Issues to address early in agile transformations

By Matthew Rogozinski

Leaders of established companies around the world are facing disruption. Many are committing to agile transformations as a way to future-proof their businesses, making them faster and better able to deal with the challenges and opportunities disruption brings. They want a stronger focus on the customer, shorter time-to-market, faster decision-making and genuine cross-organisation collaboration. 

In support of these goals, leadership is being decentralised; organisational silos removed and replaced by multidisciplinary teams; multiple seniority levels flattened; and new roles created.  At the same time, incumbent organisations are embedding new ways of thinking and behaving to ensure agile principles, not just work practices and rituals, are genuinely adopted.

These are very big changes, typically accompanied by both anxiety and excitement across transforming organisations. To say the change management task is challenging would be a significant understatement, but these businesses must continue to run smoothly and deliver to customers, shareholders and staff.  This is no easy task, but we believe leaders’ early attention to some issues that often escape close attention in agile transformations will help smooth the path and deliver the benefits as quickly and fully as possible. 

Before going to these issues, it’s helpful to think about agile transformations as replacing old management systems in three areas: how people work together; how senior leaders steer the organisation to achieve its goals; and how people are supported to do their jobs. Senior leaders need to find ways to manage all of these areas while moving the business towards a decentralised leadership model.

1. How people work together

Much of the effort, particularly early in transformations, goes to this area, which covers the way people are organised and self-managed, and how they collaborate to deliver outcomes. But even here, where so much effort and energy is already channelled, senior leaders need to ensure issues like clear accountabilities and tight and timely coordination are addressed early and explicitly.

Clear accountabilities are particularly important as changes are made.The transformation is often rolled out in stages, with some parts of the organisation adopting the agile model while others are traditionally managed. These parts interact with each other, and people in the traditional part of the organisation need to be clear about who is accountable for what in the new model. This clarity is critical for P&L owners, whose results depend on agile teams, as well for the senior leadership team, including the CEO. People want and need to know “who to call” when problems or questions arise.

Tasks undertaken by agile teams will likely be beyond the scope of a single team, so coordination across multiple teams will be needed to make sure all the pieces of the puzzle are available and fit together at the right time. In traditional organisation models, this co-ordination is achieved through a project’s hierarchy and management. This is imperfect, and often bureaucratic and time-adding, but it at least provides a mechanism people recognise and understand. We believe the tight and timely co-ordination of agile teams’ goals, outcomes, interdependencies, activities and resources should be in the hands of senior agile leaders. These leaders should have clear, specific accountability for this co-ordination.

2.  How senior leaders steer the organisation to achieve its goals

The issues worth early, explicit focus in this area include leadership accountability for specifying the capabilities that need to be built; defining target outcomes; ensuring flexible funding for agile initiatives; and putting effective controls in place to ensure compliance.

In our view, the senior leadership group should retain accountability for identifying and agreeing the priority capabilities that need to be built and for defining the outcomes these capabilities need to deliver. This is particularly important if the program of work is business-transforming rather than a series of ongoing adjustments and innovations that agile teams may be better placed to identify and determine the appropriate level of ambition. Clear priority capabilities and target outcomes are needed to:

• Focus agile teams on building the capabilities needed to deliver the business strategy: for example, the competitive imperative for the business might be to achieve certain efficiency gains and also improve the customer experience, but an agile team—given its customer focus and relative autonomy—might prioritise customer experience and treat any efficiency gains as an ‘optional extra’; 

• Set accountabilities for the development of these capabilities; 

• Manage resourcing conflicts in an agile matrix organisation comprising capability development teams (e.g., “tribes”) and communities of practice (e.g., “chapters”); and 

• Ensure that compliance and remediation work (e.g., in response to changing regulations, internal audit findings and external resolutions) do not take second place to customer-focused work.

Agile organisations also need to find new ways to fund initiatives, as agile teams iterate solutions during the annual planning cycles; they do not produce detailed business cases for upfront budget allocations. The funding model needs to be sufficiently flexible and trusted to support this approach, and to avoid the situation where each agile team bids for the maximum budget and some potentially valuable initiatives never get up.

Lastly, effective controls are needed in all organisations to ensure compliance with relevant legislation and regulation. How this will be achieved with the move to agile bears examination, given traditional, hierarchy-based controls will likely be eroded. The control model must also be aligned with the agile way of working (e.g., responses to requests from agile teams must be speedy) and principles (e.g., agile teams must be empowered).

3. How people are supported to do their jobs

Leaders need to make sure enabling functions meet the needs of their internal agile customers. The support these functions provide will be different in scope and substance to that provided in the old model—for example, HR will support new communities of practice in recruiting from new talent pools to fill new roles with new sets of attributes. Exactly how these enabling functions’ accountabilities, operating models and capabilities should change needs to be determined early in the transformation.

Also, incumbents’ internal policies and procedures (e.g., procurement, vendor engagement, work expenses, staff remuneration and rewards) tend to be too rigid and bureaucratic to support the agile culture, and typically require fundamental revision. Senior leaders have a role to play in ensuring this happens. 

Finally, faster decision-making is an important driver of the economic benefits the agile model delivers. This is because fewer people are involved in decisions and those individuals generally have the best access to the required information. Decision rights and protocols must be redesigned in the transformation because it is critical to determine exactly who in the new organisation can make what decisions and how they should be made. This redesign is a critical aspect of agile transformations because decision-making rights are at the core of organisational influence in traditional management systems.

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We expand on some of these issues in further articles in this series: The Pressure on Business Enabling Functions Is Increasing: What to Do About It, Breaking Policy Shackles - In a Controlled Way, and From a Maze to a Clearway: The Road to Better Decision-making in Organisations.