K3 Insights

The thought of working in or leading an Agile organisation for someone who does not understand Agile could either conjure up images of freedom from corporate constraints to drive change and innovation…or chaos, lack of control and endless frustrations around who supports me.

Every organisation is perfectly designed to get the results they get, but there is no perfect organisational design.

For some businesses the dominant “traditional” organisational rationales – e.g. function, customer, product, geography, channel, etc. – still work for their whole business, or at least parts of it. But these rationales are also being challenged in a world occupied with disruption, where their intent is to help support stability. As such these rationales can fall foul of unresponsiveness to marketplace pressures, they may be too siloed inhibiting effectiveness of getting ‘work done’, and information/ decisions rights often have to flow down the hierarchy impacting speed.

Many companies are now investigating and/or investing in ‘Agile’ organisational design to help them stay competitive in today’s fast-moving market. Agile has traditionally helped software development and IT solutions deliver fast, iterative, and flexible solutions that can change at the speed of the market.

But, it is now expanding to improve other business areas and in particular, organisation design.

Agile isn’t just stand up meetings and an activity board to stick post it notes to. It is a new way of organising teams that fundamentally changes how they approach, organise and deliver their work.

We need to understand that Agile has no universal methodology and is merely a set of principles and different frameworks that are more successful in certain applications than others. For example, “Scrum” is a methodology that Agile co-founder, Jeff Sutherland, has developed that essentially eliminates the traditional “waterfall” method of software/product development in favour of his more iterative and flexible solution.

This is in turn one of the approaches people are now taking in reviewing how they design their organisation to be Agile.

In the simplest form, Scrum is a way to mobilise small teams (e.g. six people plus or minus two) to iteratively develop products that fit customer needs, to remain flexible to market/customer changes, and to help teams become as effective as possible. In Scrum, teams work on a set number of projects and tasks in “sprints” that take anywhere from one week to a month to complete.

Scrum has demonstrated the power of Agile principles to increase production speed, effectiveness, and flexibility, delivering products (software and others) on time and customised for individual customer needs.

If implemented well, with the right capabilities in the right roles an Agile design can deliver significant value for your organisation.

Yes, there are lots of examples of organisations exploring how they could employ Agile organisational designs beyond IT projects or technology functions. And yes, there are some failures but there are many where successful results are enabling broader adoption.

In the current economic environment, where businesses are facing new challenges every day including increased pressure on their resources, an Agile design may offer opportunities to create greater value, ensure sustainability and drive commercial success.

Change is a key factor of business today. Hierarchical organisations where communication is driven from the top down will find it hard to function successfully in an increasingly unpredictable business environment, where the need to be able to manage with ambiguity has become a key competence for leaders. Successfully leading in an Agile structure requires a certain skill set.

Organisations looking at moving to an Agile organisational design shouldn’t be put off by negative stories. However, they do need to make sure they get a few basics right.

Companies often fall into the trap of spending their time and energy on getting the macro level issues sorted out - i.e. overarching organisational governance and executives levels, agreeing how the model will work, which functions could be Agile, etc. - with the remaining small amount of time focused on the micro issues. These are the details that can make or break an Agile organisation i.e. identifying the appropriate capabilities, process design, assigning decision rights. To be successful the focus needs to be end to end alignment right through the organisation (or at least in those areas adopting Agile).

Agile can give organisations the opportunity to remove costly duplication of resources and can be equally useful for small to medium enterprises, as for multinational corporations. Implemented with care and attention to detail, an Agile design can provide an organisation with the competitive advantage they need to succeed.

So, what is the detail? It may sound obvious, but as a starting point an organisation needs to focus on what they want to achieve. Having a clear rationale including what the objectives and desired results are is essential. Often a move to an Agile design is driven by changes in the organisation’s marketplace, such as the need to be more responsive to customer demands, grow into new markets/products, perhaps to offset declining sales in other areas but to try to resolve these issues in a manner different to how the business might traditionally approach it.

The need to do more or do it differently, without incurring more cost can be a strong driver. In a nutshell, doing more with less and faster!

Once you’re clear on what you want to achieve, a robust organisational design process (which is an article in itself), will allow you to test whether an Agile design is in fact the best way to organise your organisation. The key is knowing what the potential benefits are versus the risks, along with a clear understanding of how you can mitigate any risks.

The risks need to be factored into the design work to ensure you meet your objectives. Before diving in you’ll need to give some thought to the following points.

The first of these is leadership. Having the right leadership capability is critical for any organisation’s success regardless of structure. However, an Agile structure presents unique leadership challenges which require specific skills, many of which may not be part of the usual leadership package. Leaders need to have the ability to persuade, influence and negotiate with people at all levels of the organisation, being mindful of ‘cultural’ sensitivities which are particularly critical when drawing capabilities from across multiple teams, functions, geographies, etc.

Conflict management skills are a must-have along with a solution focused mindset. As an individual, leaders in an Agile structure need to be good communicators, change resilient and able to tolerate ambiguity. They should be good delegators and be able to balance the need to have control, versus empowering employees, who they may have no ‘control’ over while they are off being part of an Agile team.

The right leader of an Agile organisation will be able to head potential problems off at the pass.

Effectively managing performance is fundamental to Agile organisations functioning well. Allocating adequate time to ensure role clarity for individuals including responsibilities, decision rights and reporting lines of accountability is a key first step.

The support functions – i.e. Finance, Human Resources – are critical to the effective functioning of an Agile design (while they might also be aligning themselves in an Agile fashion). They need to focus on enabling the Agile design and driving continuous improvement in what they do, not stifling it with traditional process. For example, the Finance team must ask “have we got the right mechanisms in place to tell us whether we are creating value within our Agile model and if not, how can we get insights in a responsive fashion to help improve the situation”.

The HR team must drive the talent selection and succession planning with a focus on hiring and developing people that will add value in an Agile structure. Effective communication within and across the organisation must be encouraged and demonstrated by all those in management roles. Clear communication is critical in driving success and mitigating potential problems.

Get the details right and you’ll reap the benefits of an effective Agile organisational design including, increased coordination across boundaries from the synergies created through Agile teams. Productivity will increase due to sharing of resources, which in turn leads to greater insight into products, services and costs. Companies should also see increased speed in production and delivery, and smarter product design resulting in greater opportunities to leverage opportunities within a chosen market.

All this relies heavily on having a clear understanding of the reason for the Agile design, clarity of the potential pros and risks of the design and how the latter will be best mitigated, leaders with the right capabilities and enablement (management) systems that enable rather than hinder the functioning of the Agile.

Get this right and the organisation will be well positioned to benefit from the value an Agile organisation might bring your whole organisation, or at least select functions, as the business environment continues to see mass disruption, irrespective of industry.