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Agile performance management | McKinsey

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class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j">Lucia Darino<!-- --> </span></span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j"><a data-component="mdc-c-link" href="/our-people/marcus-sieberer" class="mdc-c-link-inline___7DRrt_8032924 mdc-c-link-inline--secondary___YKoOK_8032924"><span class="mdc-c-link__label___Pfqtd_8032924">Marcus Sieberer</span></a> </span></span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j">Arthur Vos<span>  </span></span></span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j">Owain Williams</span></span></div><div class="mdc-u-grid-col-md-start-8 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-8 mdc-u-grid-col-lg-end-11 ArticleContent_mck-c-article-content__share-tools__kWRRw"></div></section><section class="mdc-u-grid mdc-u-grid-col-md-12 mck-u-animation-blur-in-400"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_8032924 mdc-u-ts-5"><div class="mck-u-links-inline">Performance management is tough enough in traditional organizations; in agile organizations, three changes are essential to success.</div></div></div></section><main data-layer-region="article-body" class="mdc-u-grid mdc-u-grid-gutter-xxl"><div class="mdc-u-grid mdc-u-grid-col-1 mdc-u-grid-col-md-12"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div class="mdc-o-content-body mck-u-dropcap"><p><strong>The evidence is clear:</strong> a small number of priority practices make the difference between an effective and fair performance-management approach and one that falls short. Organizations that link employee goals to business priorities, invest in managers’ capabilities, and differentiate rewards for the extremes of performance are 84 percent more likely to have performance-management approaches that their employees perceive and <a href="/capabilities/people-and-organizational-performance/our-insights/the-fairness-factor-in-performance-management">recognize as being fair</a>. Furthermore, these practices are mutually reinforcing: implementing one practice well can have a positive effect on the performance of others, which leads to positive impact on employee and organizational performance, which, in turn, drives organizations to outperform peers.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="dark" data-module-background="deep-blue" data-module-category="" data-module-gradient-position="bottom-right" class="mck-c-inline-module-container SideBar_mck-c-sidebar__bgimg-wrapper__Qj4Dt mck-o-edge-to-edge mck-u-screen-only mck-c-module-wrapper" data-layer-region="sidebar"><style></style><div data-component="mdc-c-background-image" class="mdc-c-bg-image___GJdv1_8032924 background-image-sidebarBg-004d94f7-a234-4575-b80b-a667e57b83c3 SideBar_mck-c-sidebar__scrolling-bg__m0W_L" role="img" aria-label="What defines an agile organization"></div><div class="SideBar_mck-c-sidebar__scrolling-wrapper__U9X9c mdc-o-container__wrapper mdc-u-spaced-mobile "><div class="mdc-o-container__wrapper is-wrapped mdc-u-grid-gutter-md mdc-u-grid mdc-u-grid-col-sm-12"><div class="mdc-u-grid-col-sm-span-12 mdc-u-grid-col-md-span-12 mdc-u-grid-col-lg-span-4 SideBar_mck-c-sidebar__content-sticky__k5JFm mck-c-sidebar__scrolling-heading"><h2 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 mdc-u-ts-3 SideBar_mck-c-sidebar__content-heading__NJekY"><div>What defines an agile organization</div></h2><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_8032924 mdc-u-grid-gutter-xs"><div class="SideBar_mck-c-sidebar__next-heading__ZYaa2"></div><button data-component="mdc-c-button" aria-label="" type="button" id="button_id" class="mdc-c-button___U4iY2_8032924 mdc-c-button--ghost mdc-c-button--size-medium SideBar_mck-c-sidebar__arrow-down__JAGOH"><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_8032924 mdc-c-icon--size-lg___5rPck_8032924 mck-arrow-down-icon"></span></button></div></div><div class="mdc-u-grid-col-sm-span-12 mdc-u-grid-col-md-span-12 mdc-u-grid-col-lg-start-6 SideBar_mck-c-sidebar__content-sticky__k5JFm"><div class="SideBar_mck-c-sidebar__scroll-share__FVQ34"><div data-component="mdc-c-dropdown-menu" class="mdc-c-drop-down"><button data-component="mdc-c-button" aria-label="" type="button" id="button_id" class="mdc-c-button___U4iY2_8032924 mdc-c-button--ghost mdc-c-button--size-medium mdc-c-drop-down__rootmenu___yJzvz_8032924" aria-expanded="false" aria-haspopup="menu"><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_8032924 mdc-c-icon--default___f-hQM_8032924 mdc-c-icon--size-md___yi5fA_8032924 mck-share2-icon"></span></button><div data-component="mdc-c-module-wrapper" data-module-theme="light" data-module-background="white" data-module-category="" class=""></div></div></div><div class="SideBar_mck-c-sidebar__black-background__tPdB_"><div class="SideBar_mck-c-sidebar__content-description__4p9iI mdc-u-ts-7"><div class="mdc-o-content-body"><p><strong>“Traditional” organizations,</strong> designed primarily for stability, involve a static, siloed, structural hierarchy. Goals and decision rights flow downward, with the most powerful governance bodies at the top. These organizations operate through linear planning and control to capture value for shareholders. Although such a structure can be strong, it is often rigid and slow moving.</p> <p>In contrast, <a href="/featured-insights/mckinsey-explainers/what-is-agile">agile organizations</a> are designed for both stability and dynamism. They are made up of a network of teams within a people-centered culture that features rapid learning and fast decision cycles enabled by technology and guided by a powerful common purpose to cocreate value for all stakeholders. Such <a href="/capabilities/people-and-organizational-performance/our-insights/how-to-create-an-agile-organization">agile operating models</a> allow for quick and efficient reconfigurations of strategy, structure, processes, people, and technology toward value-creating and -protecting opportunities. Agile organizations thus add velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions.</p> <p>Five trademarks distinguish these organizations:</p> <ul> <li>a North Star embodied across the organization</li> <li>a network of empowered teams</li> <li>rapid decision and learning cycles</li> <li>a dynamic people model that ignites passion</li> <li>next-generation-enabling technology</li> </ul> <p>For more, see “<a href="/capabilities/people-and-organizational-performance/our-insights/the-five-trademarks-of-agile-organizations">The five trademarks of agile organizations</a>,” January 2018.</p></div></div></div></div></div></div></div> <p>But how do these priority practices work in the context of agile organizations, which feature networks of empowered teams and rely on a dynamic people model? Colleagues rightfully ask a number of related questions:</p> <ul> <li>Why do I need individual goals when the locus of organizational performance is my squad, chapter, and tribe?