Nearly two decades after “The Agile Manifesto” disrupted the traditional, dysfunctional “waterfall” method of software development, organizations across a wide range of industries are adopting agile methodologies. The underlying driver remains the same: Unpredictable, rapid market changes require greater flexibility than outdated management systems can support. Excessive bureaucracy stymies employee engagement and creativity, and inefficient operations render deliverables obsolete by launch time. The complexity and speed of the Digital Age call for nimble processes that can adapt to dynamic market conditions.
Case studies abound of non-IT firms that have embraced agile methodologies, including John Deere and NPR, and multiple surveys identify agility as a top strategic priority for many organizations. Despite the well-documented benefits enjoyed by agile units, these paragons of nimble efficiency remain a minority. Corporate executives are learning the lingo but often make little headway toward agile transformation.
Managing Uncertainty with Agility
Whether working in the traditional “scrums” and “sprints” from agile software development or organizing by “tribes” and “chapters” like global financial institution ING, agile management follows the OODA (Observe-Orient-Decide-Act) Loop, used by U.S. fighter pilots since the 1950s. This decision-making system has been dubbed “the disruptor’s handbook” and hailed as a model for managing uncertainty and chaos, defining features of the modern business world. In the corporate setting, OODA consists of the following:
- Collect information on what’s happening in an organization and its industry.
- Assess the organization’s relative market position by reviewing key performance indicators in the context of gathered data.
- Use orientation insights and create a course of action to overcome obstacles or to capitalize on opportunities.
- Implement the plan through outward-facing projects or inward-facing initiatives. Speed of execution encourages innovation through fast failure on a small scale; build on successes and learn from misses.
Unfortunately, most organizations are not set up to support this mode of decision-making. The hierarchical management systems created during the Industrial Age continue to dominate the corporate world—despite their failings in the modern environment. Research by McKinsey & Company reveals that such organizations are rethinking both their strategy and their structure more than ever. Eighty-two percent of respondents had gone through a restructure in the previous three years, with only 23% of those efforts successful.
Agile Methodology vs. Organizational Agility
Since its inception in the IT world, “agile methodology” has described a specific approach to designing and developing software and systems. Because technology has become so ingrained in every aspect of modern life, agile methodology applies to many organizations across industries as they migrate traditional services to digital platforms. At the end of the day, however, agile methodology remains a specific project-management tool and should not be confused with organizational agility—the ability to adapt strategy and operations in response to a rapidly changing environment.
Some companies have embraced agile development principles and applied them across the board, assuming their relevance for all business operations. The methodology supports projects—those endeavors that produce a unique customer output—but the larger organization requires an underlying operating system that can sustain day-to-day operations and drive innovation in the most effective, efficient way possible.
Creating this organizational flexibility depends upon understanding and implementing three core principles:
- The organization operates in two dimensions, and both have a role
- The team is the primary unit for producing work
- Accountability does not require authority
1. Managing Two Dimensions
First and foremost, complex organizations—generally those with 50 or more employees—must recognize the need to manage two dimensions:
- The vertical dimension is the dimension of functions and reporting relationships. This dimension, depicted by the organizational chart, is what typically comes to mind when people consider the structure of an organization.
- The horizontal dimension is the dimension of work. This dimension is where teams use processes to transform inputs such as raw materials into outputs that serve the customer, as well as where they create new and/or improved outputs through projects.
In every organization, the horizontal dimension must be the primary focus. The goal is to align the whole organization around a common strategy that will deliver products and services to customers or clients while fulfilling the overall mission. The vertical dimension, on the other hand, exists to support the horizontal, ensuring that the organization has the capacity and capability to implement the strategy. This dual focus on both external and internal strategy is a hallmark of organizational agility, allowing companies to keep an eye on the market and on client needs for threats and opportunities and to respond rapidly and appropriately.
Too many corporations, however, prioritize from within the vertical dimension, at the expense of horizontal operations. This insular, navel-gazing approach to management fosters unproductive internal competition and inefficiency, while distracting leadership from shifting market changes until a crisis grabs their attention. At that point, the typical knee-jerk reaction is to throw resources at the problem, get past the hurdle, and then reorganize the vertical dimension—often the source of the original issue—which perpetuates a cycle of failure.
To create a more flexible organization, leaders must not only acknowledge the horizontal dimension, but also shift to running the business from this dimension using teams. Historically, the prevailing management model has given leaders sole decision-making authority over their part of the organization. The cross-functional nature of modern workflows requires bringing stakeholders together to make the decisions needed to run the business—another trait shared by agile organizations.
