The organization rewritten: The forces reshaping the modern enterprise

Something profound is happening to the modern organization. It is easy to mistake it for another technology cycle, another bout of economic turbulence or another generational adjustment in the workplace. It is all three, and considerably more.

McKinsey & Company’s The State of Organizations 2026, published recently, describes the moment through three “tectonic forces”: the infusion of technology and artificial intelligence into the architecture of work; intensifying economic and geopolitical disruption; and fundamental changes in the workforce itself. Based on responses from more than 10,000 senior executives across 15 countries and 16 industries, the report argues that these are not temporary disturbances that organizations can simply endure until normality returns. They are structural forces changing what an organization is, how work is performed, where value is created and what leadership increasingly means.

The most consequential message is simple. The great organizational challenge of the next decade may not be surviving disruption. It will be performing through disruption; and that is a serious distinction.

When McKinsey produced the previous edition of this research in 2023, organizations were emerging from the pandemic, supply-chain dislocation and widespread uncertainty. Resilience dominated the management vocabulary. By 2026, the emphasis has shifted. Executives are increasingly concerned with sustained productivity, long-term value creation and the organizational changes required to deliver both. In short; the age of organizational survival is giving way to the age of organizational performance.

Artificial intelligence is the most visible force driving that transition, but perhaps also the most misunderstood. Much of the corporate conversation about AI remains trapped at the level of tools: which applications employees should use, which chatbot should be deployed, which functions can be automated and how much labour might eventually be displaced.

McKinsey’s argument goes much further, by stating that AI ultimately challenges the architecture of the organization itself.

For more than a century, companies have largely been constructed around human limitations. Hierarchies allocate authority. Departments aggregate expertise. Managers coordinate information. Meetings synchronize decisions. Shared-service departments process transactions. Layers of supervision compensate for the fact that information is dispersed and human attention is scarce.

AI changes several of those assumptions simultaneously. Machines can increasingly analyze, generate, predict, coordinate and execute. Emerging AI agents can undertake sequences of activities rather than simply respond to individual instructions. Data that once travelled slowly through organizational hierarchies can increasingly be interpreted almost instantaneously. Routine decisions can be automated. Knowledge that once depended upon particular individuals can increasingly become accessible across an enterprise.

Yet the striking statistic in McKinsey’s work is not how rapidly organizations are embracing this possibility. It is how poorly prepared they remain.

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Eighty-six per cent of surveyed leaders say their organizations are not ready to incorporate AI into everyday operations. One in six organizations does not even have a clearly identified C-suite executive accountable for AI adoption. McKinsey also notes that fewer than one in five companies that have attempted AI adoption have so far achieved significant tangible bottom-line impact.

The problem is becoming familiar. Companies acquire twenty-first-century technology while retaining twentieth-century organizations. They introduce AI into fragmented workflows, dysfunctional approval systems, duplicated activities and deeply entrenched organizational silos. They automate parts of inefficient processes without redesigning the processes themselves. The result is digital sophistication layered over organizational complexity.

Technology therefore produces activity without necessarily producing transformation. This explains one of McKinsey’s most important ideas: organizations must undertake a double transformation. Technology must change, but the organization surrounding the technology must change with it. Workflows, decision rights, management layers, capabilities, incentives and operating models have to be reconsidered together.

This leads naturally to McKinsey’s second major theme: the movement from structure to flow. For generations, the instinctive response to organizational difficulty has been restructuring. New divisions are created. Reporting lines are redrawn. Executives change titles. Departments are merged, separated and renamed. Consultants produce new organization charts.

But productivity rarely resides inside an organization chart. It resides in the movement of work. How long does a customer request take to travel from initiation to resolution? How many approvals intervene between an investment proposal and a decision? How many departments touch a procurement transaction? How many times is the same information entered into different systems? How rapidly does intelligence from the frontline reach someone with the authority to act?

McKinsey reports that 43 per cent of executives now identify productivity growth as their leading priority. Nearly 40 per cent regard redesigning process flows as the largest opportunity for overcoming productivity constraints during the next two years. Most strikingly, two-thirds say their organizations are excessively complex and inefficient.

That should change how leaders think about organizational reform. The question is no longer simply, “Who reports to whom?” It is increasingly, “How does value move through the enterprise?”

A bank may have excellent executives and still require days to resolve a problem that a digitally native competitor resolves in minutes. A manufacturing company may own modern machinery while procurement bottlenecks repeatedly interrupt production. A government agency may contain highly qualified professionals yet require months to approve a relatively straightforward decision.