</li> <li>Who will coach and evaluate me when I have no boss? How can my evaluator understand my performance when he or she doesn’t see my work day to day?</li> <li>How can we maintain a team spirit while still fairly differentiating the highest- and lowest-performing colleagues?</li> </ul> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="DownloadsSidebar_mck-c-downloads-sidebar__iFmyt mck-o-xs-right-span"><div data-layer-region="downloads-right-rail"><h3 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 mdc-c-heading--title___5qyOB_8032924 mdc-c-heading--border___K8dj3_8032924"></h3><div><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_8032924"><a data-component="mdc-c-link" href="#/download/%2F~%2Fmedia%2Fmckinsey%2Fbusiness%20functions%2Fpeople%20and%20organizational%20performance%2Four%20insights%2Fperformance%20management%20in%20agile%20organizations%2Fperformance-management-in-agile-organizations-final.pdf%3FshouldIndex%3Dfalse" class="DownloadsSidebar_mck-c-downloads-sidebar__download-link__fPqFQ mdc-c-link___lBbY1_8032924" target="_self" data-layer-event-prefix="Download Link" data-layer-action="click" data-layer-report-type="" data-layer-file-name="performance-management-in-agile-organizations-final" data-layer-report-name="performance-management-in-agile-organizations-final&gt;"><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_8032924 mdc-c-icon--size-md___yi5fA_8032924 mck-download-icon"></span><span class="mdc-c-link__label___Pfqtd_8032924"> (PDF-418 KB)</span></a></div></div></div></div> <p>The good news is that there are answers to these questions—and, going further, agility can be a springboard to improve performance-management practices that traditional organizations struggle with (Exhibit 1). Nearly all organizations, for example, feel the need for more frequent feedback. Working in agile sprints of a few weeks each creates a cadence into which collective and individual feedback naturally fits. Similarly, a culture of more autonomy and risk taking opens opportunities for employees to stretch, take on more responsibility, and find out quickly how they can improve.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mck-c-content-header"><div class="ContentHeader_mck-c-content-header__eyebrow__cBTe_"></div></div><div class="mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex1.svgz?cq=50&amp;cpy=Center"/><img alt="The five trademarks of agile organizations have profound relevance for performance management." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex1.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <p>Agile organizations will, however, need to adapt each of three core performance-management practices to make the recommendations actionable in the agile operating model (Exhibit 2).</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mck-c-content-header"><div class="ContentHeader_mck-c-content-header__eyebrow__cBTe_"></div></div><div class="mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex2.svgz?cq=50&amp;cpy=Center"/><img alt="Adapting three core performance-management practices will be crucial." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex2.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <div data-component="mdc-c-module-wrapper" data-module-theme="dark" data-module-background="deep-blue" data-module-category="" data-module-gradient-position="top-right" class="mck-o-edge-to-edge SectionHeader_mck-c-section-header___N7qG mck-c-module-wrapper"><style></style><div data-component="mdc-c-background-image" class="mdc-c-bg-image___GJdv1_8032924 background-image-section-header-D372B474D71B4B7DAF98C3CCC8CB4A38-bg SectionHeader_mck-c-section-header__parallax-container__sgMMy" role="img" aria-label="Linking goals to business priorities"></div><div class="mck-o-container"><div class="mck-o-container--wrapped mck-o-container--mobile-spacing"><div id="section-header-1" class="mdc-u-grid mdc-u-grid-col-lg-12 SectionHeader_mck-c-section-header__wrapper__CZEyB"><div class="mdc-u-grid-col-lg-start-2 mdc-u-grid-col-lg-end-12 SectionHeader_mck-c-section-header__wrapper-positioned__fIWpF"><div class="mdc-u-grid mdc-u-grid-gutter-sm SectionHeader_mck-c-section-header__wrapper-text__hSx1f"><h2 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 SectionHeader_mck-c-section-header__heading__2ePOu"><span>Linking goals to business priorities</span></h2></div><div class="SectionHeader_mck-c-section-header__section-holder__BaLti"></div></div></div></div></div></div> <p>Transparently linking employees’ goals to business priorities and maintaining a strong element of flexibility are core practices of agile ways of working. They are also significant practices if employees are to have a sense of meaning and purpose in their work. But agile organizations may worry about how the emphasis on individual goals marries with the autonomous teams that characterize agility. There are three approaches that can help agile organizations to adapt and ensure that goals remain meaningful and linked to business priorities.</p> <h3>Introduce team objectives in addition to (or instead of) individual targets</h3> <div data-module-category="" class="PullQuote_mck-c-pullquote__DbaQ5 mck-o-sm-left-span"><blockquote data-component="mdc-c-blockquote" class="PullQuote_mck-c-blockquote__6n21p PullQuote_mck-c-blockquote--hide-quotes__CpGpg mdc-c-blockquote mdc-c-blockquote--is-quotes___TozKo_8032924"><p>Empowered and autonomous teams are central to agility.</p></blockquote></div> <p>Empowered and autonomous teams are central to agility. It therefore makes little sense to manage performance solely—or even primarily—on an individual level. Successful agile organizations focus on team performance when setting goals and evaluating performance, often allowing teams to define their own goals to drive ownership. At one bank, for example, performance objectives are a combination of team goals, individual contributions to the team, mastery of competencies required at the level of individual jobs, and alignment of professional behavior to the bank’s values. The weighting of these components varies by role, with specialists, in particular, more inclined toward team performance to encourage collaboration. Another financial institution experimented with replacing individual objectives in contact centers with team objectives. Within a few months, it saw productivity gains of more than 10 percent, compared with control-group centers, in addition to a noticeable increase in teamwork and cohesion.