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A flexible organizational structure is one in which workers can easily adapt to the needs of their clients, completing their work efficiently and expediting decision-making when necessary. Several types of internal organizational structures are flexible enough to meet these objectives.
Today, companies have to face very changing and complex environments. They need to face a large input of information every day that helps them make their decisions. The volatility of the global market in recent years adds to the pressure that organizations have to develop the almost impossible task of forecasting and planning in turbulent environments.
The new scenario of organizations requires reacting quickly and adequately to constantly changing conditions. But what exactly is organizational flexibility and why is it so important for companies? What makes an organization more agile?
How do you achieve organizational flexibility?
Organizational flexibility is achieved by being alert to internal and environmental changes, both to opportunities and challenges, becoming the ability to use the company’s available resources in a timely, flexible, affordable and relevant manner in order to respond to these changes effectively.
Index to determine your degree of flexibility
ACE (Allied Consultants Europe), together with the participation of Improve, has designed an index to determine the degree of flexibility of an organization. This index is based on six dimensions that are essential to ensure that organizations are flexible. These would be:
- Leadership and Management
- Learning and change
In order to configure the flexibility index in the organization, more than 500 senior managers of companies from the main European countries have been interviewed about the situation of their organizations with regard to flexibility, reaching the main conclusion that agility and success keep a close relationship.
Benefits of flexible organizations
Organizational flexibility is one of the main success factors for those companies that want to enjoy a good position in the market and the conclusions of the study clearly confirm this. The most successful participants, according to their responses on several of the key performance indicators, are also the most flexible organizations according to the ACE-Improve Flexibility Index. All organizations with high flexibility rates are successful.
European organizations have perfectly understood the importance of the organization’s flexibility for their business and the future attitude towards growth and profitability. Naturally, the vast majority are not satisfied with their current degree of flexibility and intend to increase it:
Respondents who are successful and more flexible generally have better results than their rivals in most key performance indicators. For these, the important factor that allows to success has been to have responded quickly to the changes in the market.
There are interesting differences in European countries according to geography. Scandinavian organizations (Denmark and Sweden) are considered the most agile in Europe, followed by the Swiss. In contrast, British, Dutch and German companies are considered the least agile.
The study also concludes that highly flexible organizations are more likely to be leaders in their market or have excellent results compared to their competitors. According to the results obtained, one of the reasons for their leadership in the market or the excellent results is that they are flexible and can continue to be so.
However, the dynamics of the environment sometimes require other skills that are not simply flexibility. For example, in environments that have few changes and are less complex, operational excellence is the most appropriate focus of attention, thereby maximizing efficiencies.
However, if the dynamics of the environment move quickly, but still not very complex, then more entrepreneurial competition is needed to adapt to the changes without being overwhelmed by complexity.
In a slow-moving, but the complex environment, capacity is usually required to plan with a strategy that can model complexity and allow time to design future scenarios.
Finally, if the dynamics of the environment move quickly and are complex, flexibility is the most necessary capacity. Even so, this does not imply that organizations should not focus on a certain degree of standardization and efficiency in processes.
Anyway, the conclusions of the ACE-Improve study also determined that, in general, the current environment and the one we will have in the coming years will be quite complex and dynamic so that this environment is becoming “the new normal” in all the sectors
How the environment influences the flexibility of the company
When we measure the dynamics of the environment (the combination of the speed of change and the complexity) of the respondents, we observe that the greater the dynamics of the environment, the higher the degree of agility, which means that organizations naturally adapt to the environment to survive. The question is: is your organization agile enough for the environment in which it moves?
Likewise, the conclusions of our study reveal that the faster the changes in the environment, the more organizations aspire to have a “very high” ideal degree of flexibility:
ACE-Improve (Allied Consultants Europe) Flexibility Index
A flexible organization takes advantage of the change by moving quickly and decisively to get ahead and take advantage of the change while remaining strong enough to absorb any setback. Motivated by the need for competitiveness, it exploits the opportunities successfully and maintains good performance over time, as the environment changes, absorbing and reacting to serious problems simultaneously, avoiding major confrontations. It is not only fast but continues to take risks while remaining aware of customer needs.
