The best way to predict your future is to create it.
—Abraham Lincoln
Welcome to the second part of this book, which focuses on the real-world application of agile management. This first chapter looks at how to translate the agile principles from Chapter 7 into your new organizational structure.
8.1 Organizing for Agile Management
It is 1980 when the Brazilian, Antonio Semler, asks his son Ricardo to start working in his company, Semco, which produces industrial mixers and turns over $4 million annually. Ricardo is 21 years old and really only interested in playing guitar with his rock band; but he agrees. Within a week, however, father and son are already having a blazing row. Ricardo sees passive, unhappy workers, who are doing boring work, are strictly controlled and are totally uninspired, just waiting until it is time to clock out. According to Ricardo, this is a result of the autocratic way in which his father runs the company and he, therefore, wants to make this more democratic. After yet another of their regular arguments, his father decides to retire and give Ricardo the freedom he wants. And he takes it too. He immediately dismisses most of the managers, abolishes the hierarchical structure, and diversifies the company into other sectors. He starts building a culture where reliability, honesty, transparency, and trust are key. His main goal is to have happy employees, because he believes that everything else will follow naturally. Therefore, workers are free to do whatever they want, within the framework of the company’s mission, as long as the job is completed on time. They share in the profits, set their own salaries, and determine their own working hours. They are encouraged to dare, to be creative, and to investigate and question everything. And to recognize their own mistakes, guided by the principle that everything can be improved, always. Sales grow dramatically by 25 percent to 40 percent per year. Semco now boasts eight separate companies, with around five thousand employees, and all are market leaders in their industry. According to Ricardo Semler, these results are directly attributable to what he calls self-organization.1
Self-Organization
In many European countries, traffic signs and lights are increasingly being removed, especially at intersections. The idea behind this is shared space. The premise is respect rather than rules: road users are perfectly able to work with each other to ensure everything runs smoothly. And it seems to work: there is more communication and safety improves. You can also see it in shops and restaurants. Long ago, it was thought that shop-assistants were the only possible way to let customers buy something. When the first self-service stores opened, almost nobody believed this concept could work. But customers proved well able to control most things they needed to, and it came with more speed and cost savings. Nowadays, it is so obvious that it works, that many people prefer not to be helped by an assistant. We do it all ourselves, in supermarkets, gas stations, McDonald’s, and Ikea, but also online and even, step-by-digital-step creating our ideal vacation. You can compare it to making music: a big classical orchestra must have a conductor, but a small jazz orchestra or a rock band can “jam” together perfectly without one.
Self-organization can be a success factor for organizations if their structures are established around small, independent groups. This is based on “Dunbar’s number,” the insight that the number of people with whom one can maintain relationships is cognitively limited.2
The potential of self-organization is proved by the “lattice” (or “open allocation”) management concept that W. L. Gore & Associates deploys, which is comparable to the “cell philosophy” applied within BSO, and Zappos’ “holacracy” approach.
If you dare to let go of control, you create a lot of space. And with the right care and stimulation, good things will arise to fill that space. Things that remained contained when there was no space for them to appear and flourish. Very likely, your employees then experience more job satisfaction, feel more involved, have more initiative, are more productive, more innovative, and deliver better quality. Agile management is not an end in itself, but a means to achieve these benefits. You want your people to work with head, heart, and hands. And self-organization is a foundation for this. Figure 8.1 shows us, based on extensive scientific literature,3 where we should put our attention when we want to make our organizations agile.
Figure 8.1 The four success factors of agile management and their impact on the results
The People success factor includes the elements of culture and leadership we discussed in Chapter 7. Processes are covered in Chapter 9 onwards; below you can read more about organizational structures and information systems.
To stimulate entrepreneurship within agile management, you work with self-organizing, cross-functional teams. These can range in size from three to ten people, but seven or eight is ideal. The teams consist of employees, from different disciplines, who together are responsible for achieving a specific goal from start to end. Goals can be large or small, wide-ranging or very specific: developing a new market or product, optimum implementation of human resource management (HRM) policy, getting the most out of an enterprise resource planning (ERP) system, or providing the best possible instore customer experience. A priority is that the team must always learn from what they do, and that proceeds most effectively in groups.4 Eventually, this learning leads to value for the customer; internal or external.