</p> <h3>Set objectives as a team, discuss results frequently, and pivot as required</h3> <p><a href="/capabilities/people-and-organizational-performance/our-insights/unleashing-the-power-of-small-independent-teams">Teams in agile organizations</a> work autonomously and at pace, with a clear focus on output. They follow broadly set directions and strategic priorities rather than detailed, top-down instructions (Exhibit 3). Agile organizations typically rely on a tightly run process—often a quarterly business review (QBR)—to ensure alignment among the autonomous teams. This is where objectives and key results (OKRs), popularized at Intel in the 1970s and now used in many organizations, from the Bill &amp; Melinda Gates Foundation to Google, come in. Every quarter, a clear cascade from strategic priorities to objectives at the team level is created, while performance versus key results is made transparent and discussed. To allow for changing priorities coming out of the QBR, team and individual objectives need to be dynamic, rather than fixed in a once-a-year exercise. Setting objectives collectively can have other benefits, too, particularly with regard to engagement and ambition. Unsurprisingly, commitment to goals that you have set for yourself is typically stronger than to those set for you by others. At a B2B sales organization, shifting to bottom-up goal setting (versus top-down setting by executives) resulted in 20 percent higher overall targets.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mck-c-content-header"><div class="ContentHeader_mck-c-content-header__eyebrow__cBTe_"></div></div><div class="mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex3.svgz?cq=50&amp;cpy=Center"/><img alt="Agile organizations need to adapt their goal-setting approach." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex3.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <h3>Create transparency of targets and performance</h3> <p>The decentralized nature of agile organizations creates a risk that devolution and empowerment might drift into chaos. One way to avoid this is to introduce extreme transparency of objectives and performance. At Google, all OKRs, starting with the CEO’s, are visible to all other employees. At LinkedIn, the CEO’s executive team reviews OKRs weekly. This kind of transparency also has several benefits: surfacing interdependencies among teams and units, creating urgency and “mindshare,” and reinforcing the nonhierarchical culture and mind-set that characterize truly agile organizations.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="dark" data-module-background="deep-blue" data-module-category="" data-module-gradient-position="top-right" class="mck-o-edge-to-edge SectionHeader_mck-c-section-header___N7qG mck-c-module-wrapper"><style></style><div data-component="mdc-c-background-image" class="mdc-c-bg-image___GJdv1_8032924 background-image-section-header-3200F004D5F047C0B6889FCA2F74CB7A-bg SectionHeader_mck-c-section-header__parallax-container__sgMMy" role="img" aria-label="Investing in the coaching skills of managers"></div><div class="mck-o-container"><div class="mck-o-container--wrapped mck-o-container--mobile-spacing"><div id="section-header-2" class="mdc-u-grid mdc-u-grid-col-lg-12 SectionHeader_mck-c-section-header__wrapper__CZEyB"><div class="mdc-u-grid-col-lg-start-2 mdc-u-grid-col-lg-end-12 SectionHeader_mck-c-section-header__wrapper-positioned__fIWpF"><div class="mdc-u-grid mdc-u-grid-gutter-sm SectionHeader_mck-c-section-header__wrapper-text__hSx1f"><h2 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 SectionHeader_mck-c-section-header__heading__2ePOu"><span>Investing in the coaching skills of managers</span></h2></div><div class="SectionHeader_mck-c-section-header__section-holder__BaLti"></div></div></div></div></div></div> <p>Our prior research shows that managers—typically, line managers—are important stewards of effective performance management. Investing in their coaching skills to help them become better arbiters of day-to-day fairness is often the most powerful intervention in performance-management transformations. The agile organization, however, challenges the traditional model of the line manager. Who, then, acts as the day-to-day arbiter of fairness? And whose capability needs to be built? Agile organizations can address these questions through three approaches.</p> <h3>Clarify the roles that leaders play in development and evaluation</h3> <div data-module-category="" class="PullQuote_mck-c-pullquote__DbaQ5 mck-o-sm-right-span"><blockquote data-component="mdc-c-blockquote" class="PullQuote_mck-c-blockquote__6n21p PullQuote_mck-c-blockquote--hide-quotes__CpGpg mdc-c-blockquote mdc-c-blockquote--is-quotes___TozKo_8032924"><p>In successful agile organizations, feedback is the heartbeat in a culture of taking risks, failing fast, and pursuing continuous personal development at all levels.</p></blockquote></div> <p>In a prior publication, we described <a href="/capabilities/people-and-organizational-performance/our-insights/the-agile-manager">three different types of managers in agile organizations</a>. In the context of performance management, each performs different roles. Chapter leaders evaluate, promote, coach, and develop their people. Tribe leaders set directions linked to business priorities, match the right people to opportunities or squads, coach their teams on how to enable collaboration across organizational boundaries, and empower people. Squad leaders strive to maintain a cohesive team by inspiring, coaching, and providing feedback to everyone. The common theme across these leaders is active coaching for ongoing development and arbitration of day-to-day fairness.</p> <h3>Focus on continuous feedback and ongoing development conversations</h3> <p>As in any organization, individuals in agile organizations develop through receiving feedback and being exposed to development opportunities. In successful agile organizations, feedback is the heartbeat in a culture of taking risks, failing fast, and pursuing continuous personal development at all levels. These organizations encourage employees to ask for and give feedback constantly. Making this happen is often hard. Managers and nonmanagers alike may need to overcome mind-set and capability barriers to giving and receiving feedback more frequently—not just up and down the hierarchy, but also to peers. A European financial institution, for example, invested in dedicated capability building for teams on how to have courageous conversations in a peer-like way.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-o-md-center Image_mck-c-image__fhx5v"><picture data-component="mdc-c-picture" class="Image_mck-c-image__img-container__JusDB"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/performance-management-agile-1070958794-1536x1024.jpg?cq=50&amp;mw=1180&amp;cpy=Center"/><img alt="Mentoring" src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/performance-management-agile-1070958794-1536x1024.jpg?cq=50&amp;mw=767&amp;cpy=Center" loading="lazy"/></picture><div data-component="mdc-c-content-block" class="mdc-c-content-block___7p6Lu_8032924"><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_8032924 mdc-u-ts-9 mdc-u-mt-3 Image_mck-c-image__description__nsDz3"><div>In agile organizations, successful performance management means encouraging employees to ask for and give feedback constantly.