Four strategies for increasing organizational agility

In recent years, leaders have come under pressure to become increasingly agile as businesses seek smarter ways to increase productivity, innovation and customer satisfaction amid rapid technological changes. Not only does that often require prioritizing speed over perfection but it also means improving how leaders make decisions as they struggle to filter important input from a constant stream of content and other kinds of data.

Against that backdrop, fraud examiners and other decision-makers now understand the importance of feedback from all stakeholders — customers, employees and partners included — when finding solutions for complex problems. In short, it’s important to have the right agility framework so organizations can expedite sound decisions, complete projects and quickly gather actionable client or customer feedback. It also helps reduce the risk of fraud.

[See sidebar: “Rapid response to customer needs”.]

Agile leadership isn’t new

In the early 2000s, “agile software” was the movement that spawned the buzzword “agility” as the adjective for every organizational function, from agile engineering to agile marketing. (See “A brief history of the agile methodology,” by Isaac Sacolick, InfoWorld, April 8, 2022.) Indeed, we’ve always had agile organizational leaders who manage teams that excel at being able to streamline input from employees and clients, evaluate its relevancy, determine the best or quickest available course of action, and implement the right solution.

But most recently the term “agile leadership” has come to describe that focus on collaboration, flexibility and adaptability. It’s an approach to creating high-performance teams and implementing projects that encourage rapid response times and focused communication.

Recent research has also underscored the importance of understanding how we make decisions in an increasingly high-pressured and fast-paced environment. In the classic book on decision-making, “Sources of Power” (MIT Press, 20th Anniversary Edition, 2017), author Gary Klein studied people in professions that require decision-making under great pressure and in challenging situations — like nursing and firefighting, as examples. He concluded that when experts make decisions, they don’t proceed logically and systematically, comparing pros and cons of each opportunity. Even though that’s the way we’re schooled, it’s too slow an approach in the real world. Instead, such experts use their experience and intuition (the rapid cognition of System 1 thinking) to create an approximate mental simulation for responsive decision-making without all the noise. In his best-selling book, “Blink” (Back Bay Books/Little, Brown and Company, 2005), Malcolm Gladwell echoed those insights, arguing that snap judgments sometimes can work better than well-thought-out decisions. (See “Blink, by Malcolm Gladwell,” Shortform.)

Anti-fraud agility

An agility framework is also important from an anti-fraud perspective. (See “You’re not agile if you’re not tackling fraud and chargebacks with the right strategy,” Chargebacks911, March 18, 2019.) After all, it provides the ability to:

• Adapt: Business conditions shift constantly. Your risk mitigation and audit processes must keep pace with these shifts without causing operational disruptions.
• Respond: Value systems will shift over time, as evidenced by who’s buying and selling in the business environment. Agility means responding to the changing needs of your target audience with up-to-date products and services.
• Safeguard excellence: Emerging financial trends could impact the business of clients and customers (and create opportunities for some to game the system); therefore, be vigilant and proactive by anticipating how these trends could affect the quality, cost and effectiveness of your anti-fraud solutions.
• Capitalize on opportunities: Embracing an agile framework means you expect change rather than regard it as an obstacle. View change as an opportunity to refine and improve operations.

An agility framework offers a dynamic approach that helps fraud investigators and auditors quickly triage potential risk or suspicious financial transactions so they can determine the appropriate action sooner than later. This framework allows them to concentrate on the most urgent, relevant aspects of an investigation or audit, while maximizing effort and minimizing resources. Business agility helps the CFE identify and deploy rapid-response options for navigating complicated organizational boundaries and structures while eliminating distractions and error-prone decisions.

The agile CFE leader is always looking for ways to reallocate resources, streamline processes, and optimize productivity and responsiveness.

Rapid decision-making with OODA

Such responsive decision-making benefits greatly from a four-step process known as the OODA loop (observe, orient, decide, act) as shown in Figure 1 above. American fighter pilot and military strategist instructor John Boyd developed OODA in the 1950s as part of his training on combat strategy. (See “OODA loop,” by Sarah Lewis, TechTarget.) It focuses on sorting relevant, up-to-date information, placing it in the proper context and arriving at appropriate decisions at both the organizational and individual levels.

The military has used the OODA loop for decades to train personnel on how to make time-sensitive decisions in the heat of battle. The goal of the strategy was to execute the process quickly to subvert and disrupt the enemy’s decision cycle. Let’s examine the four elements from “OODA loop,” by Sarah Lewis:

• Observe. Observation is an essential part of making critical decisions because it relies on the assessment of facts rather than assumptions about what might happen next or speculation in the absence of evidence.
• Orient. Orientation provides valuable insight into any given problem, issue or situation. The primary goal of orientation is to interpret collected data from observed facts and develop potential solutions.
• Decide. Making decisions on what to do based on the information gathered during the observation and orientation phases is arguably one of the most important steps. This phase is where you determine an advice or an action plan and how best to move forward.
• Act. This phase can involve any number of actions depending on the situation. You might execute a previously determined plan or improvise in response to new information received during the decision-making process.

OODA in VUCA environments

It’s no surprise that the OODA loop has had success in the military. As 19th century Prussian Field Marshal Helmuth von Moltke said, “no plan survives contact with the enemy.” Any situation that is volatile, uncertain, chaotic and ambiguous (VUCA) demands a rapid, no-frills decision-making process. The term gained widespread use in the military when describing the collapse of the former USSR. (See “Where does the term ‘VUCA’ come from?” by Waltraud Glaser, VUCA-WORLD.) Figure 2 below breaks down the elements of VUCA in more detail.