These are not necessarily failures of intelligence or resources. They are failures of organizational flow.

McKinsey’s third tectonic force makes the problem still more complex. The workforce itself is changing.

Technology is altering what employees do. Demographic shifts are changing labour markets. Younger workers have different expectations of employment, careers and authority. Remote and hybrid arrangements have weakened the assumption that organizational membership requires continuous physical proximity. Specialists can increasingly participate in multiple projects without belonging permanently to one traditional departmental structure.

The consequence is not the disappearance of hierarchy. It is the declining adequacy of hierarchy as the sole mechanism through which organizations coordinate work. The organization of the future is therefore likely to combine hierarchy with networks, permanent structures with temporary teams, human workers with AI agents, centralized platforms with distributed execution.

Leadership must consequently change as well. The traditional leader derived much of his authority from information asymmetry. He knew more than the people below him because information rose through the hierarchy. In an environment where technology democratizes access to information, leadership increasingly derives value from something else: judgment.

What deserves attention? Which contradiction matters? Where should capital move? Which capability should the enterprise build? Which activity should it abandon?

What risk should it accept? Which signals indicate that yesterday’s strategy has become obsolete? The premium moves from knowing more to deciding better.

And that brings us to another of McKinsey’s important organizational shifts: focus.

Only 56 per cent of executives surveyed say they possess clarity about their organization’s most important battles. Among senior managers that falls to 44 per cent. Among middle managers – the people through whom much execution actually occurs – it collapses to 27 per cent. Only 30 per cent of organizations reallocate resources across the enterprise rather than principally within established organizational boundaries.

There is a profound lesson here. Organizations rarely fail because absolutely nothing is happening. They frequently fail because too much is happening.

Every department has initiatives. Every executive has priorities. Every strategy retreat produces additional objectives. Projects survive because somebody senior once sponsored them. Budgets reproduce historical allocations. People protect headcount. Managers defend domains. Activities accumulate faster than organizations can terminate them. ‘Busyness’ becomes the enemy of performance.

The high-performance organization therefore requires what might be called institutional concentration: the ability to identify a small number of outcomes that matter disproportionately and concentrate money, authority, technology and talent behind them.

This becomes still more important because the external environment is becoming less forgiving.
Geopolitical fragmentation, trade restrictions, supply-chain reconfiguration, industrial policy, currency volatility and economic uncertainty mean that organizations can no longer optimize exclusively for efficiency under stable assumptions. Location choices, suppliers, financing arrangements, technology platforms and markets increasingly contain geopolitical dimensions. Resilience, therefore, remains necessary. But resilience without productivity eventually becomes expensive stagnation.

The organization of the future must possess both. It must be efficient without becoming fragile; adaptable without becoming chaotic; technologically ambitious without becoming technologically intoxicated; focused without becoming rigid; and human without becoming resistant to automation.

This is why McKinsey’s report deserves attention beyond the management profession. It suggests that we are approaching the end of one organizational age.

The industrial organization was designed principally to coordinate human labour at scale. The digital organization improved information flows through that structure. The emerging organization will increasingly orchestrate people, machines, algorithms, data, capital and external ecosystems simultaneously.

Its competitive advantage may no longer come principally from possessing more resources. It may come from converting resources into outcomes faster than others can.

That is an especially important idea for countries such as Nigeria. The World Bank has noted that output per worker declined across much of the Nigerian economy during the decade to 2023, meaning that employment and economic activity were not being translated sufficiently into productivity gains.

Seen against that background, McKinsey’s report poses an uncomfortable question. What happens when organizations operating in a relatively low-productivity economy encounter a global organizational revolution whose central currency is productivity?

The answer will not be determined primarily by whether Nigerian companies purchase AI subscriptions. It will depend on whether they can redesign themselves. Because the real divide emerging in global business is unlikely to be between organizations that possess technology and those that do not.

It will be between organizations capable of converting technology, talent and information into performance – and organizations that remain trapped inside structures built for another age.

That divide has already begun. And in Nigeria, its consequences could be profound.

Dr Hani Okoroafor is the Founder of The Capacity Institute and the originator of the Capacity State Framework, a body of work dedicated to advancing the study and practice of institutional execution capacity. He advises corporate boards and senior executives across Europe, Africa, North America and the Middle East, and serves on the Editorial Advisory Board of BusinessDay. Reactions welcome: [email protected]