Everybody’s got a loudspeaker - Building Trustbuildingtrust.ypacanada.com/wp-content/uploads/... · SOURCE: McKinsey Organization Practice McKinsey & Company 18 Companies that could

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Everybody’s got a loudspeaker

now: Best practices in building a

responsive organization

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company

is strictly prohibited

Scott Sharabura

([email protected])

YPAC Pipeline Conference | August 2017 | Edmonton, AB

2

Resource nationalism, mineral taxes, land

access rights, community reach, reputation

Tariff regulation, access to infrastructure, fiber

deployment, licensing, spectrum

Pricing regulation, land access, permitting,

liberalization of sector

Market access, generics regulation,

pricing, funding of innovation, clinical trials

Tariff regulation, renewable subsidies,

interconnection, access rights

Obesity, sustainability, food safety, health and

wellness, labeling

Government subsidies, renewable regulation,

carbon emission regulation

Capital requirements, systemic regulation

(‘too big to fail’), consumer protection

Consumer goods

Banks

Resources

Telecom and Media

Transport, Logistics,

Infrastructure

Pharma and Healthcare

Energy and Materials

Automotive, Aerospace

and defense, Tech

30–40

40–50

45–55

25–30

35–45

25–30

50–60

50–60

Est. share of EBITDA

at stake, Percent

Building trust matters:

One-third of corporate returns are at stake from external engagement

SOURCE: McKinsey

3

Four tenets of world-class external engagement

World-class

external

engagement

1

3

4 2

Map our world

Define our contribution

Engage radically

Embed in the business

What are the major trends?

What’s at risk for us?

Which stakeholders should

we engage?

What is our purpose?

What do we prioritize?

How do we measure our

societal contribution? How do we organize?

How do we engage the

front line?

How do we take a more

proactive stance?

How will we engage?

How will we react?

SOURCE: Connect (2015) by J. Browne, R. Nuttall, T. Stadlen, team analysis

4

How has the relationship with stakeholders changed?

Number of

stakeholders

Location of

influencers

Sources and

volume of

information

Communication

Heavy focus on

institutional leaders

(mayors, tribal chiefs,

NGO directors, etc.)

Influencers are primarily

local

Limited channels of

information (annual

reports, regulatory filings,

direct observation, etc.)

Stakeholders with

concerns can escalate to

local government or local

press

Possible to connect with

thousands of individual

stakeholders – each with

their own set of concerns

Influencers can come

from anywhere at any

time

Drones, satellite images,

sensors, wearable

cameras, phishing,

whistleblowers, etc.

Every stakeholder has

their own loudspeaker –

and is connected to every

other stakeholder

5

Six major technological trends matter the most

Boost in

connectivity

Enhanced

computational power

Increase

in data

321

“90% of the world’s

data was generated

in the last two

years

“Increase in speed

of IT computation in

last 15 years is like

driving from San

Francisco to New

York in 5 minutes”

“50 billion devices

connected to the

internet by 2020”

6

Six major technological trends matter the most

Digital-to physical

conversion

Facilitation of human-

machine interaction

Access to

analytics

654

“Machine learning

enables one person

today to do the

work of 100

business analysts

10 years ago”

47% of

employment in

developed countries

to be automated

by 2030

“400+ million users

of Google Now and

Apple Siri”

7SOURCE: Various press reports; McKinsey Global Institute analysis

Time to reach 50 million users

9months

13years

4years

3 years 1

year

38years

Adoption of new technologies is also accelerating

8

Consumers are becoming more interconnected

and expectant of – yet overloaded by – information and choice

NOT EXHAUSTIVE

Require convenience, immediate service 24/7, irritated by waiting, wants to multitask, one place to meet all your needs

New

impatience

“Segment of

one” --

Personalized

discounts

would

encourage

~40% of

customers to

buy more

luxury items

online

Personal-

ization

Desire to

compare,

values

transparency,

present-bias,

expects value

for money

Consump-

tion

decisions

Decisions

made relative

to particular

content, as

opposed to

rational

optimum

(anchoring,

framing effect)

Referencing

Choice

overload

reinforced by

exponential

growth of

available info

Information

overload

“Global

village” peer

focus

(e-tribe)

