Most organizations want to become more Agile, because being Agile has become a requirement to stay competitive. But it is easier to talk about being Agile than actually understanding and embracing the concept.
So let us give you a quick, condensed summary of most important problems to focus on, and how to solve them. But first:
What Agile actually means
The word Agile is used to denote many different things, but what I mean in this context is, in short:
“Quicker reaction to customer needs and more accurately directed value delivery with the aid of the company’s product and competence resources.”
Even within the next few years, becoming more Agile will only increase in importance.
What organizations typically get wrong about Agile today
Companies from all walks of life scramble to become more Agile. In software development, many teams have been Agile for quite some time now. Of course, at least as many teams and companies are talking plenty about agility, but with no understanding whatsoever of what being Agile really means in practice.
In reality, at both the team and company level, real agility is but a distant dream for many.
In many companies, Agility has become an obligation rather than a positive goal. Far too often, we see companies and employees better their image by spouting their agileness. They say they have become Agile, perhaps using Scrum or Kanban, without having actually changed the way they react to customer wishes, and produce customer value, at all.
The important themes of Agile
When you go up a level from the teams, the principles of Agile (and also Lean) are poorly understood. So the objectives are forgotten and agility becomes just one process among others.
If your objective is to develop a truly Agile organization, a few themes are more important than others. The three main development themes - which we will now explain in turn - are:
- decision-making mechanisms
- cash flow planning
- operational culture
To be truly Agile, you cannot neglect any of these three.
Agile decision making can be summarized in a single sentence as follows:
Enterprise resource planning should always take place and business decisions should always be made at the lowest level possible, but still in accordance with the company’s strategy and in the company’s interest.
Your company should be able to make decisions as quickly and as correctly as possible. This is only possible when decisions are made as close to the source of the need for decision making as possible, and with as few intermediaries as possible.
For this, you need a very clear strategy and clearly defined values and objectives from the company.
People and teams must be able to make decisions that are in the interest of the company, and in accordance with the company objectives. And these people need to be able to do so without having to ask for authorization or additional information: this should already be available to them.
Ready-made decision making models
The Agile methods and Lean thinking provide some ways to realize this. For instance, the SAFe® model helps make teams aware of the company objectives in as clear a way as possible, using Themes, Epics, and Releases. With these control mechanisms, the teams should be able to operate on their own initiative. It takes trust, though.
The company needs to have the courage to give teams freedom to operate on their own to meet the company objectives - without excess control from the program or portfolio levels. Ready-made agility models like these are not for every organization, though.
Alternatives when ready-made models don’t work
Many organizations introduce them, but forget to focus on the main principles of these methods: to react quicker and to more accurately direct value delivery.
In these cases it could make more sense to introduce, for example, small successful practices and adjust them to suit the company’s operational method and market.
The responsibility matrix, for example, creates a clear overview of what each person is allowed to decide on. Connected to this is the Advice Process. Its main principle is that the decision maker is allowed to make the decision as long as they consult all those whom the decision concerns.
Please note that the responsibility matrix serves no purpose if, at each part, we check a little box saying that only managers are allowed to make decisions.
Like many, you may note that in practice, when decision making is allowed at as low a level as possible, the management turns into the leadership. In an Agile organization, the number of managers is very limited but there are still a few leaders. Leaders get the others to make the right decisions because they want to make them - not because a manager tells them to.
Cash flows are a touchy subject. In most companies, the attitude is: “This is how budgeting/selling is done here and everybody just has to live with it.” The same goes for bonuses and wages/salaries. It takes a brave person to touch these in organizational development projects.
If I was to sum up in one sentence why cash flows play such a vital role in an Agile organization, this would be it: Money must not create a competing control mechanism, but the cash flows, strategy, and daily decisions must be in line with each other.
Allow me to elaborate a little before we dive into solutions.
When the budget is set by “the others”
Cash flow planning still holds a strong position in many companies. When budgets are drawn up, money is directed towards, for example, a certain project or team. This in itself is cash flow planning, which directs the company’s actions. This means that budgeting is often done by completely different people than those who are responsible for creating the company’s product or service vision and objectives.
In this case, the budgets already tie people’s hands, or at least make some things much more difficult.
The budgeting process never changes
Some of those who know me also know that I am not a big fan of budgets. I feel that when it comes to budgeting, many things are still done because they have always been done. Budgeting is rarely questioned, and hardly anyone ever considers how things could be done differently.
If there is one conversation I wish every company would have, it would be: “Why are budgets drawn up, what is their purpose, and what do we wish to achieve with them?” When companies find answers to these questions, they can start to think about what could be done differently.
When things evolve around sales
Sales and related activities are control mechanisms that are strongly connected with cash flow. Sales, of course, also play a central role in the business operations of companies.
