The 21st-Century Organization

Big corporations must make sweeping organizational changes to get the best from their professionals.

Although social networks flourish at many companies, only a few have formalized them. That next step, though, is one of the most important things a company can do, because it removes unnecessary complexity from horizontal interactions among talented people across organizational silos.

Measure Performance

The final set of ideas rounding out this new organizational model involves relinquishing some level of supervisory control and letting people direct themselves, guided by performance metrics, protocols, standards, values, and consequence-management systems.

To be sure, accountable leaders must control large companies even as many of their workers become more and more self-directed. But what’s needed is inspired leadership, not more intrusive management. Of course, management will continue to be vital — particularly to get value from the many employees who will go on laboring in “industrially engineered” processes and to hold all of a company’s workers and managers accountable for their performance.

But as the workforce increasingly comes to consist of self-directed professionals, leaders will have to manage them by setting aspirations and using performance metrics that motivate them to organize their work, both individual and collective, to meet those aspirations. One successful CEO once told us that to motivate behavior, measuring performance is more important than providing financial incentives to reward it. The challenge is that to measure it effectively, the metrics must be tailored to individual roles and people. Get the metrics wrong and unintended behavior is the result.

To motivate the collaborative behavior that makes this new organizational model work, companies must create metrics that hold employees individually accountable for their contribution to collective success — an idea we call holding people “mutually accountable.” Such metrics are particularly important for senior and top managers but are required, more broadly, for all self-directed workers. People who are great at developing the abilities of other talented people or at contributing distinctive knowledge, for example, should be more highly valued than those who are equally good at doing their own work but not at developing talent or contributing knowledge.

A new organizational model for today’s big corporations will not emerge spontaneously from the obsolete legacy structures of the industrial age. Rather, companies must design a new model holistically, using new principles that take into account the way professionals create value. Big companies that follow these principles will get more value, at less cost, from the managers and the professionals they employ. In the process, they can become fundamentally better at overcoming the challenges — and capturing the opportunities — of today’s economy.

About the Authors

Lowell Bryan is a director and Claudia Joyce is a principal in McKinsey’s New York office.

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