</div></div></div><div class="mck-u-sr-only">Mentoring</div></div> <h3>Frequently collect input from multiple sources when evaluating performance</h3> <p>Agile organizations need disciplined rituals for continuously gathering feedback and evaluating performance (Exhibit 4). The line manager has traditionally been the conduit for all information about the employee. But without the line manager, who acts for the employee? This requires a single person to gather feedback on an individual from several sources, synthesizing it, and working with other peers to make sure that evidence and decisions are calibrated. At a telco, for example, a chapter lead<span class="FootNote_footnote-holder__tjRqy"><a aria-label="footnote" href="javascript:void(0);" class="FootNote_footnote-wrapper__AIRwL undefined FootNote_bottom__9aoSL FootNote_inactive__VZfCp" aria-describedby="f12bd606-469c-454e-ad5e-ae273dadffc8"><sup class="FootNote_footnotesup__e73z_">1</sup><span class="FootNote_notch-wrapper__b_5NS"><span class="FootNote_notch__omKtY"></span></span><span class="FootNote_tooltip__QtrbA mdc-u-mt-2"><span class="FootNote_footnote-content__r2OVl"><span id="f12bd606-469c-454e-ad5e-ae273dadffc8" aria-hidden="true" data-module-theme="light" class="FootNote_footnote-text__VjKgO mck-u-links-inline">Chapters are groups of employees with similar functional competencies who share knowledge and further develop expertise. The chapter lead typically coordinates performance evaluations of the chapter’s members.</span></span></span></a></span> evaluates the development of an individual within the chapter, gathering and synthesizing input from the product owners, team members, and agile coaches that the individual has worked with. The chapter lead then presents the individual’s case to a people-review board made up of chapter leads. The board makes a collective performance decision and provides advice to the individual on how to develop further, which is then relayed by the chapter lead. Technology can help here. A leading e-commerce player developed an app for its employees that facilitates feedback and allows employees to share feedback with others after every interaction, the aim being for each employee to collect more than 200 feedback points during the year.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-inline-module-container mck-o-md-center"><div class="mck-c-content-header"><div class="ContentHeader_mck-c-content-header__eyebrow__cBTe_"></div></div><div class="mck-u-inline-module-border-bottom"><picture data-component="mdc-c-picture" class="Exhibit_mck-c-exhibit__image__pyIDm"><source media="(min-width: 768px)" srcSet="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex4.svgz?cq=50&amp;cpy=Center"/><img alt="The performance-appraisal process may also need adjusting in agile organizations." src="/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/performance%20management%20in%20agile%20organizations/svgz-performance-management-agile-ex4.svgz?cq=50&amp;cpy=Center" loading="lazy"/></picture></div><div class="mck-u-sr-only"></div></div> <div data-component="mdc-c-module-wrapper" data-module-theme="dark" data-module-background="deep-blue" data-module-category="" data-module-gradient-position="top-right" class="mck-o-edge-to-edge SectionHeader_mck-c-section-header___N7qG mck-c-module-wrapper"><style></style><div data-component="mdc-c-background-image" class="mdc-c-bg-image___GJdv1_8032924 background-image-section-header-8B90B5393B614DAAAF1167498777FA5A-bg SectionHeader_mck-c-section-header__parallax-container__sgMMy" role="img" aria-label="Differentiating consequences"></div><div class="mck-o-container"><div class="mck-o-container--wrapped mck-o-container--mobile-spacing"><div id="section-header-3" class="mdc-u-grid mdc-u-grid-col-lg-12 SectionHeader_mck-c-section-header__wrapper__CZEyB"><div class="mdc-u-grid-col-lg-start-2 mdc-u-grid-col-lg-end-12 SectionHeader_mck-c-section-header__wrapper-positioned__fIWpF"><div class="mdc-u-grid mdc-u-grid-gutter-sm SectionHeader_mck-c-section-header__wrapper-text__hSx1f"><h2 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 SectionHeader_mck-c-section-header__heading__2ePOu"><span>Differentiating consequences</span></h2></div><div class="SectionHeader_mck-c-section-header__section-holder__BaLti"></div></div></div></div></div></div> <p>Employees are more likely to view their performance-management approach as fair if outcomes are differentiated, particularly at the two extremes of performance. In some ways, this can be harder in agile organizations, at which collaborative and highly interdependent teams mean that it is difficult to trace results to individual efforts. Two practices can help maintain differentiation and the accompanying sense of fairness, without detracting from the team spirit.</p> <h3>Differentiate individual contribution to team performance based on desired values, mind-sets, and behaviors</h3> <p>Successful agile organizations embody agile methodologies and ways of working that are tangible and visible in day-to-day work. Less tangible, but <a href="/capabilities/people-and-organizational-performance/our-insights/how-to-create-an-agile-organization">a critical stable practice of agile organizations</a>, is culture—the strong, shared values, mind-sets, and behaviors that underpin and enable those methodologies and ways of working. Successful agile organizations evaluate and manage performance of individuals not just against hard targets but also by the extent to which the individual has shown and “lived” the desired values, mind-sets, and behaviors. Potential rewards or consequences should be well aligned with these goals. In the case of a telco, for example, rewards for sales teams are based on achievement against individual and team targets in addition to how well and how often employees offer coaching and mentoring to their team members. These contributions should be well codified and recognized because they both motivate individuals and create “pull” for the next opportunity. Conversely, organizations should make clear choices with employees who don’t actively live and show the desired values, mind-sets, and behaviors, as in the case of a fintech company at which individuals not aligned with its core cultural values and defined associated behaviors are simply let go.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="dark" data-module-background="deep-blue" data-module-category="" data-module-gradient-position="bottom-right" class="StatementDisruptor_mck-c-statement-disruptor__iOBdi mck-o-edge-to-edge" data-module-name="statement-disruptor"><div><div class="StatementDisruptor_mck-c-statement-disruptor__background-container__p_cFW"><div class="StatementDisruptor_mck-c-statement-disruptor__background-image-container__es__n"><style></style><div data-component="mdc-c-background-image" class="mdc-c-bg-image___GJdv1_8032924 background-image-statement-disruptor-FB6053ECF2864D1B854519ECFA50A81C" role="img" aria-label="In the case of a telco, for example, rewards for sales teams are based on achievement against individual and team targets in addition to how well and how often employees offer coaching and mentoring to their team members."