Without sales, companies will not succeed, even though there also are organizations with objectives other than sales. Enterprise resource planning is often conducted with the aid of sales and, in particular, sales projections. You may have come across the famous sentences:
- “It has already been promised to the customer”
- “It has to be done because it has already been sold”
In addition, skilled players have the ability to create really convincing diagrams about sales projections so that they can get their own project started in the organization. Sales must play a key role in the organization, but it must not compete with other kinds of enterprise resource planning. Sales must play by the same rules and strive to obtain the same objectives as others.
The problems with bonuses
Bonuses are a strong cash flow control mechanism. Many companies still use bonuses, and they will probably never completely cease to exist. I should write a whole separate post about the benefits and risks of bonuses, but I feel compelled to at least highlight here, the two most significant bonus-related problems:
- Bonuses often lock down the objectives for an unnecessarily long period of time and thus make the organization less flexible.
- Bonuses, especially personal bonuses, create the wrong kind of competition inside the company and cause a silo mentality, misrepresentation of information, self-interest, and weakening of motivation.
Ways to address the cash flow issues
There is no quick fix for these challenges. So they still have to be considered at the company or organization-specific level.
The Beyond Budgeting management model already provides a good basis for the improvement of cash flow planning. The organization of sales and sales practices depend entirely on the company.
When it comes to bonuses, Google’s OKR system and bonus model are worth exploring. Google still uses personal objectives and even a bonus model, but in their system the objectives are not ever meant to be fully achieved, and achieving the objectives does not affect the bonuses. The bonuses mainly depend on the person’s self-assessment, although they must ask for the opinions of others first.
There are undoubtedly many solution models in this field. But the most important point here is:
This matter has to be boldly addressed when creating a truly Agile organization.
Talking about changes in the organizational culture sounds so consultant-like that I’m ashamed (as a seasoned consultant).
Even every second-rate consultant can credibly say that the culture must be able to change in times of change. Usually, that is nothing but empty words, but this time even I believe that without a real change in the culture, it is not possible to achieve a truly Agile organization.
To sum up the need for a culture change in an organization in one sentence, I would say: Daily decision making must be based on mutually understood values which, in turn, are based on the company’s way of carrying out Agile development.
The big question to many is “can an organizational culture even be changed?”. In my experience the answer is yes. It takes major effort, new people, a sufficient amount of time, and a few effective drivers. But it is not impossible.
How to change an organization’s culture
The organizational culture changes gradually, so you need a few people who remember the basic principles of agility and Agile organizations well, and help others stay on the right path when a crisis occurs.
Generally speaking, introducing the Agile method is fairly straightforward and simple until the first fire breaks out. At that point, it is too easy to revert to old problem-solving methods which are often contrary to what you have introduced.
It is about the people
Unfortunately, a cultural change always requires a few staff changes. The culture of a company resides within the people who work for it. Therefore, new people, or the resignation of some people, further the cultural change. The behavior of a group always depends on the people in it. It is easier for a new group to change their values and operational methods than it is for an existing group.
Asking the right questions
When discussing your Agile organization, it is important to ask yourselves the following questions:
- What does customer value consist of, and what is the long-term objective in the creation of customer value?
- What is the concept of quality, and how is quality created in the company?
- What is the company’s business logic?
- Where does the company want to be positioned in relation to the competition, in terms of both the market and labor market?
Even though these questions may sound somewhat general in nature, they are very important for the company to be able to make joint decisions with the same values in different locations.
For instance, in software companies, these should affect the backlog prioritization and sprint planning of every Scrum team. In addition, the concept of, for example, quality must be fairly directly reflected in the Definition of Done.
The questions are rarely answered in the same or even a similar way by different companies. Usually, people only see the importance of their own work and not the big picture.
Changing the culture is a very difficult issue. Organizational culture will not be changed with new values and effective internal marketing. They can of course help, but in reality, it is about persistent work.
This can only be achieved when a few key persons have internalized the values and objectives of an Agile organization well enough.
In the end, make sure you become Agile for the right reason
As your company grows, extra flab is always created. Few people are needed to support sales and those who produce customer value. This usually results in there being too many people, and that slows the operation down.
These extra people cost money but that is not the biggest problem. The biggest problem is that they slow down and complicate your operations. Addressing this is a key reason why companies want to become (more) Agile. Their objective is to quickly gain efficiency and speed, to improve their position on the market.
In the end, the objective of a truly Agile organization should, however, be continuous improvement and progress towards organizational agility. In other words, the objective is to create the conditions for the continuous improvement of operations. A truly Agile organization is never complete, but constantly improving itself.
To achieve this you need exceptional vision and courage, to do things in a way that best suits the company’s own operational environment.
Published: March 29, 2022
Updated: August 9, 2022