Hyper-

connected,

values and

brand

awareness

shift quickly,

influenced by

peer’s opinion,

brands but

also bad news

spread

globally

rapidly

9

23 24

370

500

20132000

130

500 500

476

1990

477

23

477

1980

500

The definition of a stakeholder can change rapidly

SOURCE: Fortune Global 500; MGI CompanyScope; McKinsey Global Institute analysis

Number of Fortune Global 500 companiesAfrica &

Middle East

Southeast Asia

Developed

regions

Latin America

Eastern Europe

& Central Asia

South Asia

China region

1126

34

1226

500

120

2025

271

10

Companies are responding by using more advanced tools

(e.g. social media tracking dashboard)

ILLUSTRATIVE

Link clicks

New followers

Potential reach

Mentions

Retweets

Favourites

Current period

(last period) Target

… …

… …

… …

… …

… …

New followers

Page views

Clicks

Interactions

Current period (last

period) Target

… …

… …

… …

… …

Top Tweet

Engagements

20

30

10

40

50

0

Nov 22Oct 25 Nov 15Nov 8Nov 1

ReponsesRetweets

Mentions

XXXXXX

Unique visitors

SOURCE: Portland Communications, team analysis

11

This includes more sophisticated tools to prioritize and monitor

issues in real time (example: TSC i3)

SOURCE: TSC, McKinsey Reputation and Regulatory Strategy

▪ Common taxonomy for the various functions and

geographies on external risks and opportunities

▪ Prioritization of issues based on value at stake

assessment (optional)

Issues radar provides a structured and comprehensive

view of external risks and opportunities

▪ News feeds by issue

▪ Personal “watch list” to receive notifications by

issue/stakeholder and stay on top of debate

Real time news monitoring structures live

updates by issue

12

Advanced algorithms can link engagement efforts to financial metrics

(e.g. Gold miners trading at a significant NPV discount)

100

72

28

NPV2 of

underlying assets

Market

capitalisation

A recent study found a strong

link between gold miner’s market

cap and stakeholder relations:

▪ Study reflects data from 26 gold

mines owned by 19 publicly

traded firms1 between 1993 and

2008

▪ 50,000 ‘stakeholder events’ found

in the media that indicated

cooperation or conflict (e.g.,

praise, negotiate, fight, etc.) were

coded and scored – at both local

and national levels

▪ Market capitalisation discount

was tracked against stakeholder

management score

“I can show you two mines identical on these three

variables [reserves, cost of extraction, world gold price] that

differ in their valuation by an order of magnitude. Why?

Because one has local support and the other doesn’t.”

– Gold mining COO

Index

1 Listed on the Toronto Stock Exchange 2 NPV is gold reserves accounting for extraction costs

SOURCE: W. Henisz, S. Dorobantu, L. Nartey, “Spinning Gold: The Financial Returns of Stakeholder Engagement”, Strategic Management Journal (2014)

Methodology Results

55-83% of the

NPV discount can

be explained by

the effectiveness

of external

engagement

13

If the outside world is speeding up… has our organization kept pace?

World-class

external

engagement

1

3

4 2

Map our world

Define our contribution

Engage radically

Embed in the business

Non-local stakeholders

More stakeholders at all levels

Ability to quantify the risks and

value at stake

Changing stakeholder

expectations

Evolving role of government

vs. industry

Stakeholders with a

megaphone

More data available to -- and

about – stakeholders

New ways to talk (and listen)

Advanced algorithms

“Need for speed” -- instant

crises needing Immediate

response

SOURCE: Connect (2015) by J. Browne, R. Nuttall, T. Stadlen, team analysis

14McKinsey & Company

More companies are turning to Organizational Agility – the ability to quickly

adapt to a rapidly changing environment

SOURCE: McKinsey 9 Golden Rules report, 2013 (number of respondents ~1900 Executives worldwide)

Traditional companies succeed in

change every 10 years, try every 2

Agile companies “change less by

changing constantly”

