1Introduction 64Business as change: Managingcontinuous transformation inthe organization 2Three tectonic forces that are reshapingorganizations 69Appendix 6Nine shifts transformingorganizations 7Unlocking the AI-enabled organization14Humans and AI agents: Building a newworld of collaboration22Leveraging AI to rewrite the future ofshared services27Finding value in a new geopoliticalcontext35From structure to flow: Reaching the nextproductivity frontier41Focusing on the core: Doing the rightthing with more intensity46Aiming higher with a new performanceedge53Sharpening the focus on diversity andinclusion57Reinventing leadership: Leading from theinside out 71Authors 72Acknowledgments Contents Introduction Three tectonic forcesthat are reshapingorganizations The third tectonic force stems from workforceshifts. Evolving employee expectations,shifting demographics, and new tech-driven working models are transformingthe workforce. To remain competitive,organizations need to transcend traditionalstructures, redefine leadership, and refocus onperformance to navigate ongoing disruption. The survey responses inform our convictionthat three tectonic forces are reshapingorganizations and will continue to define theirsuccess in the years ahead. 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,and cost reductions. They are leadingorganizations to reimagine how work getsdone, redefine domains and end-to-endprocesses, and rethink traditional structures.To harness AI’s potential, organizations needto embrace transformative dynamics, seizeemerging opportunities—and test, test, test. 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,including how humans and AI agents willcollaborate. Their impact is only beginningto unfold: Technology, particularly AI, willaccelerate the reorganization of workand value creation; economic disruptionswill keep redefining global resilience andcompetitiveness; and workforce shifts willchallenge leadership models and talentsystems in new ways. These are challenging timesfororganizations everywhere. Continuousdisruption is in the air, with forces rangingfrom artificial intelligence, economicuncertainty, and geopolitical fragmentation toevolving workforce expectations, increasingcustomer demands, and tougher competitivedynamics redefining how leaders create valueand sustain performance. findings to reflect the evolving needs andpriorities of organizations. Postpandemicquestions about balancing in-person andremote work as well as attracting andretaining talent have given way to a sharperfocus on reestablishing high performanceand aligning talent around a few boldstrategic priorities and must-win battles. 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 ondriving performance, as in the 2023 report,the emphasis has moved from short-termresilience to sustained productivity and long-term impact, powered by technology and AI atthe core of organizational transformation. This report, the second edition of McKinsey’sState of Organizations research initiative,seeks to help leaders better understandthese dynamics and address them effectively. The second tectonic force is characterizedby the economic disruptions and geopoliticaluncertainty that are intensifying as the worldbecomes more fragmented. To thrive in thisevolving landscape, organizations need toadapt swiftly yet sustainably to cope withincreasing complexity and potentially rethinktheir location strategies. The first edition, published in 2023, kickedoff our exploration of the most significantpeople and organizational shifts, includingleadership, resilience, talent and resourceallocation, and diversity and inclusion (D&I)strategies. This second edition updates our This report is organized into three sectionsthat reflect these disruptions. In all, weexamine nine organizational themes across the three categories of technological,economic, and workforce shifts. While leaders remain focusedon driving performance,the emphasis has movedfrom short-term resilience tosustained productivity andlong-term impact, powered bytechnology and AI at the core oforganizational transformation. The survey results highlight some im