Open your strategic horizon and gain organizational agility, or how to overcome organizational inertia
Olivier Lazar, Msc, MBA, PMI-SP, PMI-RMP, PMI-ACP, PgMP, PMP
Managing Partner, Valense Ltd.
Too many organizations struggle with the implementation of their strategic decisions and are stuck within a reactive mode, instead of being able to anticipate the different strategic adjustments they will have to make. They are victims of the combination of the inherent inertia of any organization and a restrained strategic horizon.
We call the latency between the moment a decision is made and the moment corresponding actions to implement this decision are initiated organizational inertia.
Organizational inertia is inevitable and is inherent in any organization. Decisions take time to be implemented. The delay between a decision and the action to implement it will, of course, vary from one organization to another depending on its size, organizational structure, and culture.
But as inevitable as it can be, organizational inertia, if not properly addressed and recognized, can be very damaging to an organization, putting its strategic initiatives in jeopardy and preventing the organization from achieving its goals by missing the eventual time-to-market constraints.
In the current times, where the lifespan of products and services is shorter than ever and even has a tendency to decrease, organizational inertia can be a deadly trap.
As with a cruise ship or a cargo boat, it is not sufficient to react to an incoming obstacle. An organization needs to have the ability to anticipate an obstacle's occurrence far enough in advance to undertake the appropriate mitigation or avoidance actions.
If organizational inertia cannot be neutralized, the only possibility left to the organization's management is to enhance its visibility, to foster its forecast and preventive capabilities by expanding its strategic horizon as far as possible.
To develop this anticipative capability, the organization will need to put in place an integrated portfolio management framework, mainly focused on four items:
- A strong and comprehensive definition of its strategic vision, used as a reference baseline to construct the strategic alignment indicators.
- A predictive performance measurement system, based on simple and consolidated relevant indicators, mainly derived from earned value metrics.
- An anticipative risk and contingency management model properly constructed to provide a realistic overview of uncertainties and unexpectancies, and allowing evolutionary trends in terms of achievability and exposure to risk of the different components of the portfolio to be derived.
- An analytical framework, integrating business, strategic, performance-based, and risk indicators to gain the necessary long-term visibility up to an acceptable and reasonable strategic horizon.
The objectives of the implementation of such a framework are to give the organization the ability to anticipate the emergence of a potential threat early enough, by making small but significant adjustments to the course of its strategic implementation, without deviating too far from its initial strategic vision, thus achieving organizational agility.
Organizational agility is the capacity of an organization to adjust its strategic plan frequently by small increments, while delivering a continuum of business benefits and performance realization, and at the same time, keeping an eye on the strategic vision.
We will see how a strategic vision is formulated within an organization, and from this, how the organization evolves within a global strategic context and aligns the different dimensions that will allow it to prioritize and control different portfolios, while making incremental adjustments to the implementation of its strategy.
We will examine how to develop an integrated value chain, allowing us to align the parameters corresponding to risks, benefits, and performance of the various components of the portfolios. We will also explore how to secure the sustainability of the strategic vision long enough to bring it to reality or allow it to evolve along with the organization's environment in a controlled manner, which will be anticipative instead of reactive.
As defined above, organizational inertia is the time it takes to arrive at a decision, from its formulation to its execution. As on a ship, there's a latency between the moment an order to change direction is given and the actual moment when the ship effectively moves in the desired new direction.
Several factors come into account in organizational inertia:
- The size of the organization: The bigger the organization, the higher the inertia factor. Again, a cruiser reacts slower than a speedboat, a start-up with 20 people reacts faster than a global multisite group of 100,000 employees.
- The organizational structure: It is very common to think that a matrix organizational structure is a sign of a higher level of maturity. This is because the matrix structure allows for more commitment, more visibility, and open communication within the organization. But in fact, often the inertia will be higher in a matrix organization than in a functional or projectized organization. This because the matrix structure is a factor of complexity, involving a multidimensional decision-making process, involving various levels of the organization. Even if communication is supposed to be easier and more open in a matrix, in fact, the decision-making process is slower and more complex, increasing then the inertia of the organization.
