Briefing_WorkforceAgility_Feb12

Workforce Agility: An Executive BriefinginnovAtors' roundtAble series

Everyone knows that truly agile employees enable an organization to innovate, create new markets and even lay the foundations for industries of the future. And yet, what do we really know about creating an agile workforce? Despite a body of work on orga-nizational agility, surprisingly little research has addressed individual and team-based agility. This briefing examines the concept of workforce agility, explains why it is critical to enterprise survival, describes its attributes and provides a number of steps manage-ment can consider to foster it.

c o n t r i b u t o r s

Malgorzata GlinskaSenior Researcher, Batten Institute

[email protected]

Sean D. CarrDirector, Intellectual Capital, Batten Institute

[email protected]

Amy Halliday Writer and Editorial Consultant, Batten Institute

[email protected]

from the University of virginia’s DarDen school of BUsiness

In the 1950s, agility was a hot topic in the field of air combat and was defined as “an aircraft’s ability to change maneuver state.”2 John Boyd—a legendary Air Force fighter pilot who flew combat missions against Russian MiGs in Korea, created innovative methods of air and ground fighting, and helped develop the F-15 and F-16—believed that agility was even more important than power or speed.3

Later on, in the early 1990s, agility also became a popular concept in manufacturing. First introduced by the Iacocca Institute in a 1991 report, “21st Century Manufactur-ing Enterprise Strategy,” agile manufacturing was suggested as a response to the threat posed by the newly industrialized nations around the Pacific Rim—the so-called “Asian tigers.” The aim of agile manufacturing in the United States was to outperform overseas competition and to help the country regain the preeminence it had enjoyed prior to the emergence of Singapore, Hong Kong, Taiwan and South Korea as high-growth economies.4

What is Agility?

health care

education

businessi n n o vat i o n

entrepreneurshipresearch & development

emerging markets

sustainability

design

s u s t a i n a b i l i t y

creativityv e n t u r ec a p i t a l

economic develoment

technologygrowth

e f f e c t u a t i o n

entrepreneurial ecosystems

b at t e n b r i e f i n gbAtten institute trAnsforming sociEty through EntrEprEnEurship And innovAtion // feb 2012

Volatility is here to stay … the winners won’t stop focusing on quality, cost, and efficiency, but they’ll be paying a lot more attention to agility, too.”

C.K. Prahalad (1941—2010)

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2 Batten Briefing innovators’ roundtable series

Although technical definitions vary (see opposite page), agility usually refers to a company’s ability to take advantage of opportunities while countering competitive threats that arise from frequent and sometimes large and unpredictable changes in the environment.5 In fact, a truly agile company is capable of not only responding to but also creating changes.6 Former Intel CEO Andy Grove relished disrupting the semiconductor industry by routinely creating technological shifts that Intel, thanks to its agility, managed better than its rivals.7

That’s company agility—but what about people, the human facet of agility within an enterprise? Workforce agility is often defined as the ability of employees to respond strategically to uncertainty. Arguably, this ability is central to creating an agile or-ganization.8 Business leaders have long known that their workforce can be a source of competitive advantage and that their companies’ financial success—if not sur-vival—depends on the ability to mobilize employees to meet the demands of volatile markets with speed, flexibility and nimbleness.

1 Prahalad, C.K. 2009. “In Volatile Times, Agility Rules.” BusinessWeek. (4147): 80.

2 Richards, C.W. 1996. “Agile Manufacturing: Beyond Lean?” Production and Inventory Management Journal. 37(2): 60-64.

3 Coram, R. 2004. “Boyd: The Fighter Pilot Who Changed the Art of War.” New York: Back Bay Books.

4 Kidd, P.T. 1995. “Agile Manufacturing: A Strategy for the 21st Century.” Agile Manufacturing, IEE Colloquium.

5 Qin, R., Nembhard, D.A. 2010. “Workforce Agility for Stochastically Diffused Conditions—A Real Options Perspec-tive.” International Journal of Production Economics. (125): 324-334.

6 Gunasekaran, A., Yusuf, Y.Y. 2002. “Agile Manufacturing: A Taxonomy of Strategic and Technological Imperatives.” International Journal of Production Research. 40 (6): 1357-1385.

7 McCann, J., et al. 2009. “Building Agility, Resilience & Performance in Turbulent Environments.” People & Strategy. 32 (3): 45-51.

