaders in a company, and they consider a lack of "digital development opportunities" a good reason to hop ship.
'Digital development' goes far beyond skills. VPs don't flee because they can't learn how to do things like code. They leave because a lack of digital development limits their capacity to lead successfully. For example, an inability to update manual, paper processes might prevent the leader from investing time and talent in innovative projects.
This mindset also applies to younger generations in the workforce, who are very used to living digitally in their personal lives, who have overall very high digital IQs, and are used to connectivity, collaboration, and flexibility. Without a digital mindset in place, organizations are likely to lose the interest of Millennials or Gen Z (or not even attract it in the first place).
Leaders who are eager to introduce digital culture, and Millennial employees who want to engage digitally, but are denied the opportunity, seem to grow disenchanted. It's not about technology, but rather the values that have emerged from digital life.
Digital dead ends, like those facing young leaders, drain talent because human nature is to compare. In business magazines, readers see the cutting edges of corporate life. They note how less digital, flexible, or open-minded their workplace is compared to others. They can't help but question their frustrations:
- "Why is it so difficult to get time off approved?"
- "Why are we not allowed to manage projects with a cloud platform?"
- "Why do we need so many approvals before running this experiment?"
These "why" questions are at the heart of work philosophies that emerged in the early 2000s and defined digital culture. Perhaps the best known is the 2001 Manifesto for Agile Software Development, which put the term "Agile" on the map. Jim Highsmith, one of the signatories, wrote in his history of the Manifesto that "in order to succeed in the new economy, to move aggressively into the era of e-business, e-commerce, and the web, companies have to rid themselves of their Dilbert manifestations of make-work and arcane policies."
Ridding a company of make-work and arcane policies has a name: self-disruption. The "digital development opportunities" VPs seek are chances to participate in that disruption. They want to question the processes, norms, and policies built on inertia rather than purpose. Digital culture encourages them to ask "why?," to do something about it, and to transform their organization.
A Digital Culture Strategy
The Digital Organization is defined by its willingness to let leaders continuously disrupt, without fear of failure, thereby improving the organization by building a culture of innovation and sharing, and a set of talent practices that facilitate a new network-based organization.i The following steps can help with building this culture of disruption:
1. Start at the top
Some leaders fear that their organization will unravel without hierarchy. However, the organization of the future is one that is fluid and flat(ish). As stated in the 2017 Global Human Capital report, "an important part of designing for adaptability is a shift away from hierarchical organizational structures toward models where work is accomplished in teams. Indeed, only 14 percent of executives believe that the traditional organizational model-with hierarchical job levels based on expertise in a specific area-makes their organization highly effective. Instead, leading companies are pushing toward a more flexible, team-centric model."ii
To achieve this, start by viewing talent as a shared and fluid resource. Rather than binding people to one team or supervisor, free them to move flexibly between projects. Interests, talents, and the company's objectives, not made-up organizational charts, should determine what people focus on. A digital culture experiments to find its own model of self-organization.
2. Then work bottom up
Support the digital culture with new hiring practices. Although Millennials and Gen Z are naturals with digital technology, anyone can use digital tools in non-Agile ways. Paper pushing and politicking didn't end with email and won't stop with collaboration platforms. So how do you identify the Agile candidates?
The standard resume, cover letter, and phone interview demonstrate the skills of resume writing, letter writing, and talking on a phone. Interactive tests are more likely to reveal who fits in a digital culture.
Many companies use gamified coding tests to gauge engineering skills. Why not introduce tests that are more collaborative and realistic? Gamify a sales scenario, challenge marketing candidates to create a campaign, or ask design candidates to create something together.
Digital cultures thrive, in part, by the ability to make decisions more quickly and therefore are able to gain more ground more often than competitors. If you're going to dismantle hierarchy, you need people who don't wait for orders.
3. Finally, add the tools
Tools are enablers, not the source of digital transformation. Most Digital Organizations have tools for internal social networking, real-time collaboration, project management, and HR service delivery. Test them out, but don't force anything upon the company.
'Rogue' apps, those deployed by employees without permission, indicate what employees want. Yes, rogue apps do give IT departments security nightmares. However, if employees are willing to risk the repercussions, the apps must be useful to them. Start to treat the 'rogue' apps like a wish list, and work with IT to implement them safely.
Conducting internal surveys can also help identify your employees' pain points. Do they wish they had the option to work from home more? Do they have to manually enter their expenses? How do they feel about the office layout? All of these questions and answers can help you determine where to make your technological and software investments so that they have the greatest impact on your workforce. Keep in mind that all of the changes you make may not necessarily be software related, but they can still be 'digital' due to the forward-thinking, modern, and employee-centric innovation they demonstrate.
Organization of the Future
Eighty-eight percent of leaders surveyed told us that they didn't know how to build the organization of the future. The good news is that they're not supposed to know how. No single executive has the answers, and no digital culture would bow unquestioningly to one opinion.
Again, being digital is more than buying tools or demanding innovation without willingness to change. Being digital is a mindset, a culture, and a constantly evolving experience.
Digital culture trusts a community of employees to create the organization of the future through self-disruption. No process, norm, or policy is sacred when you're building the Digital Organization.
i Josh Bersin, Tiffany McDowell, Amir Rahnema, and Yves van Durme, "The organization of the future: Arriving now," Global Human Capital Trends 2017: Rewriting the rules for the digital age, Deloitte University Press, 2017, dupress.deloitte.com/dup-us-en/focus/human-capital-trends.html
ii Josh Bersin, Tiffany McDowell, Amir Rahnema, and Yves van Durme, "The organization of the future: Arriving now," Global Human Capital Trends 2017: Rewriting the rules for the digital age, Deloitte University Press, 2017, dupress.deloitte.com/dup-us-en/focus/human-capital-trends.html
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