Can you measure the flexibility of the organization? Our contribution in this regard is to define six dimensions through which to measure the level of flexibility of organizations:
- Flexible leadership and management: It is the style of leadership and its adaptation to strategy, strength and speed in decision-making, clarity of communication and the degree of trust it generates.
- Flexible innovation: It is the degree of implementation of a systematic approach that allows to share the inputs on market trends and continuously generate new ideas, as well as the possibility of using their internal and external networks to share experiences and knowledge, increasing the capacity of the organization to adapt to the changing needs of customers and technological advances.
- Flexible strategy: It is the way in which the strategy is developed, combining rational and intuitive contribution, promoting internal dialogue and clarity with which the strategic intentions and the degree of demand that is imposed are communicated, all of which contribute to offering flexibility in thinking and aspirations.
- Flexible culture: The way in which employees express their values and opinions through behavior will have an impact on the flexibility of their organization. The culture of the organization can be influenced by policies such as transparency of information and also how your organization recognizes and rewards employees for responding successfully to changes in the market.
- Learning and flexible change: The ability of employees to be aligned with the organization and share their vision, desire to change and ability to implement those changes, as well as how to address the consequences of the decisions made, will have an impact on the degree of flexibility of the organization.
- Flexible structure: The strength and solidity of operations and processes combined with the degree to which its managers are clearly empowered to make decisions, will determine their ability to respond to market challenges.
Key drivers of flexibility
Our study reveals that there is no simple solution nor do we know what is the best way to increase the degree of flexibility of the organization.
Some of the key actions carried out by the most flexible organizations that help increase their agility are:
- Cost cuts when necessary
- React to the changing market/position in the environment
- Quickly navigate to change
- Successfully launch new products/services
- Attract and retain the best talents
Innovation, driving flexibility
According to our conclusions, agile organizations are more aware of the importance of innovation.
We ask the top European managers what concrete actions they took in the last 2/3 years regarding innovation and flexibility and here we discover important differences in what they did and how they carried it out:
Highly flexible organizations support, encourage and exchange ideas with external partners (96% compared to 43% of less agile organizations).
Highly flexible organizations regularly talk about trends and market forces more frequently than less flexible companies (89% compared to 29%).
They also focus more on creating flexibility to support new and unpredictable opportunities for future success (65% vs. 15%).
Conversely, organizations with low levels of flexibility consider that the budgets and return systems of innovations are more important and, therefore, focus more on these actions. Although these factors may have to be addressed first, it is not enough to be more flexible.
Given the global importance of innovation to become satisfactorily flexible, it is worth thinking about embarking on an innovation program that encompasses the aforementioned actions in order to inject energy into the business.
Conclusions: What do I need to be flexible?
Our study reveals that the important thing to improve the flexibility of the organization will be mainly:
1. Accelerate the pace of strategic renewal dramatically.
2. Make innovation the daily work of all.
3. Create a very committed work environment that inspires employees to do their best.
In short, if you improve the flexibility of the organization, you can be ahead of the competition.
The study shows that a new order seems to be emerging in the way in which the leading organizations operate. Traditional thinking is based on two principles: The hierarchical (where each level of the organization plays a clear and defined role in a strategic process that goes from top to bottom; senior management designs the strategy, the intermediate management staff communicates it and direct superiors ensure that it occurs) and linear (a logical chain that begins with strategic thinking, then follows the design of the organization and finally completes with the development of the management).
However, these well-founded principles seem to be questioned today by the current levels of complexity and the increase in the speed of response required by the external environment. To face their respective challenges, organizations must foster and show off in a new set of skills.
This movement requires a change in the way of thinking regarding the direction, innovation and establishment of strategies. This approach should also be supported by processes and structures that offer a firm platform to adapt to market changes.
So where to start? Thanks to this study, you can know how much flexibility your organization has and we can compare it with the Organizational Flexibility Index, in order to identify the most efficient actions that allow you to be ahead of the competition with greater agility and success.