Ideas for Leaders #247

Balancing Local and Global Efficiency with Anchored Agility

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Key Concept

If your organization is struggling to balance local flexibility and global efficiency, it is not the only one; even leading multinationals are facing the problem of managing fixed vs. local needs. According to this Idea, the solution lies in adopting a framework called ‘anchored agility’. 

Idea Summary

In the quest to achieve global efficiency, often companies find themselves faced with a dilemma: how can they manage the various processes needed to run a global organization, yet keep a locally-flexible system at the same time? Unable to reach this equilibrium, many find themselves stuck in a rigid system and not as customer-orientated as they would like to be.

Based on interviews with senior executives at twelve multinational organizations, IMD Business School’s Michael Wade and Bettina Buechel have come up with a solution to this problem; they call it ‘anchored agility’. This involves deciding which processes should be fixed across locations, and which ones should be allowed to float or vary depending on local needs.

Wade and Buechel provide five guidelines for companies that want to adopt the anchored agility framework:

  1. Start with processes before moving to data and IT systems: avoid moving too quickly into system implementation before fully understanding the process landscape.
  2. Sequence functionally from back to front office: begin standardization programs with typically process-driven, back-office functions, such as accounting, finance, and procurement. Avoid starting with customer-facing functions, such as marketing and sales, as these tend to require more floating processes and are most likely to resist change.
  3. Implement smart pilots: some resistance to change is inevitable, but it can be countered with well-selected and well-conducted pilot implementations in appropriate parts of the business. To work, the pilots must be credible, replicable and feasible.
  4. Ensure top management support, from push to pull: there must be a strong ‘push’ from top management before the ‘pull’ takes place (i.e. the tipping point beyond which gains become apparent and much of the initial resistance has been overcome).
  5. Institute strong and robust governance over time: this is critical to establish and maintain the right balance of fixed and floating elements. Poor governance can lead to a set of processes and systems that is too large or too small.

Business Application

The key to anchored agility is finding the correct mix of fixed and floating processes and systems: too many fixed processes can inhibit local responsiveness, but too many floating processes can inhibit global efficiency. So in other words, organizations that want to apply this framework must be try to standardize as much as possible, but not at the expense of local responsiveness.

One way that Wade and Buechel demonstrate this in action is by applying it to hiring processes: organizations should start by examining such processes across the enterprise to understand how it is being done in different locations. Many local variations will naturally be found, which can be justified by differences in local legal requirements on hiring procedures, quotas, retirement laws, etc.

These local procedures should be categorized into strategic and non-strategic, with the latter considered for rigorous standardization or perhaps outsourcing (such as payroll processing or technical training). Some of the strategic processes, on the other hand, will require local adaptation (such as reward systems). Ultimately, say Wade and Buechel, governing anchored agility is a dynamic journey that needs careful attention on the part of management.

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Authors

Institutions

Source

Idea conceived

  • June 2013

Idea posted

  • October 2013

DOI number

10.13007/247

Subject

Real Time Analytics