></div></div></div><div class="StatementDisruptor_mck-c-statement-disruptor__content-container__2bGvV"><div class="StatementDisruptor_mck-c-statement-disruptor__content__KNhFy"><div class="mck-o-container"><div class="mck-o-container--wrapped mck-o-container--mobile-spacing"><div class="mdc-u-grid mdc-u-grid-col-md-12"><div class="mdc-u-grid-col-md-start-1 mdc-u-grid-col-md-end-13 mdc-u-grid-col-lg-start-2 mdc-u-grid-col-lg-end-12"><div class="mck-c-statement-disruptor__title-container"><p class="StatementDisruptor_mck-c-statement-disruptor__text-content__7xNDN">In the case of a telco, for example, rewards for sales teams are based on achievement against individual and team targets in addition to how well and how often employees offer coaching and mentoring to their team members.</p></div></div></div></div></div></div></div></div></div> <h3>Increase the emphasis on intrinsic motivation and nonmonetary rewards</h3> <p>Work at most successful agile organizations is characterized by a sense of fulfillment and fun: it is common to hear employees describe how their daily activity “does not feel like work.” Netflix offers flexible benefits, such as unlimited vacation days. Employees stay because they are passionate about their work and the unique culture. While individuals expect to be paid fairly for their contributions, offering flexible benefits gives agile organizations an opportunity to place greater emphasis on intrinsic motivation and frequent nonmonetary rewards—including special assignments, opportunities to present externally or attend special events, high recognition in the workplace (awards and celebrations), and time for pro bono work. For example, a North America–based fintech company offers unique leadership-exposure opportunities and mentorship programs to reward performance and increase retention.</p> <hr/> <p>Organizations embarking on agile transformations cannot afford to ignore performance management. Even teams undergoing pilots need to be ring-fenced from traditional approaches to ensure that agile practices and mind-sets have the freedom to take hold and are appropriately recognized and rewarded. Done well, performance management that is customized to the agile goals and context of an organization will enable full capture and sustainability of the benefits promised by agility.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-disruptor-signup mck-o-lg-right-span mck-u-inline-module-border-top mck-u-inline-module-border-bottom mck-u-screen-only" data-layer-region="disruptor-signup"><div data-component="mdc-c-content-block" class="mdc-c-content-block___7p6Lu_8032924"><h2 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_8032924 mdc-u-ts-4 DisruptorSignUp_mck-c-disruptor-signup__heading__JR4i0"><div>Stay current on your favorite topics</div></h2></div><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_8032924 mdc-c-link-container--align-left"><a data-component="mdc-c-link" href="/user-registration/register-mvc" class="mdc-c-button___U4iY2_8032924 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class="mdc-c-heading___0fM1W_8032924 mdc-u-ts-6"><a data-component="mdc-c-link" href="/capabilities/people-and-organizational-performance/our-insights/the-five-trademarks-of-agile-organizations" class="mdc-c-link-heading___Zggl8_8032924 mdc-c-link___lBbY1_8032924"><div>The five trademarks of agile organizations</div></a></h6></div></div></div></div></div></div></div></main></div><script id="__NEXT_DATA__" type="application/json">{"props":{"pageProps":{"locale":"en","dictionary":{},"sitecoreContext":{"route":{"name":"Performance management in agile organizations","displayName":"Performance management in agile organizations","fields":null,"databaseName":"web","deviceId":"fe5d7fdf-89c0-4d99-9aa3-b5fbd009c9f3","itemId":"bdf452a8-bb90-4e30-8835-601fdd4212a6","itemLanguage":"en","itemVersion":1,"layoutId":"ae753eb4-a035-40b4-83bf-4b4438df6742","templateId":"683910db-02ba-40ba-92e7-726c880160a9","templateName":"ArticleJSS","placeholders":{"jss-main":[{"uid":"232bb7e9-289f-492d-a916-2b6185e44a84","componentName":"ArticleTemplate","dataSource":"","fields":{"data":{"articleTemplate":{"title":{"jsonValue":{"value":"Performance management in agile organizations"}},"sEOTitle":{"value":"Agile performance management"},"description":{"jsonValue":{"value":"Performance management is tough enough in traditional organizations; in agile organizations, three changes are essential to success."}},"sEODescription":{"value":"For truly agile performance management, companies with an agile operating model need to adapt three traditional practices."},"displayDate":{"jsonValue":{"value":"2019-04-29T00:00:00Z"}},"body":{"value":"\u003cp\u003e\u003cstrong\u003eThe evidence is clear:\u003c/strong\u003e a small number of priority practices make the difference between an effective and fair performance-management approach and one that falls short. Organizations that link employee goals to business priorities, invest in managers\u0026rsquo; capabilities, and differentiate rewards for the extremes of performance are 84 percent more likely to have performance-management approaches that their employees perceive and \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-fairness-factor-in-performance-management\"\u003erecognize as being fair\u003c/a\u003e. Furthermore, these practices are mutually reinforcing: implementing one practice well can have a positive effect on the performance of others, which leads to positive impact on employee and organizational performance, which, in turn, drives organizations to outperform peers.\u003c/p\u003e\n[[Sidebar 1]]\n\u003cp\u003eBut how do these priority practices work in the context of agile organizations, which feature networks of empowered teams and rely on a dynamic people model? Colleagues rightfully ask a number of related questions:\u003c/p\u003e\n\u003cul\u003e\n \u003cli\u003eWhy do I need individual goals when the locus of organizational performance is my squad, chapter, and tribe?\u003c/li\u003e\n \u003cli\u003eWho will coach and evaluate me when I have no boss? How can my evaluator understand my performance when he or she doesn\u0026rsquo;t see my work day to day?\u003c/li\u003e\n \u003cli\u003eHow can we maintain a team spirit while still fairly differentiating the highest- and lowest-performing colleagues?\u003c/li\u003e\n\u003c/ul\u003e\n[[DownloadsSidebar]]\n\u003cp\u003eThe good news is that there are answers to these questions\u0026mdash;and, going further, agility can be a springboard to improve performance-management practices that traditional organizations struggle with (Exhibit 1). Nearly all organizations, for example, feel the need for more frequent feedback. Working in agile sprints of a few weeks each creates a cadence into which collective and individual feedback naturally fits. Similarly, a culture of more autonomy and risk taking opens opportunities for employees to stretch, take on more responsibility, and find out quickly how they can improve.