McKinsey recently refreshed its research on effective operating models, resulting in a 12-element “Organize to Value” system that integrates people and processes as seamlessly as possible.
We discovered that leaders often focus on structure when redesigning their operating models because it creates accountability and gives them perceived control over how strategy is implemented. But our new research revealed that structure is just a small part of sustained value capture. In fact, updating the org chart while leaving other key factors untouched can be a waste of time and resources. Costs often return as underlying processes and behaviors remain static.
Creating end-to-end processes that drive value is an area where many organizations fall short. Tasks and roles remain function-based, managers’ days are stuffed with briefings that don’t reflect priorities or performance management, and data lives in silos and spreadsheets, preventing scalable efficiencies. According to our State of Organizations research, two-thirds of executives see their organizations as overly complex and inefficient.
The solution sounds simple: finding the most effective and efficient way to get from point A to point B with results that reflect the organization’s strategic goals. Yet many organizations find it extremely difficult to do.
In this article, we discuss how organizations improve their workflows through four key steps: eliminating, synchronizing, streamlining, and automating processes. This end-to-end process optimization improves efficiency and effectiveness across the enterprise, not just in particular business units or for individual tasks. With the help of digital tools including AI, leaders can simplify how work gets done and create more value.
Identifying workflow shortcomings
Historically, companies have focused their operating model redesigns on structural optimization—streamlining hierarchies, reducing management layers, and reallocating resources. While these efforts deliver gains, they often fail to sustain productivity improvements over time, creating a performance gap. McKinsey research shows that successful transformations that create sustainable impact are more likely to focus on optimizing their workflows to capture value (Exhibit 1).
To see positive results, organizations must overcome challenges in two areas: building accountability and changing mindsets.
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Building broad accountability
Many organizations suffer when there is no value creation accountability across functions outside of executive roles and the heads of regional or individual markets.
Typical cross-cutting management processes, including strategic planning, budget forecasting, and performance reviews, can consume 40 to 65 percent of management and overhead time, according to our work with multiple companies. This huge slice of management attention is often overlooked as a source of potential productivity loss.
The result of these cross-functional blind spots lead to both effectiveness and efficiency challenges, including:
Parallel organizations: commercial and operations responsibilities mirror each other, leading to duplicated activities on the market level
Unnecessary complexity: processes create excessive granularity but generate low-value work
Lack of strategic resource allocation: no clarity on where the most value is created, leading to poor distribution of resources across processes with limited ROI
Redundant governance structures: continuous reviews and re-opening of decisions lead to conflicting views on capital expenditure, consumer priorities, or R&D pipelines
One-size-fits-all market processes: optimizing for functional execution or market entrepreneurialism without considering the larger strategic context of lead markets, distributor markets, or high-growth expansion markets
Fragmented manual data with varying truths: Each function and/or market reports its own reality with varying definitions of market size and share, volume, labor costs, and growth potential.
Organize to Value
Build your operating model with value at the core
Changing siloed mindsets
In many organizations, talent is offered incentives and promoted based on functional targets rather than enterprise-wide goals. This can create the classic “us versus them” mentality, in which a group’s own perceived ability to execute on its targets is stymied by perceived bottlenecks in other functions. This problem is magnified when data lives in silos and spreadsheets, preventing scalable efficiencies.
At the same time, leaders and employees alike can slip into a backward-looking focus. They obsess about preventing past problems from recurring rather than pushing for innovative solutions to current and potential challenges and opportunities.
Without addressing these underlying inefficiencies, organizations risk falling into a cycle of diminishing returns.
For example, leaders pushed the marketing team at a global retailer to save on indirect costs to the company’s annual marketing budget. The team made cuts, but without assessing what the impact would be on relevant consumer segments, channels, and competitive markets. While the company met its target of a 30 percent budget cut, it lost market share. The reason? Cutting costs was easiest to address from an HQ perspective, though it meant ignoring competitive market realities and the importance of different channels to activate consumers. The decision was reversed three months later once market share dropped. The country marketing budget process was optimized for value capture to avoid making the same mistake again.
In another example of siloed behavior, a consumer-packaged-goods (CPG) company’s product development function created new innovations and line extensions without clarity on how they intersected with production or marketing/commercial. The collective know-how of the company was not being tapped: Commercial impulses relevant to how a product fit in the market weren’t shared with the global marketing and R&D teams before the development was completed. Material innovations were not identified or shared by procurement in a timely manner, and production units had long lead times for commercial scale-up of batches.
After mapping the product development process to value, it became clear that what could most drive success was category development across four critical functions (commercial, R&D, production, and procurement). These functions were then integrated through governance, data clarity, and visibility for all with aligned KPIs and decision points. As a result, speed to market increased by more than 1.5 times, the net present value (NPV) of the product pipeline increased by 20 percentage points, and employee engagement increased by 25 percentage points.
The new productivity mantra: Simplify and unify
To improve cross-cutting accountability across functions and hierarchies, organizations can take two important steps.
Diagnose the challenges of current end-to-end processes
Business leaders should understand and quantify the challenges the organization faces with its cross-cutting processes. These include strategic planning, annual budgeting, forecasting, monthly or quarterly performance reviews, commercial review, sales and operational planning (or integrated business planning), product development, and life cycle management. This kind of analysis will help leaders assess levels of maturity across each process, using four levers:
Eliminate: Do your governance meetings include only decision-makers, or do they include too many stakeholders? Eliminate nonessential meetings and reduce personnel involved where possible. If forecasting each quarter, consider forecasting biannually. Are you repeating processes across markets, regions, and group levels? Investigate overlap and delays.