McKinsey survey shows companies

spend a lot of time in re-design efforts,

with disappointing results

▪ Over 80% of executives surveyed have

experienced re-designs, 57% in the

past 2 years

▪ Only 23% percent of re-designs where

perceived to be successful

Agile companies change continuously

instead of taking discrete re-

organization steps to maintain pace

▪ Fluid organizations with roles instead of

positions enable rapid changing of

structure

▪ Empowerment at frontline enables

reacting to cues in the environment as

they arise


Being Agile requires a simultaneous focus on two conflicting objectives

Long term aspiration

and strategy

Stability to allow

people to focus

on business

Simplicity, stability

& effectiveness

Strong leadership and

steering to ensure

alignment

Rapid reactions

to emerging changes

Constant change

to keep at pace

with the market

Autonomy to

ensure engagement

and motivation

Flexibility and quick

reaction time

Central coordination

and standardization

Local responsiveness

and flexibility

and


An Agile organization “feels” different – nimble and responsive, but not out

of control

SOURCE: McKinsey

Agile

Bureaucratic

Weak Strong

Stable backbone

We

ak

Str

on

g

Dyn

am

ic c

ap

ab

ilit

y

Trapped

Start-up

How this feels

▪ Nimble

▪ Collaborative

▪ Easy to get things done

▪ Responsive

▪ Free flow of information

▪ Quick decision-making

▪ Empowered to act

▪ Learn from failures

▪ Continually evolving

▪ Versatile

▪ Flexible

▪ Adaptive

▪ Innovative

Dynamic: able to act quickly to

challenges; adaptable to new ways

of doing things

Stable: baseline processes,

structures and systems that

eliminate re-work


When successfully implemented, Agile projects generate tangible benefits

Simplified development process

Improved organizational alignment

Accelerated time to market

Reduced risk

Enhanced project quality

Improved project visibility

Increased productivity

Enhanced ability to handle changing priorities

67

76

79

79

80

81

84

84

85

90

Better managed distributed teams

Improved team morale

Share of respondents, Percent

Impact of Agile

Significant benefits across the board in terms of change handling, transparency, productivity and team health

SOURCE: “State of Agile” 2012 Survey from VersionOne, including information from 4,048 participants

Respondents quoting

“improved” or

“significantly improved”

18McKinsey & CompanySOURCE: McKinsey Organization Practice

Companies that could be called Agile already existed long before the 1990s

-- the tipping point for Agile adoption has arrived mid 2010s

Elements of the approach

existed long before the

internet and were used by

industrial players

“Agile manifesto” by a few

Silicon Valley developers

gave the concept a name,

set out key principles and

structured methodology

Non-tech players took

notice and Agile

methodology began to

spread well beyond the

Silicon Valley

2000s accelerated the trend Tipping point in 2015-16First examples already in

1950s


Today, more and more “traditional” (non-tech) companies have noticed the

great potential of Agile


Applying a lens on project requirements – from “one size fits all”

to “minimal viable product”

SOURCE: McKinsey

Start with the minimal viable product

(covering 80% of customers)

Evolve over time

Agile approachTraditional “waterfall” project delivery

“This is a big and long project, let's

make sure we capture everything,

otherwise we are never going to get it”

What 80% of

customers want/need


One popular agile tactic is “Scrum” – an approach that uses rapidly forming

teams to tackle 1-4 week “sprints” of work

Prototype

Business logic and

user experience

understood prior

to development

2

Prioritize

Prioritize frequently

to capture

the highest value

items sooner

1 4 Test with users

Use the system early

and often. Incorporate

feedback into

following prototype

Configure or Develop

Short cycles that follow

best in class engineering

practices

3

Sprint

“work cycle for

sub-deliverables”

1 – 4 week work cycles

depending on size and

pace of development

Iterative development is at the heart of being agile

▪ Incremental value captured every cycle

▪ Highest value items come to market faster

▪ Higher quality end products delivered

SOURCE: McKinsey Organization Practice


The core Scrum team will have a different composition to the traditional team

structure; primarily focusing on implementation

Team ▪ Staffed with cross functional

team members

▪ Is self-organizing and

empowered

Scrum master ▪ Oversees the Scrum process

and coaches the team

▪ Removes impediments to

facilitate progress

▪ Enables cooperation across

all roles and functions

Product owner ▪ Represents the business

community

▪ Ensures value delivery

▪ Acts as voice of the customer

▪ Sprint planning: Break

work down into small

repeatable chunks with a

concrete deliverable

(“sprint”) – typically 1-4

weeks

▪ Sprint execution: Daily

stand-up meetings

(progress since

yesterday, plan for today)

▪ Sprint retrospective:

Aims to improve the

process for the next

sprint

▪ End of each sprint has a

potentially implementable

solution to a problem



Agile team principles to enable productive high-performing teams

Self

organizing

▪ The team decides how to best to organize themselves to meet

the team’s goals

Self

managing

▪ Every member of the team is responsible for ‘managing’

the team

Cross

functional

▪ The team requires a range of skills to go from Product Backlog

to production ready solution

Right-sized▪ The team consists of 7 +/- 2 team members

Committed▪ The team is committed to delivering features for the sprint

Empowered▪ The team has authority to do what is needed to meet the

required functionality (within certain constraints)