\u003c/p\u003e\n[[Exhibit 1]]\n\u003cp\u003eAgile organizations will, however, need to adapt each of three core performance-management practices to make the recommendations actionable in the agile operating model (Exhibit 2).\u003c/p\u003e\n[[Exhibit 2]]\n[[SectionHeader 1]]\n\u003cp\u003eTransparently linking employees\u0026rsquo; goals to business priorities and maintaining a strong element of flexibility are core practices of agile ways of working. They are also significant practices if employees are to have a sense of meaning and purpose in their work. But agile organizations may worry about how the emphasis on individual goals marries with the autonomous teams that characterize agility. There are three approaches that can help agile organizations to adapt and ensure that goals remain meaningful and linked to business priorities.\u003c/p\u003e\n\u003ch3\u003eIntroduce team objectives in addition to (or instead of) individual targets\u003c/h3\u003e\n[[PullQuote 1]]\n\u003cp\u003eEmpowered and autonomous teams are central to agility. It therefore makes little sense to manage performance solely\u0026mdash;or even primarily\u0026mdash;on an individual level. Successful agile organizations focus on team performance when setting goals and evaluating performance, often allowing teams to define their own goals to drive ownership. At one bank, for example, performance objectives are a combination of team goals, individual contributions to the team, mastery of competencies required at the level of individual jobs, and alignment of professional behavior to the bank\u0026rsquo;s values. The weighting of these components varies by role, with specialists, in particular, more inclined toward team performance to encourage collaboration. Another financial institution experimented with replacing individual objectives in contact centers with team objectives. Within a few months, it saw productivity gains of more than 10 percent, compared with control-group centers, in addition to a noticeable increase in teamwork and cohesion.\u003c/p\u003e\n\u003ch3\u003eSet objectives as a team, discuss results frequently, and pivot as required\u003c/h3\u003e\n\u003cp\u003e\u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/unleashing-the-power-of-small-independent-teams\"\u003eTeams in agile organizations\u003c/a\u003e work autonomously and at pace, with a clear focus on output. They follow broadly set directions and strategic priorities rather than detailed, top-down instructions (Exhibit 3). Agile organizations typically rely on a tightly run process\u0026mdash;often a quarterly business review (QBR)\u0026mdash;to ensure alignment among the autonomous teams. This is where objectives and key results (OKRs), popularized at Intel in the 1970s and now used in many organizations, from the Bill \u0026amp; Melinda Gates Foundation to Google, come in. Every quarter, a clear cascade from strategic priorities to objectives at the team level is created, while performance versus key results is made transparent and discussed. To allow for changing priorities coming out of the QBR, team and individual objectives need to be dynamic, rather than fixed in a once-a-year exercise. Setting objectives collectively can have other benefits, too, particularly with regard to engagement and ambition. Unsurprisingly, commitment to goals that you have set for yourself is typically stronger than to those set for you by others. At a B2B sales organization, shifting to bottom-up goal setting (versus top-down setting by executives) resulted in 20 percent higher overall targets.\u003c/p\u003e\n[[Exhibit 3]]\n\u003ch3\u003eCreate transparency of targets and performance\u003c/h3\u003e\n\u003cp\u003eThe decentralized nature of agile organizations creates a risk that devolution and empowerment might drift into chaos. One way to avoid this is to introduce extreme transparency of objectives and performance. At Google, all OKRs, starting with the CEO\u0026rsquo;s, are visible to all other employees. At LinkedIn, the CEO\u0026rsquo;s executive team reviews OKRs weekly. This kind of transparency also has several benefits: surfacing interdependencies among teams and units, creating urgency and \u0026ldquo;mindshare,\u0026rdquo; and reinforcing the nonhierarchical culture and mind-set that characterize truly agile organizations.\u003c/p\u003e\n[[SectionHeader 2]]\n\u003cp\u003eOur prior research shows that managers\u0026mdash;typically, line managers\u0026mdash;are important stewards of effective performance management. Investing in their coaching skills to help them become better arbiters of day-to-day fairness is often the most powerful intervention in performance-management transformations. The agile organization, however, challenges the traditional model of the line manager. Who, then, acts as the day-to-day arbiter of fairness? And\nwhose capability needs to be built? Agile organizations can address these questions through three approaches.\u003c/p\u003e\n\u003ch3\u003eClarify the roles that leaders play in development and evaluation\u003c/h3\u003e\n[[PullQuote 2]]\n\u003cp\u003eIn a prior publication, we described \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-agile-manager\"\u003ethree different types of managers in agile organizations\u003c/a\u003e. In the context of performance management, each performs different roles. Chapter leaders evaluate, promote, coach, and develop their people. Tribe leaders set directions linked to business priorities, match the right people to opportunities or squads, coach their teams on how to enable collaboration across organizational boundaries, and empower people. Squad leaders strive to maintain a cohesive team by inspiring, coaching, and providing feedback to everyone. The common theme across these leaders is active coaching for ongoing development and arbitration of day-to-day fairness.\u003c/p\u003e\n\u003ch3\u003eFocus on continuous feedback and ongoing development conversations\u003c/h3\u003e\n\u003cp\u003eAs in any organization, individuals in agile organizations develop through receiving feedback and being exposed to development opportunities. In successful agile organizations, feedback is the heartbeat in a culture of taking risks, failing fast, and pursuing continuous personal development at all levels. These organizations encourage employees to ask for and give feedback constantly. Making this happen is often hard. Managers and nonmanagers alike may need to overcome mind-set and capability barriers to giving and receiving feedback more frequently\u0026mdash;not just up and down the hierarchy, but also to peers. A European financial institution, for example, invested in dedicated capability building for teams on how to have courageous conversations in a peer-like way.