8 Prahalad, C.K., Hamel, G. 1990. “The Core Competence of the Corporation.” Harvard Business Review. 68 (3): 79–91.

What is Agility? [ c o n t i n u e d ]

A truly Agile compAny is cApAble of not only responding to but Also creAting chAnges.”

but WhAt About people, the humAn fAcet of Agility Within An enterprise?”

Agility noun /ə-΄ji-lə-tē/

etymology

French agilité (14th cent.)

Latin agilitāt-em

The quality of being agile; readiness

for motion; nimbleness, activity, dex-

terity in motion.

Source: Oxford English Dictionary

3

9 Sharifi, H., et al. 1999. “A Methodology for Achieving Agility in Manufacturing Organizations.” International Journal of Production Economics. 62 (1/2): 7-22.

10 Yusuf, Y.Y., et al. 1999. “Agile Manufacturing: The Drivers, Concepts, and Attributes.” International Journal of Pro-duction Economics. 62 (1/2): 33–43.

11 James, T. 2005. “Stepping Back from the Lean.” IEE Manufacturing Engineer. 84 (1): 16–21.

12 Ismail, H.S., et al. 2006. “Agile Manufacturing: Framework and Practice.” International Journal of Agile Systems and Management. 1 (1): 11–28.

13 Nelson, A., Harvey, F.A. 1995. “Technologies for Training and Supporting Your Agile Workforce.” In: Creating the Agile Organization. Proceedings of the 4th Agility Forum Annual Conference.

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c o p y r i g h t i n f o r m a t i o n

BATTEN BRIEFINGS, February, 2012. Special Edition,

published by the Batten Institute at the

Darden School of Business, 100 Darden Boulevard,

Charlottesville, VA 22903.

email: [email protected]

www.batteninstitute.org

POSTMASTER: Send address changes to Batten Brief-

ings, P.O. Box 6550, Charlottesville, VA 22906-6550.

©2012 The Darden School Foundation. All rights

reserved.

t h e i n n o v a t o r s ’ r o u n d t a b l e is a

membership network of senior innova-

tion executives from some of the world’s

most innovative companies. The purpose

of the network is to share best practices,

discuss common challenges, and push

the state of the art in corporate innova-

tion in a highly interactive and candid

forum. To encourage frank discus-

sion and to motivate inter-disciplinary

learning, members are selected from

among non-competing firms and diverse

industrial sectors. The Batten Institute, a

leading center for research in entrepre-

neurship and innovation at the University

of Virginia’s Darden School of Business,

convenes the Roundtable executives

once or twice a year for conversations

facilitated by the world’s top scholars in

innovation. Participating members have

included Siemens, Corning, Northrop

Grumman, Bank of America, MeadWest-

vaco, CSC and Accenture.

For further information about opportuni-

ties for membership, please contact:

[email protected].

FROM ThE ExPERTS

definitions of Agilit y

“Ability to cope with unexpected changes, to survive unprecedented threats of business environment, and to take advantage of changes as opportunities.”9

“Successful exploration of competitive bases (speed, flexibility, innovation, proactivity, quality and profitability) through the integration of reconfigurable resources and best practices in a knowledge-rich environment to provide cus-tomer-driven products and services in a fast-changing market environment.”10

“Ability to respond to change, uncertainty and unpredictability in the business environment, whatever its source—customers, competitors, new technologies suppliers, or government regulation.”11

“Ability to respond to and create new windows of opportunity in a turbulent market environment driven by individual (bespoke) customer requirements cost-effectively and rapidly.”12

“Agility is a capability; it is an organization’s capacity to respond rapidly and ef-fectively to unanticipated opportunities and to proactively develop solutions for potential needs. It is the result of an organization and the people in it, working together in ways that benefit the individual, the organization, and their custom-ers.”13


Why does Agility matter?Competing in turbulent environments requires organizations to spot and benefit from changes in the market. Businesses that cultivate workforce agility can do that. In addition, they can produce and deliver new products efficiently.16 Businesses that lack workforce agility, however, have difficulty keeping pace with markets and tech-nological changes.17

While turbulent, hypercompetitive environments may damage or destroy less agile and resilient organizations, they give rise to opportunities for innovation for compa-nies with greater agility and resiliency. Thus, a lack of agility may result not only in significant real losses but also in lost opportunities.

It is, therefore, not surprising that nearly 90% of executives polled by the Economist Intelligence Unit in 2009 cited agility as central to global success.19 Research at the Massachusetts Institute of Technology supports this notion, showing that agile firms grow revenue 37% faster and generate 30% higher profits than non-agile compa-nies.20

Agility versus resiliency

a 2009 survey of 471 north american

companies found that environmental

turbulence is best managed by develop-

ing not just agility but also resiliency.