Focused▪ Team members should be dedicated or at least not spread too

thin (e.g., 100% or 75% dedicated to the team)

Immutable▪ Team structure does not change while in a sprint



Example: Using a Scrum approach to simplify

drilling standards

DISGUISED CLIENT EXAMPLE

Drilling standards reduced from ~1,000 to <100 pages in 8 weeks

▪ Publishable content rapidly

generated through series

of 2-week “sprints” and

intensive end-user

feedback

▪ Created tremendous

excitement and pull from

the line

▪ Completed rewriting 15

standards, tailored to

onshore drilling, in 8 weeks

▪ Reduced average well

drilling costs from $2.4m

to $1.7m

Before

Experts provide

feedback on draft

standards

Cross-functional

teams co-locate to

rewrite standards

After



▪ Standardized how work is tracked with one source

of truth for all asset data

▪ Utilized Design thinking approach to ensure a

usable and effective digital iPad application

▪ Established in-field communication and

monitoring

▪ Paper forms eliminated and all data is

captured digitally

Setup of new iPads in one of the

divisions in <2 hours

App reduced hiking time and

increased value work

Satellite view with poles overlaid helped

determine the best way to get to poles

and reduce hiking time

Better customer service

Customer alert in app had gate code

and phone # to let customer know

service rep will be in their property

Stable backbone Dynamic capability

▪ Higher spans of control with less oversight;

real-time performance management of field force

▪ More time spent on higher value work (e.g.,

minor work and maintenance)

▪ During emergency situations, supervisor can

contact the team and quickly change focus to

emergency work

Problem statement: Increase field force productivity and improve customer service: Eliminate paper, ensure

accurate record keeping and flexibly deploy resources

Digital technologies often go hand-in-hand with a more Agile

organization model (example: utility field force)

DISGUISED CLIENT EXAMPLE



New approaches can break down silos and enlist the “army” of front-line

employees toward stakeholder engagement efforts

Case example

Front-line ownership

Local leaders are

tasked with engaging

local stakeholders and

their engagement is

tied to performance

evaluations

Listening tour

After an unflattering

New York Times article

appeared about Coke’s

influence on dietary

research leaders went

and did a 'listening

tour‘, sitting with 15 of

their top detractors

Employee

ambassadors

Created “ambassadors”

program to help

employees bring back

the pride of working in

Coca-Cola by giving

them information that's

human, simple, and not

scientific to be shared

in informal settings



As Agility expands, organizations require a shift in the mental model of what

they are and how they operate


Quick

changes,

flexible

resources

Leadership

shows

direction

”Boxes and

lines” less

important

End-to-end

teams

From… To…

Organizations as “machines” with

hard coded instructions

Organizations as organic systems, in which

people collaborate quickly across boundaries

Leaders as masterminds who

delegateLeaders as catalysts who show direction

Protecting most people from stressors

and complexity

Exposing all employees to a certain

amount of uncertainty

Optimizing for set plans Optimizing for rapid response to events

Top-down

hierarchy

Detailed

instruction Silos

Bureaucracy


Self-managing teams

Stable teams with

clear KPIs and

boundaries work as

own cells

Standalone teams

Flow-to-work pools

Dynamic staffing of

people and teams

against priorities

Dynamic demand Platforms

Marketplace for

matching tasks with

resources

Independent tasks

Different companies will find different ways to bring Agile to life - examples

Interlinked environment

Cross-functional teams

End-to-end accountable and

capable teams that

coordinate with other teams



ING introduced a fundamentally different operating model

based on Agile

SOURCE: McKinsey

BANKING EXAMPLE

Watch ‘Agile ways of working at ING Netherlands’ on Youtube:

https://www.youtube.com/watch?v=NcB0ZKWAPA0

▪ Consists of no more than

9 people

▪ Multi-disciplinary, self-

steering and autonomous

▪ End-to-end responsibility

for a concrete output

▪ Product Owner (PO), but

no manager or team lead

▪ Mission is set, but squad

composition can change

▪ Each squad also has an

Agile coach

▪ Squads are dissolved

once mission is fulfilled

▪ Each squad-member reports

to a chapter-lead (also the

PO)