\u003c/p\u003e\n[[Image 1]]\n\u003ch3\u003eFrequently collect input from multiple sources when evaluating performance\u003c/h3\u003e\n\u003cp\u003eAgile organizations need disciplined rituals for continuously gathering feedback and evaluating performance (Exhibit 4). The line manager has traditionally been the conduit for all information about the employee. But without the line manager, who acts for the employee? This requires a single person to gather feedback on an individual from several sources, synthesizing it, and working with other peers to make sure that evidence and decisions are calibrated. At a telco, for example, a chapter lead[[footnote 1]] evaluates the development of an individual within the chapter, gathering and synthesizing input from the product owners, team members, and agile coaches that the individual has worked with. The chapter lead then presents the individual\u0026rsquo;s case to a people-review board made up of chapter leads. The board makes a collective performance decision and provides advice to the individual on how to develop further, which is then relayed by the chapter lead. Technology can help here. A leading e-commerce player developed an app for its employees that facilitates feedback and allows employees to share feedback with others after every interaction, the aim being for each employee to collect more than 200 feedback points during the year.\u003c/p\u003e\n[[Exhibit 4]]\n[[SectionHeader 3]]\n\u003cp\u003eEmployees are more likely to view their performance-management approach as fair if outcomes are differentiated, particularly at the two extremes of performance. In some ways, this can be harder in agile organizations, at which collaborative and highly interdependent teams mean that it is difficult to trace results to individual efforts. Two practices can help maintain differentiation and the accompanying sense of fairness, without detracting from the team spirit.\u003c/p\u003e\n\u003ch3\u003eDifferentiate individual contribution to team performance based on desired values, mind-sets, and behaviors\u003c/h3\u003e\n\u003cp\u003eSuccessful agile organizations embody agile methodologies and ways of working that are tangible and visible in day-to-day work. Less tangible, but \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/how-to-create-an-agile-organization\"\u003ea critical stable practice of agile organizations\u003c/a\u003e, is culture\u0026mdash;the strong, shared values, mind-sets, and behaviors that underpin and enable those methodologies and ways of working. Successful agile organizations evaluate and manage performance of individuals not just against hard targets but also by the extent to which the individual has shown and \u0026ldquo;lived\u0026rdquo; the desired values, mind-sets, and behaviors. Potential rewards or consequences should be well aligned with these goals. In the case of a telco, for example, rewards for sales teams are based on achievement against individual and team targets in addition to how well and how often employees offer coaching and mentoring to their team members. These contributions should be well codified and recognized because they both motivate individuals and create \u0026ldquo;pull\u0026rdquo; for the next opportunity. Conversely, organizations should make clear choices with employees who don\u0026rsquo;t actively live and show the desired values, mind-sets, and behaviors, as in the case of a fintech company at which individuals not aligned with its core cultural values and defined associated behaviors are simply let go.\u003c/p\u003e\n[[StatementDisruptor 1]]\n\u003ch3\u003eIncrease the emphasis on intrinsic motivation and nonmonetary rewards\u003c/h3\u003e\n\u003cp\u003eWork at most successful agile organizations is characterized by a sense of fulfillment and fun: it is common to hear employees describe how their daily activity \u0026ldquo;does not feel like work.\u0026rdquo; Netflix offers flexible benefits, such as unlimited vacation days. Employees stay because they are passionate about their work and the unique culture. While individuals expect to be paid fairly for their contributions, offering flexible benefits gives agile organizations an opportunity to place greater emphasis on intrinsic motivation and frequent nonmonetary rewards\u0026mdash;including special assignments, opportunities to present externally or attend special events, high recognition in the workplace (awards and celebrations), and time for pro bono work. For example, a North America\u0026ndash;based fintech company offers unique leadership-exposure opportunities and mentorship programs to reward performance and increase retention.\u003c/p\u003e\n\u003chr /\u003e\n\u003cp\u003eOrganizations embarking on agile transformations cannot afford to ignore performance management. Even teams undergoing pilots need to be ring-fenced from traditional approaches to ensure that agile practices and mind-sets have the freedom to take hold and are appropriately recognized and rewarded. Done well, performance management that is customized to the agile goals and context of an organization will enable full capture and sustainability of the benefits promised by agility.\u003c/p\u003e\n[[DisruptorSignUp full-width]]"},"isFullScreenInteractive":{"boolValue":false},"hideStickySocialShareBar":{"boolValue":false},"desktopID":{"value":""},"mobileID":{"value":""},"desktopURL":{"value":""},"mobileURL":{"value":""},"desktopPaddingPercentage":{"value":""},"mobilePaddingPercentage":{"value":""},"desktopOverrideHeight":{"value":""},"mobileOverrideHeight":{"value":""},"cerosOembedURL":{"value":""},"cerosRenderMode":{"targetItem":null},"cerosBackgroundColor":{"targetItem":null},"hideByLine":{"boolValue":false},"tableOfContentsTitle":{"value":"TABLE OF CONTENTS"},"accessStatus":{"targetItem":{"key":{"value":"RegisteredUsers"},"value":{"value":"Registered Users"}}},"articleType":{"targetItem":{"displayName":"Article"}},"hasSpecialReport":{"boolValue":false},"contentType":{"targetItem":{"displayName":"Article"}},"sourcePublication":{"targetItem":null},"externalPublication":{"value":""},"excludeFromClientLink":{"boolValue":false},"originalPublishDate":{"jsonValue":{"value":"2019-04-29T00:00:00Z"}},"footnotes":{"value":"\u003col\u003e\n \u003cli\u003eChapters are groups of employees with similar functional competencies who share knowledge and further develop expertise. The chapter lead typically coordinates performance evaluations of the chapter\u0026rsquo;s members.\u003c/li\u003e\n\u003c/ol\u003e"},"contributoryPractice":{"targetItems":[{"displayName":"People \u0026amp; Organizational Performance"}]},"aboutTheAuthors":{"value":"\u003cp\u003e\u003cstrong\u003eLucia Darino\u003c/strong\u003e is a senior expert in McKinsey\u0026rsquo;s New York office, \u003cstrong\u003e\u003ca href=\"/our-people/marcus-sieberer\"\u003eMarcus Sieberer\u003c/a\u003e\u003c/strong\u003e is a senior partner in the Zurich office, \u003cstrong\u003eArthur Vos\u003c/strong\u003e is an associate partner in the Amsterdam office, and \u003cstrong\u003eOwain Williams\u003c/strong\u003e is an associate partner in the London office.