Companies need to manage their losses on their path towards agility

Agility has become a buzzword in many industries and is an ideal many companies strive to achieve in these tough economic times.

However, agility does not come without a price. The definition of agility is the company’s ability to rapidly respond to challenges and opportunities as they arise. The key word in this definition is rapidly; this means that something within the company has to make way for flexible systems and processes as well as quick decision-making.

Losing systems and processes within a company may lead to churn. I recently read an article on the Harvard Business Review (HBR) highlighting important ways companies can avoid this.

A lauded leadership characteristic

The HBR article points out that one of the most lauded leadership characteristics today is the ability to change course quickly when a planned path is blocked or revealed to be disadvantageous. This kind of rapid adaptation, often referred to as agility, is critical in a fast-changing environment or when innovating in unknown territory where old behaviours and management practices no longer work. It’s considered by some to be a leadership superpower.

Any leadership superpower, however, can become a weakness. When leaders change course on projects frequently, their people can become confused about what they are supposed to do (or at least need to spend time re-planning and addressing the change), introducing inefficiency and churn and impeding progress. It’s also demotivating: It’s like telling someone to run north, then south, then north, and then south again. After reversing direction so many times, the smart move for an employee is to stand still until the leader figures it out.

The article adds that the solution to this problem can’t simply be to “reduce agility.” Leaders in these cases are largely doing the right thing in the face of fast-changing conditions and high degrees of uncertainty. Rather than stay committed to a path that might lead to a dead end or waste the company’s time and resources, they’re pivoting their teams to what they think will be a more productive direction, and then doing it again and again if necessary.

Differentiate means and ends

The author of the article points out that, based on his years of experience advising firms on innovation and efficiency, he believes that to counter the negative effects of these changes, leaders guiding their teams through pivots should better differentiate means and ends: They should be able to articulate an end goal that stays constant even as the means to get there changes.

Let’s look at two examples. At a tech venture that I advised, the founder had created his core product through lots of experimentation and improvisation, trying one thing after another until it became clear what worked. As the company grew to over 100 engineers with multiple project teams all building off of the original product design, the founder’s desire to keep improvising and shifting directions became more of a liability than a strength. One manager described the effect as a type of paralysis where everyone just waits for the next instruction. “No one is willing to take any initiative,” she said, “since whatever we do is probably going to be changed.”

The article adds that this dynamic of over-agility is an issue for small startups and large companies alike. Several years ago, I worked with a multibillion-dollar personal care company that had made three midsized acquisitions to diversify their product portfolio. Because each of these acquisitions included well-known brands, the CEO planned to leave them alone to operate as wholly owned but independent entities. But after a few months, under pressure from the board to extract more synergistic value from the acquisitions, he changed course and asked his corporate functions (HR, finance, and so on) to align the acquired entities’ processes and systems with those of the core company. But having people from all the corporate functions descend on the acquired firms proved to be disruptive, so he then backed off and told the corporate functions to just pick one or two systems to standardize. By this time, the managers of the acquired entities were completely confused about what their owners really wanted and told their people to just sit tight and not do anything until things became clearer.

To much attention

The article points out that in both of the cases, and in many other instances of over-agility, leaders pay so much attention to the means of achieving a goal that they (and their teams) lose focus on the end result. In the tech startup, the founder wanted the experiments to reveal new product opportunities but didn’t make clear his vision for the next generation of products. In the absence of a clear product vision, all possibilities were valid. Similarly, in the personal care company, the CEO never articulated an overarching goal for the integration of the newly acquired firms. In fact, it seemed that he was making it up as he went along and changing the goal depending on the reactions he was getting from investors, his team, and the managers of the acquired firms. Little wonder that this generated confusion among the people who needed to execute.

The good news here is that the over-focus on means and under-focus on ends is correctable, once the leader realizes that this is what’s happening. It’s a matter of both goal-setting and communication. At the tech company, the founder ultimately received strong feedback from his team that the constant engineering changes meant the teams weren’t sure what to do. In response, he worked with his team to create parameters for what the next product should look like — and then left the teams more space to figure out how to get there. Today the teams are more productive and confident that they are on a path to building a new product that will be commercially viable.

The article adds that at the personal care company, the CEO, realizing that the company was not getting the expected return on investment from its acquisitions, asked the head of business development to do a brief study about how the company should integrate new companies. One key conclusion was that there should be a more specific goal and vision for each entity post-acquisition — and that the integration team would then be empowered to find the right pathways to meet that goal. This approach was then applied to the three acquisitions.

For example, one of the acquired companies had strong market share and brand recognition in a particular product category, so the team’s goal was to accelerate this category’s growth. Early in the integration process, however, the team realized that they were in danger of losing much of the acquisition’s talent if they continued to force everyone to follow the processes and methods of the new owner. This would have jeopardised the growth goal because this team’s experience was necessary to build on the success of the category. So they changed course: Instead of integrating the acquisition into the parent company, they adopted a “reverse acquisition” approach in which some of the parent company’s people would report to the acquired company’s management team.  But the ultimate goal — growing success in the core category — stayed the same. Managers were no longer confused or demoralized, and eventually this new division exceeded the growth expectations that were envisioned early on.

Significantly beneficial

Over the past few months, a significant focus has been on the South African economy and our challenges. This fixation – while valid – has resulted in us disregarding the fact that other global economies are facing challenges regarding economic growth. Experts in Australia believe that the country is heading for a liquidation-heavy market as the country returns to normality following the ending of Covid Economic Stimuli Programmes.

The universal truth about financial distress and liquidation is that, while every company faces their own root causes of financial distress, agility is one of the key coping mechanisms that can provide a helpline during this stressful period. Agility is something that every company should embrace without delay.