Beware the Pitfalls of Agility

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Given the panoply of recent disruptions — including COVID-19, inflation, Russia’s invasion of Ukraine — it’s no surprise that many leaders are striving to quickly dial up the agility level of their companies. Indeed, the ability to rapidly adapt to changing conditions can be a shield against disruption and a healing prescription for crisis. But organizational agility is not a panacea. There are pitfalls in the pursuit of agility that can and do produce unintended consequences.

Agility is a multidimensional concept that comprises three sequential and interrelated processes: alertness to the need for change, the decision to make the change, and the mobilization of the organizational resources required to execute the change. Our agility research and observations regarding the behavior of companies, especially during the pandemic, revealed that each process contains a pitfall that can subvert its outcomes: Alertness harbors the pitfall of hubris, decision-making harbors the pitfall of impulsiveness, and mobilization harbors the pitfall of resource fatigue.

The Pitfall of Hubris

Agility depends on the ability of an organization to sense and interpret signals — some obvious and unambiguous, others subtle and opaque — that emanate from and reverberate within the business environment. This alertness enables companies to respond to disruptions, challenges, and opportunities in a timely manner. The mindset of leaders is the pitfall in this process, especially when it is subject to the kinds of cognitive biases that lead to hubris.

A dominating “we’ve got this” mindset among leadership can result in signals being ignored or misinterpreted. In the hubris pitfall, past successes, complacency, or experiences and biases become a sort of prism that distorts the view of leaders as to which signals are important and actionable versus which are not.

When agility becomes hubristic, it can motivate misguided or mistimed action. For instance, a leader may aggressively pursue nonstrategic opportunities to simply demonstrate their competitive acumen to stakeholders and, perhaps, themselves. In the short run, these opportunities may produce pleasing outcomes, but in the long term, a “we’ve got this” alertness can divert attention or resources from opportunities and threats that are more central to the success of the company.

A dominating “we’ve got this” mindset among leadership can cause signals to be ignored or misinterpreted.

Clothing retailer Lord & Taylor achieved competitive advantage and success for decades by being continuously alert to changing fashion trends and adapting its merchandise mix accordingly. More recently, the company’s leaders sensed the need to decrease its dependence on retail stores and build a major e-commerce business. In this endeavor, however, the company’s expertise in following trends was not so successful. For example, recognizing the popularity of emerging competitors that rented out expensive garments, such as Rent the Runway, Lord & Taylor launched its own, ill-fated rental service. The company also quickly pivoted to grasp other opportunities that were wholly unsupported by its core competencies. Sales plummeted, and the country’s oldest department store filed for bankruptcy in August 2020.

Leaders can avoid the hubris pitfall by ensuring that their company’s signal-sensing and interpretation apparatus is broad-based. It should have sufficient bandwidth to tap a diverse and varied spectrum of information that extends beyond what company leadership has considered important — and perhaps acted upon — in the past. The task of scanning and interpretation also should be performed up, down, and across the organizational hierarchy, from the sales team to purchasing managers and beyond. In addition, formalizing the scanning function (for example, by creating a chief intelligence officer role) and incentivizing people across the organization to seek and share information — however trivial and routine — can help the company build, sustain, and leverage a culture of vigilance.

The Pitfall of Impulsiveness

The second process of agility encompasses decisions on whether, how, and when to respond to exogenous or competitive disruptions. Research shows that the managerial stress created by a crisis or uncertainty sharply increases the pressure to “do something now.” Moreover, when under this sort of pressure, decision makers often default to heuristics, which increase decision speed but significantly degrade decision quality. Thus, the major pitfall in agility’s decision-making process is impulsiveness.

In 2011, facing a radically and rapidly changing competitive context and sharply sagging revenues, JCPenney appointed a new CEO, Ron Johnson, who previously led Apple’s highly successful retail stores, to guide it out of its deepening crisis. Johnson quickly and aggressively set in motion a host of changes: a new pricing strategy, the elimination of the retailer’s private-label clothing line, an e-commerce platform, and new store floor designs. Unfortunately, JCPenney’s newfound and much heralded agility failed to turn the company around. Johnson and his team paid little attention to potential downside risks and long-term consequences of the moves and made only minimal effort to understand how the changes aligned with the company’s strategy and competencies. Johnson was fired after just 17 months on the job, and JCPenney continued to struggle for the next seven years before entering Chapter 11 bankruptcy in 2020.

Leaders can avoid the pitfall of impulsiveness while facilitating fast, high-quality decisions by processing more information, generating more options, and striking a steady balance between inductive judgment and purposeful, structured deliberation. Leaders should create a culture of constructive conflict and listening to ensure that the decision process is comprehensive and embraces complexity. Crucially, but perhaps counterintuitively, top leaders should voluntarily suppress their own voices and roles in the decision-making process. In so doing, powerful decision makers can sidestep their own biases and increase the levels of involvement in, commitment to, and satisfaction with the decision process and outcomes among other members of decision teams.

The Pitfall of Resource Fatigue

Resource mobilization and execution are where the rubber meets the road when it comes to agility. In this process, an organization reallocates, reconfigures, and/or modifies the resources — the technology, brand cachet, people, and money — needed to carry out change. The problem, of course, is that the resources that are needed for agility are often in short supply — a reality that gives rise to the pitfall of resource fatigue.

Resource fatigue occurs when a company lacks the ability to meet the escalating demands of operational, strategic, or tactical agility. People, processes, and routines become drained or exhausted, and fatigue sets in.

Faced with COVID-19’s frontal assault, American Airlines, the largest player in the industry, exhibited remarkable agility. The company furloughed employees, streamlined flight schedules, and rapidly implemented significant safety and health protocols. These and other initiatives that were focused on reallocating resources proved successful in the short term and helped American remain viable throughout the crisis. But more than two years after the onset of the pandemic, the company continues to struggle to return to normal operations. For instance, it did not maintain the certifications of key personnel, and its inability (or failure) to reallocate labor resulted in severe staffing shortages. In short, American reallocated and modified some key resources in the short run at the expense of maintaining the resources that are vital to its long-run operational and financial success.

To avoid the pitfall of resource fatigue, leaders need to consistently assess a company’s stockpile of existing resources and prioritize their efficient use and allocation. For example, leaders would not want to overcommit scarce resources to low-priority, low-ROI tasks. Similarly, during normal times, leaders should be cautious when considering disposing of seemingly easy-to-obtain resources in order to reduce costs if those resources are likely to become essential in a crisis. Finally, leaders should consider hiring, training, and compensation practices in their efforts to create a culture in which all personnel feel valued. Only then will employees have the energy and emotional commitment required go above and beyond their regular duties when the well-being of the company is at stake.

Agility has many benefits, but it is imperative that managers recognize that its processes contain pitfalls that can transform those benefits into negative outcomes. The failure to recognize and avoid the pitfalls of agility can subvert the best-intentioned leadership efforts aimed at tackling all manner of organizational threats.