From pandemics to politics and beyond, companies face an uncertain and changing environment characterized by fast-decreasing stability and predictability. To cope, organizations in different contexts and competitive situations have enthusiastically embraced the concept of agility. In support, thought leaders, academics and practitioners produce a constant stream of articles, reports, white papers and books on agility – not to mention the profusion of webinars and events.
The result is that when we quiz them, executives often say, “Yes, of course we do agile.” In reality, when pressed they believe they have embraced agility because they have launched some teams using agile methodologies (such as Scrum) as their way of working. But launching agile teams is often not enough to achieve the goals of becoming a more flexible and agile organization, able to operate faster. There is a difference in scope and ambition in setting agility as a goal for the overall organization against using agile methodologies to run a number of teams and projects.
In reality, if you launch agile teams while the rest of the organization is operating in the traditional way, the teams will not achieve their performance potential. Agile teams will be systematically slowed down by long-established processes. We have encountered newly formed agile teams expected to work in short cycles of a few weeks (called sprints in agile jargon) while pressed to comply with the yearly budget process, filling templates with detailed numbers for the next twelve months. Under such constraints, sprints become marathons. Does it really make sense for an agile team to invest time and effort in detailing a yearly budget plan that may be completely outdated after a few sprint cycles?
Or imagine if the same team needs to pivot and pursue a different route requiring new skills in the team. Does it make sense for them to wait for extended periods because procurement takes three months to source the newly needed outside talent through the standard vendor process? These are not theoretical questions. At one company an agile team needed to quickly find an expert on machine learning, a skill that was not promptly available in-house. The procurement process to engage a vendor was so cumbersome and time-consuming that the team gave up and eventually went with a suboptimal solution to avoid
Keeping traditional business processes unchanged may fundamentally hinder the ability to reap performance rewards from agile teams. If a company wants to become agile it must also rethink some key management processes, relics of 20th century management, that create rigidity, bureaucracy and slowness. Based on our global consulting experience, there are six main business processes that a company should adapt when introducing agile. We have published extensively on most of them and we suggest the reader who is interested to dive into some of them to refer to our other publications. But here is a summary of the six processes and their needed changes:
- Strategic Planning: allowing more dynamic assumptions and strategic options, periodically reassessed, based on strategic conversations rather than simply using a numbers game.
- Budgeting: making resources and funds available to teams in a flexible way to seize emerging opportunities.
- Goal Setting: establishing team-based objectives and related measurable key results (OKRs) on a quarterly cadence rather than annual individual MBOs.
- Performance Management: moving towards a system of social feedback, open to peers and team members, not only determined by the performance review of the hierarchical boss.
- Talent Sourcing: evolving towards a liquid workforce, leveraging the opportunity of external on-demand talents (for example, using freelance platforms).
- Decision Making: innovating the control model, reducing the chain of preventive authorizations, empowering teams and employees and establishing new ways of post-detection control.
Consider some companies that have transformed their key processes to become more agile.
Take the case of Vodafone: as part of an ambitious Agile transformation program they have rethought key processes such as resource allocation to allow more adaptability and flexibility to changes. For example, while in the past the planning for Christmas offerings and campaigns used to start months in advance, today portfolio dynamics follow much shorter cycles of few weeks or even less. Consequently, budgeting and resource allocation cannot be rigid anymore. Their budget, for instance, is restated four or five times a year: the initial version is not bounding, and the spending mix of a Tribe can be reallocated across different Squads according to shifting priorities.
PTC Therapeutics, a New Jersey-based biotech company, introduced an agile goal setting process, using an OKRs approach. For example, one goal of the company is to advance late stage clinical programs, with the concrete key result of obtaining FDA approval by the first quarter of the year. This set of company’s OKRs is aligned to the teams owning each clinical development program, which in turn define more granular OKRs – such as completing a certain clinical study by a deadline or having the briefing documents ready to be submitted to FDA. Individuals, or sub-teams, that perform work then have their OKRS, which are discussed with the team. This creates an environment of communication, alignment, and collaboration. Moreover, one team’s OKRs are visible to other teams to increase transparency and ease interdependencies. OKRs are discussed and updated quarterly to reflect changing priorities.
AffinityPlus, a Minnesota-based credit union, is a remarkable example of innovation in decision making and control model. In traditional banks, even if the customer fits the credit scoring, the branch employee must ask for a signature two or three levels up before granting a loan. This slows down decisions, creates bureaucracy and reduces employee engagement. AffinityPlus eliminated the long approval processes and introduced a framework (in a nutshell: “Do what is in the best interest of our clients”) to guide everybody in making decisions for loans. Within that framework every employee can use their judgement to deviate from the bank’s policies, but they are required to justify their decisions and post their rationales in the system in a transparent way.
Embracing agility is more than simply launching teams using an agile methodology. Companies that have agility as goal for the overall organization must rethink fundamental processes that create rigidity in resource allocation and bureaucracy in decision making, delaying actions and hampering the commitment and engagement of their employees. Making those processes more agile will also enable the work of agile teams, improving their performance and morale and, at the same time, preparing the right preconditions for full-scale organizational transformation.
About the Authors
Alessandro Di Fiore is the founder and CEO of the European Centre for Strategic Innovation (ECSI) and ECSI Consulting. He is based in Boston and Milan. He can be reached at [email protected] Follow him on twitter @alexdifiore.
Gabriele Rosani is a senior manager at ECSI Consulting, expert in the areas of business model innovation, platform economy, innovation management and organizational agility. He is based in Milan and can be reached