Synchronize: Analyze how market information cascades to global units. How long after a market performance review is performance data available at the regional and headquarters levels? Do relevant stakeholders get information in a useful time frame? If it takes 30 days, cut to 15 days. What silos exist across functions, business units, and between headquarters and markets? Identify those silos and create integrated solutions.
Streamline: Focus on decision-relevant input and output. What data is collected that isn’t adding to decision quality? Do reporting templates include actions or only backward-looking commentary? What is the difference in data granularity across markets, regions, and groups? Do monthly performance reviews run to more than 50 pages? Cut them back.
Automate: Focus on digital workflows to reduce manual reporting and get the data you need quickly to make decisions. How seamlessly does your data flow from monthly financials into forecasts and annual budgeting? How many hours does it take (across functions) to create the reporting views required? Ask the market units how many different requests they get each week for the same data points, albeit with different cuts in time or different visualizations. The top quartile of organizations already leverage gen AI and other technologies to enhance workflows, including advanced analytics dashboards.
Here is how the four levers worked at another CPG company. It began its diagnostic by looking at its annual integrated calendar to identify where decisions were being made, how often, and with what level of effectiveness across four layers (group, business unit, region, and market). It created a heat map of challenges related to cross-cutting processes and mapped them to the four levers. The results were surprising: Its frequency of meetings was 60 percent higher than that of top-quartile peer companies. Thirty-five percent of decisions were duplicated across functions, and market information took two months to cascade to the group layer, with more than 1,000 hours of manual preparation time spent to produce these monthly reports across functions and the four layers while the daily business continued.
In another example, a global fast-moving-consumer-goods (FMCG) company found that more than 60 percent of decisions and reports were duplicated across its commercial and producing units. While the stakeholders involved had a different functional focus, decisions were reopened, or sometimes made twice, and often escalated to market presidents or the CEO. The diagnostic revealed that the preparation for governance decision meetings was creating bottlenecks in supporting functions based on slight differences in data cuts across timelines. This practice more than doubled workloads and created divergent realities, slowing decision-making to a crawl.
The CPG company’s solution was to identify the key value-driving decisions and create the right accountability across roles while eliminating 70 percent of the duplications. In addition, the number of reported data points was cut by more than 30 percent, and automated dashboards were implemented. The biggest challenge was overcoming cultural resistance—commercial and production units did not want to give up their perceived power. The implementation of streamlined processes, and who would make the decisions, became politicized.
To overcome this problem, leaders invited all stakeholders to both commercial and production unit meetings, where numbers were reported side by side, for three months. This approach made people see that differences in data were marginal after definitions were cleaned up. It also created understanding between the two units and emphasized what mattered most, including volume bets (commercial opportunities based on competitive moves), the effect of promotions on volumes, and market share developments based on competitive moves.
Redesign processes and routines to align with strategic priorities
After companies understand their process shortcomings, they can turn to redesign. Quick wins create momentum early while offering visible signs of change across the organization. For example, a global apparel maker found through its process diagnostic that it could cut the frequency of many meetings from monthly to quarterly, and implemented that change in four weeks. A European retailer reduced the number of participants in its 15 governance boards by more than 60 percent in just one week.
Over the medium to long term, a process redesign focuses on optimizing the value of each workflow based on its business impact. For most companies, optimizing the product development process is key. The goal is to improve product–market fit, speed of innovation, and optimization of the product life cycle to focus on the highest NPV. Some companies focus on creating a seamless planning flow across the entire organization, from product design and demand plans to supply plans and financial planning.
A workflow upgrade should simplify the entire integrated planning process to better meet financial targets and commitments across functions and markets. In practice, this means evolving the sales and operations planning process to integrated business planning, which creates a more unified approach that links supply chain planning with sales, marketing, and finance.
Linking processes to value
The race to align processes and decision-making to value has already begun, with the promise of delivering higher total returns to shareholders. In our experience, we have seen how end-to-end process optimization leads to better performance and increased value.
These days, upgrading analytics and AI can streamline workflows and drive innovation. We have seen early successes when companies act across the four levers (Exhibit 2).
The value of optimizing processes and decision-making delivers immediate and tangible benefits without necessitating structural changes. Instead, structure is a supporting element in aligning workflows with overall strategy. By focusing on how work is done rather than how teams are structured, organizations can achieve significant impact. Benefits include increased speed to market through simplification, a reduction in nonessential meetings, and faster, higher-quality decisions. Employee engagement and performance management also improve, leading to greater organizational health over the long term.
The power of process optimization was clear at a global CPG company that was experiencing stagnant growth, despite having a clear strategy on its growth and acquisition targets and a track record of delivering. The main excuse that kept surfacing could be boiled down to, “We are already working 80 hours a week, and the organization is exhausted.” The verdict was clear: Managers were stuck in meetings and reporting cycles with not enough time for strategic priorities. As a result, the company moved rapidly to decrease workloads by more than 15 percent within the first year.
More broadly, end-to-end process optimization creates a “one company” mindset as people begin to work together across functions and markets, rather than in the service of their units or individual tasks. This focus on collective processes and knowledge can also spread beyond organizational walls to partnerships and ecosystems, from retail alliances to shared marketplaces.
Creating an operating model that reflects an organization’s strategic goals is crucial in today’s volatile business environment. Simplifying and optimizing processes across an organization allows managers and employees alike to invest their time and resources more effectively to create sustainable value.
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