Therefore, you need a team of different specialists. Compare it with professional football: the goalkeeper, defenders, midfielders, and forwards need to cooperate closely and each must make their specific contribution. But even if you have the best players, you still need other specialist roles. There are the coaches, skills trainers, condition and strength trainers, equipment managers, physiotherapists, doctors, psychologists, and many more. All are aiming to get the team performing optimally. And it works the same in agile management. Often people choose to work with organizational roles that originated in Scrum, sometimes with custom names and responsibilities (see ING’s case study in section 8.3).
Beside the team members, the roles globally look as follows:
- Product owner—This is the principal of the team. He determines which products/services are to be developed and, within this, what are the priorities for the product backlog (you’ll read more about this below). Also he must have the necessary budget for the purpose. When he brings all the above, he creates clarity and calm.
- Agile coach—The agile coach ensures that the team gets continually better at applying agile-management principles. He also ensures that the environment of the team, inside and outside the organization, not only does not hinder team success, but contributes positively to it. He is emphatically not a project manager, because the team members jointly fill that function. The agile coach is a “servant” to the team, focused on facilitating it, and at the same time can be a team member contributing to the team goal.
If the organization is large, with multiple agile teams, you often see the role emerge of “agile manager” (see the Tribe Lead in the ING case study). An important goal for the agile manager is to steer the teams into alignment between each other without limiting their autonomy, as we saw with Spotify. Too much freedom leads to chaos and suboptimization, for example, because activities overlap or counteract each other. Therefore, the agile manager must create the kind of framework that he trusts will allow the team to work with the most freedom possible. He creates clarity by communicating regularly about the organization’s goals, and the associated subgoals of each team. He must also monitor the flow speed, as it affects how much value teams can create in their mutual value chains. He needs to keep the product owners informed and in agreement by regularly arranging so-called sync/huddle meetings, of which you can read more later. For larger, more complex situations, specific monitoring tools have been developed, such as SAFe (Scaled Agile Framework) and LeSS (Large Scale Scrum),5 but these, however, up until now, have been specifically focused on software development.
Finally, alongside organizing agile management, you also need to arrange for governance. Specifically, this means translating the organization’s strategy and vision into clear goals (OKRs) for the teams. The teams need to render these goals into specific key performance indicators (KPIs) for their efforts and results, indicators which put customer value-creation, learning, and quality central. After each iteration, the team should report back in a practical way, using reporting-structures that can simply become the basis for communication with internal and external stakeholders. Furthermore, all the processes and consultations are subject to continual refinement, as you will see in Chapter 9 and onwards. The same applies to HRM tools, such as personal development plans, evaluation processes, and reward mechanisms.
In the case of governance, it is of interest for the management to look at the performance of the value chain as a whole, rather than at the individual components. Agility does not ignore the fact that a chain is only as strong as its weakest link.
The Crucial Role of Information Technology
IT plays an enormously important role within agile management. Firstly, in-house or external IT professionals must work together with business functions in order to deliver the technology involved in customer solutions. These people should also be included in the multidisciplinary teams. Often within the IT organization, there is existing experience with agile working (usually Scrum). This makes cooperation easier and, therefore, offers opportunities to learn from existing agile knowledge and experience.
Secondly, information systems are necessary to quickly and accurately capture, measure, and analyze customer behavior, for instance via digital analytics. It is desirable to do this at all touchpoints and to integrate it completely into a 360 degree view of customer behavior. This is best achieved by smart-linking systems such as CRM, data warehousing, and analytics.
8.2 Agile Assessment: How Agile Is Your Organization Right Now?
Chances are you are curious about how agile your own organization currently is. You can find this out immediately below, by reading each proposition and determining the extent to which it applies to your organization. Via this science-based methodology, you build a picture of your organization, based on identifying your strengths and weaknesses.
You now have two choices:
- Do the self-assessment now
The advantage here is that you can do this reasonably objectively, without being influenced by the content in Part 2, so you’ll probably give the most accurate and least socially desirable answers. The downside of course is that you might be still unclear about some concepts and this might affect your ability to answer from a full understanding.
- Do the self-assessment when you have finished reading Part 2 of this book.
The opposite applies here: because you know exactly what the content is about, this can influence how you answer the questions.
It’s your choice (as the great Dutch footballer, Johan Cruyff, would say: “Every disadvantage has its advantage”). Whichever approach you choose for your self-assessment, you can use Table 8.1. For every statement with which you agree or disagree, indicate the level by placing a cross (X) in the appropriate box. You can fill in the questions from a broad or narrow perspective, as you wish: for a team, for a department, a business unit, or your entire organization. You can find an online version of this self-assessment at agilemanaging.org under Research.
