The Effect of Organizational Change on HR

What will be different about the organization of the future? How might your organization change as it evolves? How will these changes impact how HR organizations function?

Organizations are increasingly under pressure from multiple sources, including technologies, markets, customers, employee expectation, government, and public opinion. Simultaneously, the economy has become increasingly service oriented and digital, and the importance of speed has become critical for organizational success and growth. In many cases, lack of talent and ideas are constraining growth. Despite the growing need for speed, trapped resources and talent can’t be mobilized to address critical challenges and opportunities.

Organizations are also finding they need to adapt to changing employee expectations and loyalty. Some employees are questioning traditional corporate career paths, others place a higher value on learning opportunities rather than on traditional incentives, and yet others prefer to work for an organization that has a higher purpose than only profits. It is also becoming more common that potential employees prefer gig or contract work arrangements.

Bain and Company has some insight into what the future may hold for organizations. Bain’s experience with clients points to five emerging challenges for leadership teams:

  • Balancing organization scale (proportional business growth) and customer engagement
  • Transitioning from professional managers to mission-critical roles
  • Balancing organizational assets and ecosystems (interconnected organizations)
  • Engine 1 (today’s core business) vs. Engine 2 (tomorrow’s core business)

Balancing Organization Scale and Customer Engagement

One emerging challenge will be balancing organizational growth while maintaining the ability to become engaged and stay engaged with customers. Often, as an organization grows and becomes more organizationally complex it loses touch with its customer base. Future organizations will need to compete using both the benefits of growth and customer engagement to gain and maintain a market-competitive advantage.

Professional Managers vs Mission-Critical Roles

As organizations develop their customer-centered mission, they will need to identify and define the roles that will be critical to achieving a desirable culture. These mission-critical roles will require incumbents who have the necessary skill sets to manage both organizational growth and customer focus. In addition, these mission-critical roles need to be organizationally positioned close to the customer to shorten feedback loops and increase speed and agility. Managerial spans will widen as more information passes peer-to-peer rather than hub-and-spoke. The role of a manager will evolve into a coach, mentor and talent developer as team members move from one role to another.

Assets vs Ecosystems

The concept of organizational ecosystems has taken the form of outsourcing, initially starting with noncore assets and eventually spreading through all parts of the organization’s value chain. Any part of the organizational value chain can be outsourced. The key is to assess what the organization wants to do itself, and then through outsourcing form partnerships to maximize value for customers. This will require a new set of skills for those individuals engaged with managing vendor partners.

Engine 1 (today’s core business), Engine 2 (tomorrow’s core business)

Organizations are always looking for innovations to improve their core business – what Bain calls Engine 1. At the same time, organizations need to anticipate major and disruptive external changes – new customer needs, new competitors, new markets, new economics – to dramatically impact their organization and potentially become tomorrow’s core business – what Bain calls Engine 2. To anticipate these changes and trends, organizations need to stay externally focused, understand the customer’s needs, foresee moves that current and potential competitors are making, learn from ecosystem partners, and tap into the collective knowledge of internal resources that are customer-facing.

Leading and working in a firm of the future will be different. Teams will be formed to attack specific business problems and disband when the problem is solved. Organizations will be focused on hiring and retaining talent for mission-critical skills and designing around these mission-critical roles. Leaders will need to transition from traditional management roles to inspirational and coaching roles. Change management will thrust new challenges on leadership. Organizational transitions can occur abruptly, and leadership needs to think long-term and act.

There is no one formula for dealing with organizational change. The key is to build resilience to change into the organization. Organizations that can absorb shocks, and change coarse quickly and smoothly, will have a chance of thriving. Human Resources needs to be prepared to provide leadership during these transformations.