▪ Each chapter owns specific

knowledge/ expertise and

disseminates across squads

▪ Related squads form a Tribe

(with an own mission)

▪ No more than 150 people in

one Tribe

▪ The Tribe lead oversees the

overall mission of the Tribe and

helps develop chapter leads

and product owners (PO)

The squad is the basis

for how we work …

… and squads are organized

by chapters and tribes


… which led to lower costs and dramatic improvements in

response times and customer engagement

SOURCE: McKinsey

ING - Impact achieved through Agile organization model

▪ 30% fewer FTE

(i.e., ~2,500 FTE)

▪ Move from 6 to 3

org layers

30%

COST SAVINGS

▪ From several

releases in a year

to one each

2-3 weeks

▪ +20 points on

engagement level

measured in polls

after introduction

of Agile

IMPROVED

CUSTOMER

SERVICE

▪ Significant

improvement in

Net Promoter

Score (NPS)RELEASES PER

WEEK

2-3

POINTS

EMPLOYEE

ENGAGEMENT

IMPROVEMENT

+20POINTS

EMPLOYEE

ENGAGEMENT

IMPROVEMENT

+20


More advanced versions of Agile can radically improve responsiveness –

Home nursing example

95% of nursing companies today Debora’s Agile operating model

▪ Optimize, standardize, specialize

▪ “Well-managed machine”Core idea

▪ Organization is the backbone

▪ Nurses are the professionals

Operating

model

Regional

leader

Leader for nursing

work

CEO

Lead

nurse

Nurse

Regional

leader

Lead

nurse

Lead

nurse

Nurse Nurse

Lead

nurse

Nurse

Lead

nurse

Lead

nurse

Nurse Nurse

▪ Hierarchy of

planners (20%)

and doers (80%)

▪ Control schedule

and policy

adherence

Nurse

team

Nurse

teamNurse

team

Nurse

teamNurse

team

Central team

Nurse

team

▪ 99% of people do

nursing work in self-

managing teams

with no boss

▪ 6 FTE central team

▪ Tight KPIs for teams

▪ Coordinators to help

Patient and

nurse

experience

▪ Patients: Up to 40 different nurses per

month

▪ Nurses: “Taxi driver with needle” feeling

▪ Patients: Have own dedicated nurse pair

with whom they have strong connection

▪ Nurses: Take accountability for

themselves and team.

Results

▪ 15% absence rate of nurses

▪ Low satisfaction of patients & caretakers

▪ Expensive hospital days for municipalities

▪ Firefighting, profitability issues

▪ <2% absence rate of nurses

▪ Win patient satisfaction comparisons

▪ 20% reduction in total costs (in pilot)

▪ Profitable growth at ~40%

SOURCE: McKinsey; client example


Shifting to an Agile organization is a particular challenge for senior leaders

SOURCE: McKinsey

From … To …

Focus

▪ Building a high-performing system

that optimizes exposure to positive &

negative risk

▪ Execute and optimize against

a profitable plan

Role

▪ Visionary – chart the overall direction

so everyone knows where to aim

▪ Architect – design an open system that

empowers people at all levels to

respond real time to a constantly

changing environment

▪ Coach – help everyone build the skills

and mindsets they need to succeed

▪ Planner –define detailed plans

through extrapolating

past performance

▪ Director – communicate the

plans and ensure everyone is

clear on what they are

supposed to do

▪ Controller – constantly check-

up and ensure everyone does

what they were assigned to do

Mind-

sets

▪ Learning

▪ Optionality

▪ Partnership

▪ Expert

▪ Predictability

▪ Control


Best practices in building a responsive organization - Summary

Our stakeholders

have changed

Our tools

have changed

Has our

organization

model kept up?

Instant feedback and rapid iterations:

▪ How (and how often) are we collecting stakeholder

feedback?

▪ Do we have the right set of stakeholders?

▪ How quickly do we act on what we hear?

Design and launch:

▪ Is there a bias toward launching and learning?

▪ What’s the level of comfort with an 80% answer?

Rapid re-prioritization

▪ How quickly, and how dramatically, can the

organization change its stakeholder approach?

▪ How many stakeholder decisions can be made by

a front-line employee?

Documents

Everybody’s got a loudspeaker - Building Trustbuildingtrust.ypacanada.com/wp-content/uploads/... · SOURCE: McKinsey Organization Practice McKinsey & Company 18 Companies that could