In fact, that’s exactly what many civilian organizations have to contend with in a confused economy, shifting market conditions and supply chain shortages. There’s truth in the military phrase “the easy way is always mined” when working in VUCA environments. The OODA loop process should be the go-to approach when analyzing customer/client feedback or anticipating shifts in labor, supply and market conditions.

How well a company approaches decision-making in such VUCA environments heavily influences organization effectiveness. Challenges are unfamiliar and unpredictable, and their duration varies significantly.

As the VUCA environment intensifies, some organizations (and leaders) may be tempted to cast aside guiding ethical and moral principles when trying to ride out the storm. When that happens, the door opens wide for opportunity, rationalization and financial pressure: the three components of the Fraud Triangle.

Personal values and guiding principles should serve as a beacon to direct their journey to safe harbors and calm waters.

Agility is a survival mechanism

Interestingly, agility stemmed from evolutionary biology to refer to a survival mechanism, where it’s a complex factor that’s influenced by genetic and environmental variables. (See “Evolution of agility,” by Benjamin Burk, 2018.)

During my geology undergraduate years, I knew it as a new theory called “punctuated equilibrium,” whereby certain members of a biological population that survived sudden and catastrophic environmental changes (e.g., floods, earthquakes, drought, meteorite impacts) rapidly evolved to adjust to the new conditions.

In contrast, judging by the evidence of the incomplete fossil record, it seems that lengthy periods of environmental stability — we’re talking geologic time scale — produced only incremental variations.

Agility as a survival mechanism is also apt for organizations. The concept of punctuated equilibrium has been applied to organizations that undergo rapid change (think mergers and acquisitions, organization-wide restructuring, large layoffs) between extended periods of stability. Most of us have been on that rollercoaster ride at least once in our careers.

The available research is limited, but it appears to support the notion that revolutionary transformation is the most common mode of change in organizations. (See “Organizational Transformation as Punctuated Equilibrium: An Empirical Test,” by Elaine Romanelli and Michael L. Tushman, The Academy of Management Journal, Vol. 37, No. 5, October 1994.) An organization is much more likely to undergo a radical transformation if environmental factors are constantly changing and its CEO has been replaced.

Apparently, the opportunity to evolve when environments change greatly enhances a company’s performance and likelihood of survival. However, minor changes to individual strategies, structures, and power/authority distribution failed to generate major shifts in transformation or performance.

Bottom line: Embrace agility today

Agility is a necessary quality for responding to rapidly shifting priorities affecting your organization. OODA is a critical decision-making approach that helps you minimize irrelevant data and lets you zero in on crucial next steps for addressing identified threats, issues or challenges. VUCA reminds you to be aware of the tumultuous, turbulent conditions that underlie those financial risks, hazards and dangers you’re trying to address with OODA.

Move quickly, be agile.

Donn LeVie Jr., CFE, is a staff writer for Fraud Magazine and has presented at ACFE Global Fraud Conferences from 2012 to 2022. He has led people and projects for Fortune 100 companies, the federal government, and academia for more than 30 years. An award-winning author and former leadership influence coach, strategist and speaker, LeVie is now retired but is trying his hand at writing popular fiction novels. Contact him at donnleviejr@gmail.com.

Rapid response to customer needs

Part of rapid-response leadership is understanding how customers and clients interact with products and services. The most reliable method for increasing customer or client loyalty isn’t through surveys that ask how satisfied they were, but instead by using customer effort scores (CES) to measure the ease of their experience with your products or services. (See “How to measure it,” by Alex Birkett, blog.hubspot.com, Jan. 24, 2023.)

In keeping with rapid response efforts, the best time to gather client/customer ease-of-use feedback is immediately after a sale, installation or service. The CES can be a very strong predictor of future purchases and referrals, according to a study by Harvard Business Review. (See “Stop trying to delight your customers,” by Matthew Dixon, Karen Freeman and Nick Toman, Harvard Business Review, July-August 2010.) According to the results, 94% of study participants who rated “low effort of use” would consider future purchases, while 88% would consider an increase in spending. Of those who rated “high effort of use,” 81% said they would speak negatively about the company to others.

Net promoter score (NPS)

The net promoter score (NPS) measures the customer experience and helps predict the success of a company and its future prospects. This metric helped revolutionize the business world, and today many companies use it to determine customer experience management (CEM).

CES is more proactive, focusing on the overall customer experience. Companies use the NPS as the primary indicator of how their clients and customers perceive their brand. It’s a great tool for knowing who your brand evangelists are.

Your organization’s NPS score is based on client/customer responses to questions, such as “How likely is it that you would recommend [your company brand] to friends or colleagues?” Individual responses are scored from 0 to 10. Respondents are categorized by their score as “promoters” (9-10), “passives” (7-8) and “detractors” (0-6). (See “What is Net Promoter,” NICE Satmetrix.)

Subtracting the percentage of detractors from the percentage of promoters and multiplying by 100 yields the net promoter score (see Figure 3 below). NPS certification, benchmarks and training are available at netpromoter.com.

Figure 3. NPS scale and calculation (illustration source: NICE/Sametrix)

CES is a customer or client report card that alerts you to how easy (or hard) it is to use your product or service. High ease of use means a positive customer or client experience and can lead to a long-term preference for your brand. The NPS scale is a tool to help you determine which clients or customers are likely to provide repeat business and referrals. High scores on both the CES and NPS scales mean you’re making the right decisions early; low scores mean there are opportunities to be had to raise those scores.