Table 8.1 Self-assessing the agility of your organization
Now you have filled-in your answers, it is time to analyze the results. This can be done using Table 8.2. The upper half concerns questions 1 to 33. First, count the number of crosses you made by category (“Completely disagree”—“Completely agree”) in Table 8.1 and write these numbers in the appropriate boxes. Multiply this category number by the corresponding value for that category (1–5) to calculate the cumulative value, and record your cumulative values in the appropriate boxes. Calculate the total by adding these five numbers together and write this number in the appropriate box. Finally, divide this number by 33 and then multiply it by 20.
Table 8.2 Analysis of the results of your self-assessment
This gives you your percentage, which you put in the appropriate box. This is your score. Repeat the above steps for questions 34 to 78 and write the score in the bottom half of Table 8.2.
The first score indicates how well your organization is able to create the conditions that facilitate an agile organization. If you want to improve that, you can start looking at Table 8.1, at those of the 1–33 questions to which you gave a low score (i.e., “Totally disagree,” “Disagree,” or “Neutral”).
The second score indicates the effectiveness of the agility of your organization. In other words: what is the result? This score can be increased by either optimizing collaboration of teams within a chain, or by improving facilitation. For the latter, go back again to Table 8.1 and look for any of 1–33 to which you gave a low score. Success!
8.3 Organizational Structure and Roles within ING Netherlands
Agile management is not restricted to start-ups and small organizations, in case you might think so. There are plenty of large organizations using this method successfully. Notable examples include Spotify, Google, Netflix, and Zappos.com: all pure online players. However, there are also large traditional organizations that work agile. The book’s earlier examples of McDonald’s and GE are not the only ones. Organizations like Boeing, Philips, and ING all use forms of agile management. Let’s take a closer look at the last one, ING.6 (Advance warning: in this company, the agile management approach is already quite mature. It has already been scaled-up to a large part of the organization and the governance for this purpose has also been continually refined. Most other organizations, however, are still in the early stages and probably see this example as a “future state.”
Background and Goals
ING headquarters sees a quickly changing world, driven especially by technological developments. Customer behavior is changing because customers have more channels at their disposal to do their business, and they take it for granted that these are available 24/7 from wherever they happen to be. This results in ING feeling the need to respond quickly to changing customer needs by substantially shortening time-to-market of improvements in customer processes, so the bank can offer a more relevant and best-in-class personal service. ING hopes this approach will increasingly differentiate it from its competitors.
To achieve this, ING wants less thinking about and working on large and long-term projects and much more focus on small and short-term projects. In addition, they want fewer obstacles, transfers, and meetings between departments. Organizational silos need to be broken down in order to promote cooperation. ING wants to transfer from a talking and thinking culture to a doing culture. Instead of spending time on meetings and monitoring, ING wants to empower employees. This means more initiative and responsibility for teams and individuals, allowing ING to adapt flexibly to the needs and demands of the moment. The customer must be central.
Actualization and Implementation
ING wants the customer to experience tangible improvements. In order to achieve rapid results, they choose to follow a process cycle similar to that of many start-ups, the three steps of think–try–adjust. Failures are also permitted, because they can be quickly adjusted and improved. ING wants employees to be energized by discovering things together.
ING decides to fundamentally reorganize its headquarters, with agile working as the starting point. The bank wants people to work in small teams, which have plain, clear goals and end-to-end responsibility. These small teams should take center stage, while the organization around these teams should aim to optimally support the team in achieving its goals. In addition, it’s worth noting that agile working is a means and not an end in itself. The premise is simple: if it does not work, make flexible adjustments, or look for another solution.
Organizational Structure
As seen in Figure 8.2, ING shapes and focuses its organization using building blocks called squads, chapters, and tribes (and no, staff members aren’t swaggering around in metal-studded leather jackets with pictures of a lion and the letters ING embroidered across their backs). The characteristics of these groups are as follows.
Figure 8.2 The structure of ING’s agile organization is composed of squads, chapters, and tribes
Squads are self-organizing, autonomous teams with end-to-end responsibility to achieve very specific customer-related goals. An example of a “squad” is Mortgage Applications Process. This squad’s goal is to constantly create the most customer-friendly and efficient process to get a mortgage application approved. The Search squad must create the most customer-friendly and effective search functionality for ING’s digital channels.