While agility is the capacity for moving

quickly to spot and exploit opportunities in

fast-changing environments, resiliency is

the capacity for resisting, absorbing and

responding to unexpected and disruptive

change. as the study uncovered, com-

panies exhibiting higher levels of agility

and resiliency are more competitive and

profitable, even with higher levels of

turbulence.14

“While agility is the capacity for moving quickly to spot and exploit opportunities in fast-changing envi-ronments, resiliency is the capacity for resisting, absorbing and respond-ing to unexpected and disruptive change.”

london Business school professor Don-

ald sull found a different way to convey

the importance of being agile and, at

the same time, having the strength and

stamina to weather market turbulence.

he called it agile absorption. as he put it,

companies that cultivate agile absorption

don’t merely succeed during turbulent

times—they emerge as true market lead-

ers. 15

WhAt benefits Would your orgAnizAtion be most likely to reAp if its Agility And speed increAsed?

all data weighted by gDP of constituent countries to adjust for differences in response rates from

various regions; excludes respondents who answered “don’t know”; respondents could select up

to two answers to each category.

source: mcKinsey Quarterly

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chAnge in the mArketplAce isn’t something to feAr: it’s An opportunity to shuffle the deck.”

Jack Welch, former CEO of General Electric

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5

Why does Agility matter?

14 McCann, J., at al. 2009. "Building Agility, Resilience & Performance in Turbulent Environments." People & Strategy. 32(3): 45-51.

15 Sull, D. 2009. “How to Thrive in Turbulent Markets.” Harvard Business Review. 87 (2):80-88..

16 Swafford, P.M., et al. “The Antecedents of Supply Chain Agility of a Firm: Scale Development and Model Testing.” Journal of Operations Management. 24 (2): 170–188.

17 Qin, R., Nembhard, D.A. 2010. “Workforce Agility for Stochastically Diffused Conditions—a Real Options Per-spective.” Int. J. Production Economics. (125): 324-334..

18 Noel, T., Charan, R. 1989. “Speed, Simplicity, Self-Con-fidence: An Interview with Jack Welch.” Harvard Business Review. 67 (5):112-120.

19 2009. “Organizational Agility: How Business Can Survive and Thrive in Turbulent Times.” A Report from the Econo-mist Intelligence Unit.

20 Ibid.

21 “Building a Nimble Organization: A McKinsey Global Survey.” The McKinsey Quarterly. The survey was conduct-ed in June 2006 and received 1,562 responses from a rep-resentative worldwide sample of executives at publicly and privately held businesses across a full range of industries, as well as nonprofits and government organizations. The survey defined “speed” as a measure of how rapidly organizations execute an operational or strategic objective and “agility” as the ability to change tactics or direction quickly.

22 Drucker, P.F. 1959. “The Landmarks of Tomorrow.” London: Heinemann.

23 Breu, K., et al. 2001. “Workforce Agility: The New Employee Strategy for the Knowledge Economy.” Journal of Information Technology. (17): 21–31.

24 Ibid.

In 2002, researchers at Cranfield School of Management in the U.K. conducted a study to determine the attributes of an agile workforce. Their research focused on managers and non-production workers—those members of the organization whom Peter Drucker called “knowledge workers.”22 Analysis of their survey data collected from 515 U.K. companies discovered ten key attributes of workforce agility, clus-tered into five broad capabilities:23

intelligence refers to the collective ability of a workforce to perceive and interpret external change (such as in customer needs, market conditions, emerg-ing business opportunities and competitor strategies), to respond by adjusting objectives accordingly and to act fast in line with the resulting strategic direc-tion.

competency refers to the acquisition of skills, in particular IT and software skills, management and business process integration skills, and their continu-ous alignment with an evolving business direction. Researchers identified the combination of intelligence and competencies as the strongest determinant of workforce agility.

collAborAtion is the workforce’s capability for working together effectively across project, functional and organizational boundaries.

culture refers to the development of an internal environment that empowers employees and rewards local decision making.

informAtion refers to the deployment of a flexible information technol-ogy infrastructure that supports the assimilation of new systems rapidly and effectively.24

What Are the Attributes of an Agile Workforce?


Achieving workforce agility requires motivated, cooperative employees who can change their capabilities and leaders who can motivate and train them to master timely knowledge and skills. But, of course, that’s easier said than done. When sur-veyed, many business leaders admit that their organizations fall short when manag-ing and deploying their workforce as an asset. They often fail to ensure that the best talents and skills of the entire workforce are fully utilized and that employees are shifted dynamically to where they are needed when they are needed.