- Cultural aspects: Organizational culture – which conditions the way people interact, communicate, and make decisions – and national culture can define how people position themselves toward authority and how decisions are made. Some cultures require more consensus than others; some cultures are more horizontal or more vertical in their relation toward power and authority. A more direct and vertical culture will create less inertia than a culture that more horizontal and consensual.
What do we do with organizational inertia? This factor seems to slow down each and every initiative, sometimes to the extent that a decision may be obsolete even before it has been implemented, leading to another decision and then to content fluctuations in the organization's strategy and decisions.
In fact, there's not much to be done. Organizational inertia exists and will always be there. It's one of the enterprise environmental factors so famous and loved by any person preparing for the Project Management Professional (PMP)® certification exam. It influences you more than you can really influence it.
But, no worries: The situation is not as bad as it might seem.
Overcoming Organizational Inertia
The fist thing to do is to recognize it, and eventually be able to measure it.
How long does it take in my organization for a strategic decision, made at the executive level, to be implemented? How often can changes be expected in my business environment? These are the two most important questions to ask when trying to understand organizational inertia.
Coming back to the boat example, imagine sailing in the fog. If you can expect an iceberg to appear every 15 minutes on your path and it takes an hour for your ship to change direction, most probably, you will end up at the bottom of the sea sooner rather than later.
So what are the solutions?
Of course, on one hand, we can try to find ways of increasing our reactivity, and thus, reducing the inertia. Indeed, we can optimize.
We can simplify some processes, clarify roles and responsibilities, prepare procedures and policies, and try to automate them as much as we can. That will certainly be useful and appreciated; it will put some oil in the mechanism, but inertia will not disappear completely. There's always an uncompressible level that cannot be optimized any further.
So, the only way we have to overcome this is to enhance our visibility over our environment, disperse the fog surrounding us, and optimize our capacity to anticipate. In other words, we need to expand the organization's strategic horizon.
The strategic horizon is the limit in time over which the organization oversees its future and the limit by which it plans its future initiatives and resources.
Depending on the specifics of each organization (business, industry, etc.), this strategic horizon can be close (three to five years) or quite far away (10, 15, 20, or more years).
Constructing the Organization's Strategy
The first level of the solution lies within the way the strategic vision of the organization strategy is expressed and communicated.
The vision is the direction, the heading in which the organization is oriented, usually expressed as the perception of the organization's desired environment in a more or less near future. That doesn't change—or, at least, not often. It's the purpose of the organization, its rationale. This is your ship's destination.
The strategy derived from this vision is the course of actions to be conducted to realize the vision. This includes the different projects, programs, portfolios, and operations that the organization will undertake to achieve its vision.
The strategy is the roadmap, the path to reach the destination; it's the definition of the journey.
The better the vision and the related strategy are defined, the clearer the view you will have of the course of your organization and its environment; that is, the thinner will be the fog surrounding it.
Putting in Place the Means to Anticipate, Rather Than React
Knowing where your organization is heading is good, but it is not sufficient.
A proper portfolio management policy and related procedures will be essential to give the organization the means to anticipate and predict the different variations that will inevitably occur during the execution of the strategy.
Portfolio management is a process aimed to give visibility and transparency over the usage of resources, both current and future; to adjust that usage to the organization's strategic objectives; and to forecast the resources and investments necessary in the future to realize that strategy (Exhibit 1).
Exhibit 1. Principle of portfolio management
The aim of portfolio management is to provide the organization's executive leadership with a control dashboard and the steering wheel that will allow them to make all necessary adjustments to the course of actions, to the strategy.
These changes are implemented in anticipation of an incoming threat or opportunity, overseen at the limit of the organization's strategic horizon.
Taking into account the different elements coming toward the organization within its strategic horizon, balanced with risks and the available resources, it will be possible to make the necessary adjustments to the strategy and adapt the course of actions soon enough to overcome organizational inertia.
Overcoming this inertia is the key for the agile organization. Being agile doesn't mean being able to change the strategy drastically at every moment. It means being able to keep heading toward the objective, but also being able to make frequent, limited, anticipative adjustments … and avoid the icebergs.
© 2015, Olivier Lazar
Originally published as a part of the 2015 PMI Global Congress Proceedings – Orlando, Florida, USA