As markets become increasingly characterized by high volatility, uncertainty, complexity, and ambiguity, the acronym "VUCA" is popping up everywhere. Companies are under pressure to reduce the time to market of their new products and services and quickly identify and capture new opportunities in order to survive on the market – particularly in highly competitive industries. In this context, however, organizations are hardly capable of predicting when and where internal communication and cooperation might be needed in the medium term. Responsibilities, decisions, and cooperative relationships thus have to be defined dynamically on a case-by-case basis. In such situations, management often sees agile organizational development as a universal solution to the challenges at hand. This usually means fundamentally rethinking and redesigning organizational and operational structures, values, management techniques, and working methods that have become established over an extended period of time. Agility is the answer! After all, the effects of implementing agile methods have proven to be largely positive for many companies.
In addition to greater organizational adaptability, higher employee satisfaction has been seen in agile teams. Thanks to their interdisciplinary nature and extensive expertise, cross-functional teams can not only capture synergy effects more efficiently, but also deliver results quickly and with few dependencies.
The path of agile transformation often starts with individual organizational units – normally with the IT department. Meanwhile, the other departments of an enterprise generally continue working in their familiar linear hierarchies for the time being. Long-term transformation projects are launched to establish agility throughout the enterprise using tried-and-tested top-down planning. This, however, is a contradiction in itself. An attitude is simply declared as the organization's new approach to work: “We’re agile starting today!” At most, a few selected specialists will also be trained in agile methods and a daily meeting established for regular coordination. The software development team immediately starts using scrum methods; the corresponding roles, such as scrum master and product owner, replace the former team lead; and eye-catching boards visualize team success or the current state of development. In the hope of reducing time to market through more efficient work processes, innovations, and transparent cooperative relationships, metrics such as velocity are defined to map the success of the new organization. And when all is said and done, the results achieved usually fail to match the initial expectations. Why is that?
It shouldn’t come as any surprise that a two-day “mindset” course attended by selected employees isn’t enough to achieve a sustainable cultural shift and corresponding change in working methods. It is often forgotten that “A new culture is the result of, and not a prerequisite for, agile organizational development.” Here, a systemic conception of human beings satisfies an important prerequisite for assuming a constructivist stance. After all, in contrast to Taylorism, the systemic approach assumes that people generally act logically in a given context, at least from their own perspective. Accordingly, this approach – when combined with a responsibility for producing results – is based on one value above all: trust in individual responsibility. Individual team members are assigned tasks based on their particular strengths so they can make the best possible contribution to the team’s success. Ideally, leadership is practiced through guidelines, a jointly defined framework, and reliable processes and structures. Managers act more as collegial coaches who use dynamic, decentralized techniques to help each individual employee reach their full potential. Under the “pull principle”, a single team member with a fixed role takes on a new problem as soon as capacity to do so becomes available and makes decisions in coordination with other team members.
Managing dependencies on other organizational units Even when individual teams perform admirably and demonstrate autonomy, the desired success can still fail to materialize. In most cases, this failure is due to the fact that even cross-functional teams that work together on a single project still depend on other teams. A frequent practice, for example, is to have several (agile) teams work on one product or be dependent on organizational units from the line organization. Inefficiency mostly arises due to the need to wait for deliverables from someone else. Since this problem is usually not rendered with full transparency by the commonly used kanban boards, its cause is often not apparent at first glance. As this example shows, the success of agility is not determined by the excellence of a single team. Instead, the organization must focus on ensuring that the right team is working on the right thing at the right time. This entails making the interaction among teams more agile and breaking down silos – which can arise even with cross-functional teams. The focus should thus be shifted from the team level to product boards, which makes it possible to visualize dependencies between individual units and teams and make them transparent for everyone. The establishment of regular product retros and stand-ups is one potential approach to optimizing communication between individual departments and teams. One delegated person from each team can take part in a stand-up meeting and bring the relevant information back to their teams. Here, the main goal is to develop the capabilities of the organization's individual employees to manage dependencies and differing objectives in an efficient manner. Ideally, these meetings will also take place at the strategic level to identify where the organization truly stands and where adjustments are necessary.
All the efforts aimed at making the organization agile should focus on added value for the customer. When structures, processes, leadership techniques, and individual values change, the key question should always be: How can we offer customers the greatest possible utility? The logical conclusion of this customer orientation is clear. Ultimately, the organizational structure is not the decisive factor; a customer-centric operational structure determines whether or not actions are successful. Identifying the biggest pain points from the customer perspective delivers valuable information about a potential solution, and it also makes it possible to prioritize related activities. The elements customers care about – the ones that deliver them major benefits – are the main ones that are made agile. Whether it's scrum, kanban, or the Spotify model, the methodology selected is secondary here and usually irrelevant for the customer. In practice, dividing an organization based on the customer journey has proven to be efficient, which means the focus does not always have to be on the product.
Agile organizational development can and should progress as incrementally and iteratively as the procedure that has proven successful in product development. Possible prototypes of what the new organization might look like can be visualized in joint interdisciplinary workshops. The results can then be discussed with members of the organization in a subsequent review to identify the long-term pros and cons. This is another area where acceptance of the changes is fostered above all through the participation and early involvement of employees, regardless of their position in the hierarchy. After all, employees from operative units are usually the true experts in solving problems. With their knowledge and experience, they can play a prominent role in creating value and helping establish a customer-centric organizational profile. Ideally, selected customers will also be involved in these considerations, which presents opportunities to test initial prototypes together and evaluate them regularly with an eye toward increasing utility.
When one examines truly prosperous companies, it is apparent that their ability to innovate is not the sole reason for their ongoing lasting market success. According to a study by Stadler and Wältermann, the “centennial champions” are characterized by the following factors above all: “Acting conservatively, that is, despite all adjustments, to maintain the culture and identity of the company and its evolutionary changes.” Accordingly, the strength of these organizations lies in their ability to strike the right balance between identity and renewal, and thus counteract disorientation and loss of identity. Managers therefore need to act with a simultaneous focus on stability and change. It makes sense to involve employees in the change process at an early juncture here, as well. This presents the chance to learn more about their values, fears, and desires in order to gauge the identity of the organization and retain meaningful aspects even in the context of change.
The basic tools described as examples in this article cover some of the many input factors that must be considered on the road to becoming an agile organization. In summary, it's clear that agility can be a solution after all – if it is practiced individually and transparently across all levels of an organization.
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Markus GroneradExpert IT Management
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