by Roderick McInnes2
Can An Agile Approach Work In Large, Traditional Organisations?
In this post Rod McInnes explores whether an agile management approach can be used successful in large, traditional organisations. Can businesses learn from start up models and use agile tactics for growth?
Traditional management theory is based around a hierarchical command structure. The higher one goes up the management chain; the more responsibilities are placed on individuals. Competence is expected.
Lower down the chain, a greater degree of incompetence is expected. More supervision is needed. The larger the organisation, the more management layers are required to ensure C-suite strategies are implemented by employees.
Despite humanistic principles, emanating from psychologists such as Abraham Maslow and Douglas McGregor, the fundamentals of management haven’t changed for centuries. Participative replaced legacy management over the last fifty years, but the basics underwriting both approaches are unchanged. A seventeenth-century merchant would not feel out of place in a modern organisational chart, once he got the hang of email.
New theories are emerging. Challenger ideas to traditional participative management: Agile. Also known as Lean, Radical, Scrum and Kanban. To keep this simple, we will refer to these theories only as Agile in this article. Although hardly untested theories anymore, given they have been field-tested and proven in thousands of organisations around the world.
What is Agile Management?
Some of the leading advocates of this approach include Steve Denning, author of The Leader’s Guide to Radical Management (Jossey-Bass, 2010) and Eric Ries, founder of the Lean movement. Denning is a management theorist and keynote speaker, with decades of experience in the World Bank.
Ries, on the other hand, is a Silicon Valley entrepreneur turned VC turned author. He comes from the same background as ‘Agile’, as practiced by software teams, engineers and IT professionals. In many respects, agile software development is responsible for management practices that share its name. Although both Ries and Denning come from different backgrounds, they are advocating similar approaches that could radically alter how large organisations implement projects and serve customers.
Agile is all about reducing bureaucracy. Making it easier to implement ideas that come directly from customer needs, thereby learning and iterating more quickly.
Agile recognises that solving problems is no longer a simple matter of “fixing” something, as you would a leaky tap or replace a fuse. That assumption hinges on management being the “grown ups” telling staff, “the children” what needs to be done. This approach does not work anymore, not when the challenges large organisations face are more complex, requiring a network effect to analyse and fix from several different perspectives.
In a knowledge economy, senior management should no longer assume they are the smartest people in the room.
To borrow an analogy that CFO’s would understand: agile is to traditional management what throughput is to cost accounting. Continually looking to cut costs forces managers into a zero sum gain of wins of loses. Whereas, throughput aligns costs and investments against the overall organisational objectives.
As Denning said in a Forbes article, “If your CFO understands the thinking behind throughput accounting, you are well on your way to having a sensible discussion about the value of Agile.”
Can Agile Work In Large Organisations?
In Forbes, Denning interviewed Rod Collins, former COO of Blue Cross Blue Shield Federal Employee Program [FEP], who later wrote Leadership in a Wiki World (2010), about how he implemented Agile management in an organisation known for decades of slow growth.
Collins recognised the value of agile, using it to turn around the Blue Cross Shield FEP, based on these principles:
- A riveted focus on what the customers value and what’s most important to them.
- A preoccupation with group process rather than distributed tasks as in traditional management.
- Recognition that work is fundamentally iterative learning
Leaders in large organisations often have a difficult time accepting these ideas because, fundamentally, it alters power structures. Power can still be exercised. It can still flow from the top, in keeping with a hierarchical approach, but agile shifts the power concept from managers “being in charge” to “being connected.”
Companies that now generate billions emerged from these ideas, they were startups not that long ago, including Facebook, Google and LinkedIn. Agile management came easy to them since they were already using agile software development.
How To Implement Agile Management Ideas
Letting go can be difficult for managers that have built careers on amassing power. But when lean principles are driving forward innovation in organisations such as GE (where Ries has been an innovation consultant for years), should managers consider agile from another angle?
Is it more about using talent, power and knowledge to create better working practices? That’s certainly how Denning sees agile, as it applies to larger, more traditional organisations. Better working practices will result in problems being solved much faster. Larger organisations usually have larger problems, with solutions dependent on people spread across different divisions, teams and sometimes countries.
Instead of senior managers trying to “fix” a problem from the top down, small teams can be created – working groups – capable of implementing experiments to find a solution using shared resources and knowledge. Work is organised more easily. Senior managers can assess the results, and then allow further experiments throughout an organisation. Each focused on the customer, not procedures.
This is not meant to throw out the rule book, simply re-write it for a new era. An era of social media, smartphones, bring your own devices, remote working and Wikipedia.
Agile is about testing theories quickly, iterating, trying new theories until one approach works that solve the initial problem in an accelerated timescale, compared to the traditional approaches.
Can this approach work for large organisations? It was, after all, designed for startup teams. Speed is not a luxury. Slow moving startups die fast. Large organisations don’t have that worry, except for the fact that innovation is itself taking place at an accelerated pace. Look at Yahoo compared to Google. MySpace compared to Facebook. Traditional organisations that move too slow innovate behind the curve of competitors will not retain market share and strong capitalisation forever.
Agile management means:
- Allowing greater autonomy within teams designed to solve specific problems using a network effect, rather than a top-down approach to delivering a solution.
- Accepting that letting go of a certain amount of control is necessary, providing a company hires capable high-achievers. Culture must push, support and nurture talent, encouraging rather than stifling innovation.
- Recognising that all work is iterative learning. Whereby gradual improvements should always be focused on the customer, not processes, power structures, or creating work for works sake.
We would be interested in your views on business agility and how traditional organisations are adopting this approach to stay competitive and grow in the current economic climate. If you are an interim manager who has experience in this area, please leave a comment below.