Do you remember the old TV series The A-Team? Those men always knew how, with limited resources, to find very quick solutions to major problems. That was largely because they were complementary in their specialties (and, of course, because the bad guys couldn’t shoot straight). A squad works on the same principle. Each is a multidisciplinary team consisting of up to nine people. The skills and expertise of the squad are determined by its goals:
- Marketing:
- product management
- process management
- Customer journey experts in the fields of
- Data Analysis
- IT
The squads work in sprints of three weeks. At the end of this period, they must present a demo version of the improvement(s) they have developed. In order to realize the necessary speed, the squads work in the same physical space, and they communicate face-to-face as much as possible. They also use visual planning boards, including during the short, daily team meetings.
Chapters run across multiple squads. A chapter is a group of up to eight members, of different squads, who have the same specific expertise or competence. This could be data analytics, or user experience or product management processes. Chapters decide for themselves how they are going to achieve their goals, and exchange knowledge and experience.
And finally, there is the tribe: a collection of squads with related goals, a kind of matrix-like structure. Examples of tribes are those for investments, mortgages, one-to-one propositions, private banking, daily banking, and omni-channel experience. A tribe may be up to 150 people. So the “Mortgages Service” tribe includes:
- One squad: Customer Journey Analysis
- Four squads around Mortgages Applications Process
- Five squads around Mortgages Management
- Four squads around the back-office system HYPOS
- One squad: Securitization (merging and subsequently selling assets and marketable securities)
Not all departments at ING’s headquarters are placed into the agile organization, making it a hybrid form. For example, in the operations department, the smaller parts have been placed into a tribe, but its larger parts have not. And while IT staff do work within a tribe, hierarchically, they are part of the CIO organization. This shows its customized nature.
Within ING’s squads, chapters, and tribes, everything evolves around the squad members. These are the employees that, as team members, contribute their specific expertise and knowledge. In addition, there are another four specific roles: product owner, chapter lead, tribe lead, and agile coach. These roles are explained in more detail below.
A product owner always has a business background and is responsible for one squad. He is not the leader of the team, but plays a functional role. He works for 90 percent of his time within the team. In his role:
- he is responsible for what the squad do
- he manages the backlog (the list of future projects) and the to-do list of ongoing projects
- he determines the priorities of the squad.
A chapter lead works for 60 percent of his time within a squad. He is also responsible for a chapter. A chapter lead cannot also be product owner, because these two roles must stay completely separate. In his role as chapter lead:
- he is responsible for how things are done and sets the standards for the way the team works;
- he is the hierarchical superior of the squad members;
- he chooses the squad members;
- he is responsible for the continuous personal development, coaching, and assessment cycle of the squad members.
A tribe lead has line responsibility for a tribe and this takes up 100 percent of his time. He coordinates the affairs of the tribe:
- he sets clear goals and priorities;
- he creates optimal conditions, so that squads can achieve their goals;
- he allocates available resources, including budget;
- he ensures coordination and cooperation between different squads;
- he facilitates sharing of knowledge and insights;
- he ensures coordination with other tribes;
- he holds weekly meetings with the product owners about progress in achieving their squad’s goals;
- he gives guidance to the chapter leads, with whom he jointly determines the deployment of employees within the tribe.
Finally, there is a “loose” role, that of agile coach. He:
- trains and educates individuals in agile working; and
- coaches individuals and squads (between three and five), to improve and realize the desired high-performance.
Now that you know more about how you can set-up your organization, it is time to look at which process your organization should begin working on. This comes in the following chapter.
Having read this chapter, you’ll have discovered the following:
• Self-organizing teams are the foundation of agile management. The structure and management of the organization must be adapted accordingly.
• How agile your own organization is. You might already have determined this through a self-assessment, through which you also looked at facilitation and effectiveness.
• The ING Netherlands case study shows a possible structure if you want to implement agile management in your organization.
1. Semler, R. (2004). The Seven Day Weekend. London: Portfolio
2. Also see: https://www.theguardian.com/science/2011/apr/25/few-people-dunbars-number
3. Hoogveld, M., and J. M. D. Koster. (2015). Implementing Omnichannel Strategies: The Success Factor of Agile Processes. Working paper.
4. Senge, P. M. (2006). The Fifth Discipline: The Art and Practice of the Learning Organization. New York: Doubleday.
5. See scaledagileframework.com, less.works, disciplinedagileconsortium.org
6. Thanks to Payam Djavdan; see also several YouTube videos about agile working at ING.