\u003c/p\u003e\n\u003cp\u003eThe authors wish to thank Bryan Hancock, Kyla Kelly, and Andrew St. George for their contributions to this article.\u003c/p\u003e"},"authors":{"targetItems":[{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"9F9F9FC05C8746039386B317CE6192C0","name":"Lucia Darino","authorTitle":{"value":"Lucia Darino"},"description":{"value":"Partners with organizations to transform their workforce to harness the full potential of innovation in their industry"},"thumbnailImage":{"alt":"Lucia Darino","src":"/~/media/mckinsey/our people/lucia darino/lucia-darino_profile_1536x1152.jpg"},"profile":{"targetItems":[]}},{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"65ECAD30134549FF879E0D6BB2FC6F18","name":"Marcus Sieberer","authorTitle":{"value":"Marcus Sieberer"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[{"standardImage":{"src":"/~/media/mckinsey/our people/marcus sieberer/marcus-sieberer_fc_mask_profile_1536x1152.jpg","alt":"Marcus Sieberer"},"emailLinks":{"value":"Marcus_Sieberer@mckinsey.com"},"linkedInUrl":{"value":"https://www.linkedin.com/in/marcus-sieberer-3555b917"},"description":{"value":"Advises financial-services companies, payments providers, private-equity firms, and the public sector on corporate governance, strategy, enterprise agility, operational efficiency, risk management and regulation"},"locations":{"targetItems":[{"name":"Zurich","displayName":"Zurich"}]},"firmTitle":{"value":"Senior Partner"},"thumbnailImage":{"alt":"Marcus Sieberer","src":"/~/media/mckinsey/our people/marcus sieberer/marcus-sieberer_fc-mask_headshot_988x741.jpg"},"url":{"path":"/our-people/marcus-sieberer"}}]}},{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"E7B1691F7C1D4F1E84B462BA2ADE1293","name":"Arthur Vos","authorTitle":{"value":"Arthur Vos"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[]}},{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"BC43BBE25FD64ED6A54B32D3E3E544F9","name":"Owain Williams","authorTitle":{"value":"Owain Williams"},"description":{"value":"Serves financial institutions on organization, people and strategy topics to increase their efficiency and effectiveness"},"thumbnailImage":{"alt":"","src":"/~/media/mckinsey/industries/financial services/banking blog/organizational efficiency and effectiveness the winning banks secret weapons/owain williams.jpg"},"profile":{"targetItems":[]}}]},"nonPartnerAuthors":{"targetItems":[]},"interactiveToUse":{"targetItem":null},"enableArticleComponents":{"boolValue":false},"relatedArticles":{"targetItems":[{"sourcePublication":{"targetItem":null},"publicationSource":null,"externalPublication":{"value":""},"title":{"value":"Planning in an agile organization"},"url":{"path":"/capabilities/mckinsey-digital/our-insights/planning-in-an-agile-organization"},"eyebrow":{"targetItem":{"name":"Article"}},"articleType":{"targetItem":{"name":"Article"}},"contentType":{"targetItem":{"name":"Article"}},"description":{"value":"Agile organizations rely on an innovative mix of stable and dynamic elements to bring planning up to speed with their fast-paced needs."},"standardImage":{"src":"/~/media/mckinsey/business functions/mckinsey digital/our insights/planning in an agile organization/hero-planning-in-an-agile-organization.jpg","alt":"Planning in an agile organization"},"heroImage":null,"thumbnailImage":null},{"sourcePublication":{"targetItem":null},"publicationSource":null,"externalPublication":{"value":""},"title":{"value":"How to select and develop individuals for successful agile teams: A practical guide"},"url":{"path":"/capabilities/people-and-organizational-performance/our-insights/how-to-select-and-develop-individuals-for-successful-agile-teams-a-practical-guide"},"eyebrow":{"targetItem":{"name":"Article"}},"articleType":{"targetItem":{"name":"Article"}},"contentType":{"targetItem":{"name":"Article"}},"description":{"value":"What personality traits and values help agile teams bloom? 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topics"}}}]},"articlesidebar":{"results":[{"mediaID":{"value":"1"},"description":{"jsonValue":{"value":"\u003cp\u003e\u003cstrong\u003e\u0026ldquo;Traditional\u0026rdquo; organizations,\u003c/strong\u003e designed primarily for stability, involve a static, siloed, structural hierarchy. Goals and decision rights flow downward, with the most powerful governance bodies at the top. These organizations operate through linear planning and control to capture value for shareholders. Although such a structure can be strong, it is often rigid and slow moving.\u003c/p\u003e\n\u003cp\u003eIn contrast, \u003ca href=\"/featured-insights/mckinsey-explainers/what-is-agile\"\u003eagile organizations\u003c/a\u003e\u0026nbsp;are designed for both stability and dynamism. They are made up of a network of teams within a people-centered culture that features rapid learning and fast decision cycles enabled by technology and guided by a powerful common purpose to cocreate value for all stakeholders. Such \u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/how-to-create-an-agile-organization\"\u003eagile operating models\u003c/a\u003e allow for quick and efficient reconfigurations of strategy, structure, processes, people, and technology toward value-creating and -protecting opportunities. Agile organizations thus add velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions.\u003c/p\u003e\n\u003cp\u003eFive trademarks distinguish these organizations:\u003c/p\u003e\n\u003cul\u003e\n \u003cli\u003ea North Star embodied across the organization\u003c/li\u003e\n \u003cli\u003ea network of empowered teams\u003c/li\u003e\n \u003cli\u003erapid decision and learning cycles\u003c/li\u003e\n \u003cli\u003ea dynamic people model that ignites passion\u003c/li\u003e\n \u003cli\u003enext-generation-enabling technology\u003c/li\u003e\n\u003c/ul\u003e\n\u003cp\u003eFor more, see \u0026ldquo;\u003ca href=\"/capabilities/people-and-organizational-performance/our-insights/the-five-trademarks-of-agile-organizations\"\u003eThe five trademarks of agile organizations\u003c/a\u003e,\u0026rdquo; January 2018.\u003c/p\u003e"}},"aboutTheAuthors":{"jsonValue":{"value":""}},"headline":{"jsonValue":{"value":"What defines an agile organization"}},"footnotes":{"value":""},"showShareTools":{"boolValue":true},"backgroundColor":{"targetItem":{"key":{"value":"Deep Blue"},"value":{"value":"deep-blue"}}},"gradientDirection":{"targetItem":{"key":{"value":"Bottom Right"},"value":{"value":"bottom-right"}}},"renderMode":{"targetItem":{"key":{"value":"Scrolling"},"value":{"value":"scrolling"}}},"isAboutAuthor":{"boolValue":false},"background":{"targetItem":{"key":{"value":"Deep Blue"},"value":{"value":"deep-blue"}}},"image":{"src":"/~/media/mckinsey/business functions/people and organizational performance/our insights/performance management in agile organizations/performance-management-agile-1046599632-2000x1619.png","alt":"What defines an agile 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