So, what’s to be done? When it comes to management actions that can promote workforce agility, here are some suggestions gleaned from several surveys:

focusEncourage employees to focus on what is truly core to the business. By strengthening or redefining the core, employees can find new ways to spur growth. By minimizing time and money spent on non-core programs, organiza-tions and employees can direct their limited resources more efficiently to satisfying customer expectations and creating superior customer value. As a result, they will be positioned well not only during downturns but also during periods of growth. 26

tolerAnceFoster tolerance for change and ambiguity. Use scenarios to explore possible futures and encourage individual employees and teams to build hypotheses and models about what is happening and what they are experiencing. Get your em-ployees to read broadly and explore new ideas together.27

floWImprove the flow of information. Managers should regularly share with em-ployees information on the company’s overall operating results, the business unit’s operating results, new technologies that may affect employees, business plans and goals, and competitors’ relative performance. Employees need relevant and timely information in order to respond to changing organizational needs.28 Often, com-munication and collaboration become trapped in functional, geographic or other silos. By breaking down silos, business leaders can improve collaboration inside and outside their enterprise and better align departmental goals and performance measures with overall strategy.

Action biAsCreate an action bias throughout the organization. Set clear priorities and deadlines and hold people responsible for meeting them. Avoid paralysis in deci-sion making; work on streamlining and clarifying roles and responsibilities in decision-making processes.29

25 Glenn, M. 2009. “Organizational Agility: How Business Can Survive and Thrive in Turbulent Times.” A Report from the Economist Intelligence Unit.

26 Ibid.

27 McCann, J., et al. 2009.

28 Sumukadas, N., Sawhney, R. 2004. “Workforce Agility Through Employee Involvement.” IIE Transactions. (36): 1011-1021.


cAse in point

What can managers do?

When fujifilm saw its core busi-

ness threatened by the advent of digital

photography, its employees explored

innovative ways to apply their expertise to

new markets. “We are a photo-imaging

company, but we realized that human

skin shares similar properties to thin-

film photo processes,” said Stefan Kohn,

head of innovation management at Fuji-

film Europe. The employees recognized

that the oxidation control mechanisms

the company invented to prevent photos

from deteriorating could be modified to

produce creams that preserve the skin.

In 2007, the company launched a line of

skin care products, called Astalift, based

on technology it had developed for film.”25

7

knoWledgeIntegrate and automate knowledge-sharing processes. Such integration will enable IT to strengthen organizations’ ability to solve problems, improve their use of critical data and help employees make better decisions.30

trAiningCross-train your workforce. Training is essential for employee involvement.31

Employees can perform a range of tasks only if they have the necessary skill sets, such as group decision making and problem solving; leadership; understand-ing the business; quality and statistical analysis; team building; and job-specific capabilities. Cross-trained workers are even better: they can be easily deployed where they are needed when they are needed. As a result, they are able to achieve a higher performance—or the same performance with a smaller workforce—than specialized workers.32

reWArdsReward agility-promoting behaviors. Compensation systems are important in supporting workforce agility. Even traditional systems, such as “pay for perfor-mance,” profit sharing and Employee Stock Ownership Plans (ESOPs), align individual goals with company goals. Team-based production incentives encourage teamwork, promoting acquisition of different skills. The non-traditional approach-es appear even better suited to promoting workforce agility. All-salaried pay fos-ters an egalitarian environment. Minimizing wage loss due to change minimizes resistance to change.33 Financial rewards and career incentives for innovation and continuous improvement help create and sustain an openness to change.34

poWerEncourage power sharing. Power sharing, which moves important decisions into the hands of individuals and teams, is crucial for employee involvement. There are two types of power sharing practices: low-power practices for generating employ-ee suggestions and problem solving, and high-power practices for decisions about such major areas as work redesign.35

Among all the practices mentioned here, power sharing appears to have the most positive effect on workforce agility.36 However, power sharing, which researchers classify as a higher-order employee involvement practice, needs to rest on a support-ive foundation of lower-order practices, such as training, salary- and skill-based pay, improvement incentives and various non-monetary incentives.

One note of caution: when used by themselves, many well regarded practices—such as a participative environment, a culture that values change, job redesign and team-work—may enhance workforce agility sporadically. True workforce agility can be achieved only when these practices are developed in concert.37

30 Glenn, M. 2009. “Organizational Agility: How Business Can Survive and Thrive in Turbulent Times.” A Report from the Economist Intelligence Unit.