2. Team-Based Collaboration
In an agile matrix organization, high-performing, cross-functional teams form the basic unit of operation. The team of stakeholders work together to achieve a common deliverable and goal, regardless of their reporting relationships in the vertical dimension. Teams may come together temporarily—anywhere from a few weeks to more than two years, depending on the deliverable—or they may be permanent, cross-functional teams that deliver a goal for a business segment (e.g., steering teams are permanent teams that bring together key stakeholders to manage a segment of the business horizontally). For this reason, agile organizations have been described as a “team of teams.” Senior leadership provides direction to a network of dynamic, empowered teams that come together to achieve a specific goal through collaboration and commitment. These teams make decisions at every level of the organization:
- Set organizational goals and priorities
- Determine management practices, decide on portfolio of work, and provide oversight of processes and portfolios
- Create and negotiate a doable plan to produce a deliverable within the portfolio of work and then execute that plan
Each team consists of individuals who have a stake in a specific segment of the business, whether it’s a process like sales, marketing or engineering; a cross-functional project that serves the larger organization; a product or service line; or a geographic region. The segments vary from organization to organization, and the number of teams needed is scaled to provide maximum integration and flexibility.
Another key to operating successfully is that every team uses the same collaborative tools and methodologies to make decisions, solve problems, plan projects, and create deliverables.
Many people believe they are collaborating when they solicit input before making the final decision. In a truly collaborative environment, the team leader serves as a facilitator, providing direction and encouraging member participation. Often, collaborative training at the team level is an effective way to provide tools and techniques, as well as a common vocabulary, with widespread applicability. Collaborative methods and facilitation skills benefit employees as they move from team to team, project to project, whether acting as a team leader or as a team member. Such training often works best in a two-phase approach: initial training that introduces concepts, paired with a hands-on workshop that applies training principles to a real-world challenge.
Whether it’s a strategic or operational team accountable for executing part of the organization’s strategic road map or a project team developing a new product, the individual members need to co-create the plans to achieve their shared goals. Empowering teams to self-govern improves efficiency and agility, as well as increases engagement and creativity. For example, as part of the collaboration process for a project, team members commit to deliverables based on their available capacity. Allowing individuals to negotiate these commitments fosters a culture of success, one in which employees can deliver results according to a realistic schedule, rather than arbitrary deadlines that fail to consider actual capacity. Moreover, the shared mission encourages available team members to assist colleagues proactively, moving the work forward with efficiency.
3. Accountability Without Authority
To realize such efficiency gains, it is necessary to shift accountability systems away from optimizing individual performance at the organization’s expense. Optimizing the team often means sub-optimizing individuals to maintain greater flexibility. Similarly, optimizing an organization means sub-optimizing the parts to achieve the entity’s goals. In this respect, a high-performing organization works like an orchestra, where players hone their respective skills independently but perform as part of a cohesive whole. Sometimes specific sections or players are optimized—whether it’s a project or department, or even a program or portfolio—while others are downplayed. When the whole organization is playing according to the score, the sound flows effectively and efficiently, and everyone delivers upon his or her commitments.
Most accountability systems, however, not only rely on authority, but also set up the rules so that everyone focuses on personal goals first and team and organizational goals last. By judging individuals by the performance of those employees and tasks within their purview, they have a personal incentive to ensure the success of their areas of responsibility instead of looking out for the interests of the larger organization. Beyond this inherent inefficiency, authority-based accountability assumes that leaders can control the actions of their teams. Direct reports can certainly be influenced, through threats and promises, but each person ultimately chooses whether or not to cooperate. Consequently, a control-based approach to accountability often creates an antagonistic work environment that undermines the organization’s success.
The type of accountability system needed for organizational agility requires a new set of principles and rules, avoiding the “blame game” typically associated with authority-based accountability. This type of accountability system focuses on organizational, team and individual outcomes, and it positions teams to work together without authority. Using a new accountability process establishes buy-in and commitment through planning and negotiation from the start, so each person knows who is accountable for what and when. Additionally, the new system ensures there is shared accountability for organizational and team outcomes, giving everyone a vested interest in the team’s success. Such a system creates alignment without restructuring boxes on an organizational chart.
Road to Agility
If your leaders are talking about becoming an agile organization, consider the strategy behind the transformation. Taking a systemic approach that upgrades the underlying operating system will produce high-performing, cross-functional teams of stakeholders who collaborate for the greater good of the organization. The result: A flexible, responsive organization that can execute projects using any technical methodology—whether it’s agile, waterfall, ADDIE, DMAIC, engineering, construction, etc.—and optimize business processes that produce products or deliver services that delight customers.