64Business as change: Managingcontinuous transformation inthe organization 2Three tectonic forces that are reshapingorganizations 69Appendix 6Nine shifts transformingorganizations 71Authors 72Acknowledgments Contents 53Sharpening the focus on diversity andinclusion Three tectonic forcesthat are reshaping The third tectonic force stems from workforceshifts. Evolving employee expectations,shifting demographics, and new tech-driven working models are transforming The survey responses inform our convictionthat three tectonic forces are reshapingorganizations and will continue to define their The first force is the infusion of technology asautomation and data analytics are joined bythe burgeoning of AI, both the large languagemodels underpinning generative AI and theadvent of AI agents that can be insertedinto company workflows. Collectively, thesetechnologies amount to a paradigm shiftthat promises significant benefits, includingproductivity gains, faster speed to market, Our research suggests that these forcesare not temporary fluctuations but deepstructural transformations that will testhow organizations grow, operate, and lead.They are interdependent: AI could liberateorganizations from some of the physicallocation and geopolitical constraintsassociated with human workers, but itwill raise other dimensions of complexity, findings to reflect the evolving needs andpriorities of organizations. Postpandemicquestions about balancing in-person andremote work as well as attracting and T disruption is in the air, with forces rangingfrom artificial intelligence, economicuncertainty, and geopolitical fragmentation toevolving workforce expectations, increasingcustomer demands, and tougher competitive As with the first edition, this latest researchdraws on a large-scale survey of leadersaround the world. In all, we receivedresponses from more than 10,000 seniorexecutives across 15 countries and 16industries. While leaders remain focused on This report, the second edition of McKinsey’sState of Organizations research initiative,seeks to help leaders better understand The second tectonic force is characterizedby the economic disruptions and geopoliticaluncertainty that are intensifying as the worldbecomes more fragmented. To thrive in this The first edition, published in 2023, kickedoff our exploration of the most significantpeople and organizational shifts, includingleadership, resilience, talent and resource This report is organized into three sectionsthat reflect these disruptions. In all, we the three categories of technological, While leaders remain focusedon driving performance,the emphasis has moved economic, and workforce shifts. The survey results highlight some importantdivisions and dichotomies. Just over halfof respondents expect changes in theenvironment to have at least a somewhatpositive impact on their organizations in thenext one to two years. Leaders with thispositive outlook also see their workforce as from short-term resilience tosustained productivity and Overall, the survey shows that leaders areunder pressure to achieve further productivitygains. Their primary metrics now are revenuegrowth or stabilization, cost reduction, andcustomer satisfaction, rather than cash flowimprovement, speed to market, or employee The big takeaway from our latest report,then, is that in an uncertain world, sustainedperformance and value creation are the The nine most significant shifts transforming organizations today The nine most significant shifts transforming organizations today Focusing on the core: Doing the right thingwith more intensity Reinventing leadership: Leading from theinside out Sharpening the focus on diversity andinclusion (D&I) Aiming higher with a new performance edge Unleashing the full potential of an organization’s humancapital by focusing on both people and performance candrive strong business results. While many organizationshave set the ambition to improve their performance, lessthan 25 percent successfully achieve sustained impact.Improving over time requires a focus on distinctive To drive growth, organizations need to identify thestrategic portfolio and performance moves that deliveroutsize impact. This means selecting a few areas in whichto excel, building the governance and capabilities toexecute on these priorities, and dynamically reallocatingbudget and talent to fuel them. Value creation depends As they seek to balance multiple pressures, leaderstoday need to take an “inside out” approach focusingon personal growth. That’s a reflection of the twointertwined dimensions of leadership in this age: theidea that leading others also means leading oneself. AIputs even greater emphasis on the human aspects of Four in five organizations are maintaining or expandingtheir D&I efforts despite the shifting landscape.Organizations continue to report their D&I initiatives asa strategic priority that improves outcomes for business,leads to better performance, and con