Top 10 shifts transforming organisations – McKinsey & Co

CEOs and their leadership teams are overseeing a period of rapid and transformational change.

In a bid to help these business leaders grapple with issues including the integration of AI, making progress on DEI and improving staff retention, McKinsey & Co has launched ‘The State of Organisations 2023’ report.

The paper outlines findings from an ongoing research initiative seeking to pinpoint the most important shifts organisations are facing, while providing ideas on how to approach them. 

As part of this research, the consulting giant surveyed more than 2,500 business leaders at organisations with at least 1,000 employees between May and June last year, covering various sectors and countries. Nations included Canada, China, France, Germany, India, Spain, the UK and the US. 

Through the State of Organisations Survey, conversations with CEOs and their teams and the findings of recent research, McKinsey has identified the most important organisational shifts that businesses must address today.

Here, Business Chief takes a look at the top 10. 

1. Increasing speed, strengthening resilience

From its State of Organisations Survey, McKinsey & Co discovered that just half of leaders felt their companies were prepared to react to future shocks. 

In their report, authors write that businesses looking to emerge effectively from times of crisis should organise for speed of response, give power to their people and develop a culture of continuous learning.

“Leaders can start by thinking systematically about ways to build up their organisations’ resilience,” the paper says. “They will need to take care to review and revise these elements on an ongoing basis, rather than only when external forces or global crises force them to do so.”

2. ‘True hybrid’: The new balance of in-person and remote work

Cleary, the pandemic ushered in a new era for the world of work as a huge proportion of organisations across the globe accepted new ways of working.

This involved allowing employees to work from home or in other off-site locations for much of the time, a practice which has continued into 2023. 

McKinsey & Co write that organisations must “provide structure and support” around the tasks best carried out in person or remotely, while also resetting performance expectations. By doing so, these “true hybrid” businesses can become “destination workplaces”.

3. Making way for applied AI

It’s virtually impossible at the moment for big organisations to escape the artificial intelligence conversation, and AI is already helping them to drastically improve ways of working. 

McKinsey & Co’s researchers point out that, in 2022, companies used an average of 3.8 AI capabilities such as natural-language generation and computer vision – double the 1.9 used in 2018. 

As businesses embrace new opportunities, they should focus on embedding use of AI in corporate culture. 

4. New rules of attraction, retention and attrition

While COVID-19 was a huge contributor to the Great Resignation, there is evidence to suggest the trend started several years ago and is very much ongoing. 

Employees are increasingly striving for a desirable combination of work–life balance, professional development, purpose and financial compensation for their efforts. 

Authors of McKinsey & Co’s report say organisations can respond by tailoring employee value propositions to individualised preferences in ways that can help close the gap between what today’s workers want and what companies need. 

5. Closing the capability chasm

Regardless of their sector, big-name companies often announce technological or digital advances in their strategies without having the capabilities in place to integrate them – and the data backs this up. 

Staggeringly, just 5% of respondents to McKinsey & Co’s survey said their organisations already had the capabilities that they needed. 

The consulting heavyweight adds that, to achieve a competitive advantage over rivals, these businesses must develop an integrated set of people, processes and technology, thus improving consistency. 

6. Walking the talent tightrope

Business leaders have, as McKinsey puts it, long walked a talent tightrope as they look to retain their best people while also balancing budgets.

But the firm’s research shows that, in many organisations, 20-30% of critical roles are not filled by the most appropriate people. They must therefore focus on finding ways to match top talent to high-value roles. 

“The idea isn’t new”, researchers write, “but it’s the right one in this era of hybrid work models, increased employee mobility and skill shortages.”

7. Leadership that is self-aware and inspiring

Worryingly, only 25% of respondents to McKinsey & Co’s survey said their organisations’ leaders were engaged, passionate and inspire employees to the best-possible extent.

Researchers point out that leaders must cultivate fit-for-purpose behaviours within companies, in addition to simply focusing on their short-term responses to crises. This means being able to effectively lead themselves, C-suite peers and wider networks of teams.

“That requires leaders to build a keen awareness both of themselves and the operating environment around them,” McKinsey adds. 

8. Making meaningful progress on diversity, equity and inclusion 

While companies across the globe have been making a whole host of DEI commitments in recent years, not all are necessarily making tangible progress. 

One path forward, says McKinsey & Co, is for leaders to be more systematic early on, considering the objectives and desired level of impact from their diversity, equity and inclusion programmes. 

To realise DEI aspirations, leaders will need to identify opportunities for making meaningful progress within organisations, as well as for improving their external communities and society.

9. Mental health: Investing in a portfolio of interventions 

Despite 90% of companies across the globe offering some form of wellbeing programme for their employees, health and wellbeing scores actually remain poor. 

Clearly, this is doing no favours for staff retention and productivity. McKinsey & Co found that employees facing mental health crises are four times more likely than others to want to leave their organisations.

Writing their report, authors say firms need to refocus their efforts on addressing the root causes of wellbeing challenges in a more systematic way. 

10. Efficiency reloaded

More than a third of McKinsey & Co’s survey respondents listed efficiency as a top three organisational priority. 

At the same time, 40% of respondents pointed to complex organisational structure as a cause of inefficiency, while a similar proportion cited unclear roles and responsibilities.

Boosting efficiency is about “more than managing immediate crises or getting the same work done with fewer resources”, according to McKinsey, but also “deploying resources more effectively to where they matter most”. 

Read the full report: The State of Organisations 2023