31 Sumukadas, N., Sawhney, R. 2004. This suggestion came from a study, involving 58 plants from various industries, that examined the impact of several management practices on workforce agility in the context of employee involve-ment.

32 Hopp, W.J., Van Oyen, M.P. 2004. “Agile Workforce Evaluation: a Framework for Cross-Training and Coordi-nation.” IIE Transactions. (36): 919–940.

33 Sumukadas, N., Sawhney, R. 2004.


35 Sumukadas, N., Sawhney, R. 2004.

36 Ibid. 37 Ibid.

38 Ross, J., Westerman, G. 2006. “The Agility Paradox.” A Presentation at the MIT CIO Summit on June 22, 2006.

cAse in point

7-eleven jApAn, the most profitable

Japanese retailer, has an IT-enabled

business model in which its information

system links stores, head office, sup-

plier and distribution centers. Each store

makes local decisions based on centrally

designed systems and processes. Thanks

to digitized processes, stores can order

and receive fresh foods three times a

day. At 7-Eleven Japan, information and

communication technologies are funda-

mentally intertwined with a workforce’s

ability for speedy action and operational

flexibility. As CEO Toshifumi Suzuki said,

“It’s not enough to exchange information.

The information has no value unless it’s

properly integrated by the franchisees

and makes them work better.” 38


39 Beatty, R.W. 2005. “Workforce Agility: The New Fron-tier for Competitive Advantage.” White Paper. Convergys Corporation.

40 Hackett, I. 2008. “Manager@Work: Workforce Agility Needed for Competitive Advantage.” The Edge Singa-pore.

41 The term “Velcro organization” was coined by professor Joseph L. Bower at Harvard Business School.

42 Hackett, I. 2008.

“Agile Innovation: A Footprint Balancing Distance and Immersion.” Keeley Wilson and Yves L. Doz. 2011. California Management Review. 53 (2):6-26.

“Agile Workforce Evaluation: A Framework for Cross-Training and Coordination.” Wallace J. Hopp and Mark P. Van Oyen. 2004. IIE Transactions. 36 (10): 919-940.

“Agility Training for the Learning Organization.” Craig Mindrum. 2008. Chief Learning Officer. 7 (12): 36-87.

“Building Agility, Resilience and Performance in Turbulent Environments.” Joseph McCann, John Selsky, and James Lee. 2009. People & Strategy. 32 (3): 44-51.

“Competing through Organizational Agility.” Donald Sull. 2010. McKinsey Quar-terly. (1): 48-56.

“Organisational Agility: How Business Can Survive and Thrive in Turbulent Times.” Marie Glenn. 2009. A Report from the Economist Intelligence Unit.

“Workforce Agility: The New Employee Strategy for the Knowledge Economy.” Karin Breu, Christopher J. Hemingway, Mark Strathern and David Bridger. 2002. Journal of Information Technology. 17 (1): 21-31.

“Workforce Agility through Employee Involvement.” Narendar Sumukadas and Rajeeva Sawhney. 2004. IIE Transactions. 36 (10): 1011-1021.

Whose job is it to foster Workforce Agility?

hr? As several surveys indicate,

CEOs and human resource leaders

agree hR departments should have

an organization-wide role in improv-

ing workforce agility. Many top execu-

tives believe that their hR depart-

ments have the right set of skills and

the right understanding of corporate

strategy to move their companies

in the direction of workforce agility.

What they lack, however, are the data

and the tools.39

cfo? There may also be a signifi-

cant role for chief financial officers

(CFOs) to play in building an agile

workforce. Since a company’s lack

of workforce agility can affect top-

and bottom-line results, as well as

shareholder value and even market

share, CFOs should get on board and

make sure that hR executives have

both the tools and the data they need

to ensure that the workforce is suf-

ficiently agile to deliver on corporate

strategy.40

essential reading

velcro organizationsThe shifting tectonics of today’s business landscape mean that survival calls for agil-ity, flexibility and speed. As the late C.K. Prahalad said, in today’s turbulent environ-ment, companies should strive to become “Velcro organizations” in which employees and capacity can be quickly reconfigured in creative ways to respond to rapidly evolving customer demands.42 However, building and sustaining such an organiza-tion is not easy. Business leaders who undertake the task need to be comfortable with chaos, ambiguity and unexpected change.

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Briefing_WorkforceAgility_Feb12

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