Critical organisational shifts Asian companies must address

WHEN DBS bank was thinking about how to develop itself as an organisation, it knew it had to embrace change – but it also wanted to empower its employees.

“We went to our employees and asked them what they needed to take the organisation forward,” says Lee Yan Hong, managing director and head of group human resources at DBS in Singapore.

The answers were clear: employees wanted to be able to share information across teams, leverage digital technology for their clients, and work in a psychologically safe environment.

What we heard from DBS aligns closely with the findings of new McKinsey research on the state of organisations, which analyses survey results of more than 2,500 leaders in organisations with at least 1,000 employees across industries and countries.

We found 10 important organisational shifts businesses are reacting to in order to prosper in the future. These shifts require organisations to improve resilience while incorporating hybrid working and artificial intelligence (AI) into their operating models.

They will also require companies to put talent at the centre of their organisation, investing in diversity, equity and inclusion (DEI), and mental health while simultaneously boosting organisational efficiency.

Out of these shifts, we highlight three below that are critical for Asia.

These shifts will have significant implications for organisations’ structures, processes, and people, and are no doubt challenging. However, they do present opportunities for organisations if leaders can properly address them.

Challenges in Asia

To see the current challenges in responding to these shifts in Asia, we can highlight three areas Asian companies have detailed in their survey responses:

Hybrid work: Some 71 per cent of employees in Singapore prefer a hybrid work environment, and 73 per cent of Indian employers agree that hybrid work is the future. Yet, two-thirds of these organisations have no detailed plan to manage this transition.

Applied AI: Despite major investments and assertions of the importance of AI across companies in China and Hong Kong, 91 per cent of AI projects fail to meet expectations either in terms of their benefits or the time invested.

Mental health: About 55 per cent of employees in East Asia experience daily stress (the highest response from any region in the world). Meanwhile, 42 per cent of employees in South Asia experience daily sadness and 19 per cent indicate they have recently not been treated with respect.

Making these changes at the scale necessitates an integrated approach across four different dimensions.

1. Calibrate the ambition

Identify the value that is trapped inside the organisation due to any restrictions of the current operating model. This value can then be unlocked by tuning up the existing operating model (without a major remake of the mode as a whole), or by reimagining the existing operating model through a radical transformation.

2. Cultivate talent

Value employees by tailoring employee value propositions to different employee groups along the company, leadership, job and rewards vectors. Then, fill the gaps by implementing equitable hiring practices and ensuring organisational commitment to DEI. At the same time, organisations need to build a deep bench by creating a five-year workforce projection to outline what skills will be needed and prioritise investments in the development of those skills.

3. Leadership development

Be clear about which leadership mindsets and behaviours are required, and then commit resources (finances, people, time, and assets) to create a continuous leadership development engine. The impact of these leadership development efforts can and should be measured.

4. Mindset and behavioural change

Leaders should encourage different mindsets and trigger targeted behaviours by communicating a bold change story along with goals for performance and cultural behaviours. Meanwhile, leaders can look for role models everywhere and champion individuals who are already modelling the desired future behaviours, while doubling down on institutional capability building by identifying the skills required to succeed.

One company that is responding to these organisational shifts is Chinese electronics firm Haier, which operates under a model it calls “self-evolving organisation”. “The most important success factor has been our continuous focus on human value maximisation,” says Huagang Li, senior vice-president of Haier Group and CEO of Haier Smart Home.

Haier’s organisational model is based on ecosystem micro-communities (EMCs) that allow it to stay close to users and build an innovative company. It combines this with a focus on human value maximisation, or “rendanheyi” in Chinese, by focusing on equal opportunities and empowerment for its employees.

By aligning its ambition with empowerment for employees and its mission of human value maximisation, it is able to rapidly evolve to the changing needs of the organisation and the markets in which it operates.

Organisations around the world are grappling with numerous people, procedural, and structural shifts. Companies that have learnt to navigate these shifts are teaching us very valuable lessons by showing a commitment to their people and agile transformation in the face of disruption. As Giuseppe Tomasi di Lampedusa wrote in his 19th-century novel The Leopard: “If we want things to stay as they are, things will have to change”.

Dana Maor is a senior partner based in McKinsey’s Tel Aviv office, and co-leader of McKinsey’s People & Organisational Performance Practice. Gautam Kumra is chairman, McKinsey Asia, based in Singapore.