10 minute read 22 Apr 2020
A man riding motorcycle on mountain road, Italy

How to get your agile transformation on target

By Matt Watt

EY Global Organization and Workforce Transformation Co-Leader and Design Leader

Partner at Ernst & Young LLP, leading globally for EY on aligning organizational models and organization design to achieve strategic intent. Champion for workforce inclusion and well-being.

10 minute read 22 Apr 2020
Related topics Corporate culture Workforce

A targeted approach, sequenced implementation and investment in culture are keys to a successful agile organizational transformation. 

Agile delivery models are a hot topic in organizational design circles. Organizations everywhere are implementing agile capabilities and structures at pace – and for good reason. Done right, the results can be startling: more innovative solutions, brought faster to market, with lower development costs and with stronger team engagement.

However, many organizations experience challenges in implementing them. The learning curve is long and steep, often involving both foreseen and unforeseen disruption to the business.
Some organizations have even begun to implement wholly-agile organizational models. However, these all-agile models are rarely right for most workforces, and a more targeted approach tends to yield better business results for the majority.

Fast-followers have a lot to learn from the successes and failures of the early-adopters. Organizations that derive the most value from implementing agile organizations are clear about what outcomes they want from an agile delivery model. They understand what they really want to achieve, as well as which parts of their organizations they want to set up in an agile way, and in which order. For the best chance of success, they adopt a multi-speed approach – one that implements and integrates new agile delivery models alongside traditionally-organized business units.

Implementing agile organizational structures also means developing the right skills, cultures and behaviors, supported by strong leadership for the change. In a world where culture consistently trumps strategy, building the right culture will make all the difference to organizations in achieving their intended outcomes.

Agile organizational models address the need for speed

Winning organizations are applying agile organizational principles more broadly, so they can respond faster and more efficiently to market dynamics.

Agile meets modern organizations’ need for flexibility and speed. Innovative products and services are coming to market much faster and being adopted by customers much more quickly. Disruptors are entering markets at pace, with new categories of products that take radically different approaches to meeting user needs. Whole industries are transforming in their wake.

This transformation is powered by agile development. First evolved and perfected to support software development, agile principles focus organizations on meeting customer needs, forming multifunctional teams with delegated autonomy, prioritizing work, creating minimum viable solutions and learning to fail fast.

Many organizations have sought to exploit the potential benefits of the agile development methodology by applying it to organizational problems and their related organizational functions. By taking on the principles of agile organization, they become more flexible and focus energy more quickly on effective innovation, ultimately responding faster and more efficiently to customer demand.

Why agile organizational design is challenging to implement

The template for agile organization design seems simple. In fact, the internet is full of examples. However, these models are difficult to roll out at scale across established organizations. They represent a fundamentally different way of organizing work, people and careers. They, therefore, require a different model of leadership and a different culture that fosters ownership, empowerment and customer-centricity.

Existing workers will struggle to work in this new way. And for organizational leaders, a traditional transformation and management approach is ill-suited.

  • A quick primer on agile organizational design

    An agile organizational design comprises delivery and professional organizing structures working in a matrix and focusing on delivery.

    Delivery (vertical) structures

    • Squads: Squads are multifunctional, self-organizing teams of usually less than 10 people that resolve a specific customer challenge using an agile delivery approach to design, test, launch and iterate a solution. In many models, “scrum masters” and “product owners” sit within the squads.
    • Tribes: Squads are organized into tribes, usually of 50-150 people. Tribes work in focused areas (e.g., a specific product or service category) and identify and create the need for new squads. A “tribe lead” (product owner) leads each tribe, and there is usually an “agile coach” to manage the delivery process and ways of working across the squads.

    Professional (horizontal) structures

    • Chapters: Chapters comprise individuals within a tribe who form skills-based professional groups or teams. Chapter leaders manage HR processes, such as recruitment, professional development and performance management. Individuals are matrix-managed, with squad leaders responsible for their contribution towards outcomes and chapter leaders responsible for their personal and professional development.
    • Guilds: Individuals with similar interests can be members of one or more “guilds.” These are self-organizing groups that extend across tribe boundaries, and explore and develop personal and organizational knowledge and insight into specific topics.

Four ways to help organizations succeed

There are many benefits to using these agile models. For organizations that are thinking about moving further toward an agile organizational design, here are four significant lessons to learn from the early adopters.

(Chapter breaker)
1

Chapter 1

Be clear about desired outcomes and how to measure them

Organizations need a clear objective and metrics to avoid losing their way during implementation.

Successful agile organizational models need to be focused on a clear outcome – for example, achieving accelerated top-line growth. Organizations need to be clear about what the ROI associated with that outcome is and how to measure it. Otherwise, they risk taking an expensive path that loses its way at some point during the implementation phase.

In addition to having a clear outcome, organizations need to build the capability to measure success. Typically, this comes in two forms: externally-facing customer insights and analytics, and internally-facing workforce planning and analytics. For customer insights and analytics, it is important for organizations to invest in an organization-wide center of excellence, or in localized capabilities for customer or product segments.

For workforce planning and analytics, organizations need to develop a means to plan, analyze and guide the workforce changes necessary to support an agile organizational design, as well as to monitor workforce engagement and confidence in leadership throughout the transition.

(Chapter breaker)
2

Chapter 2

Avoid being an agile purist – take a targeted approach

Create a role for, and relationship between, agile and traditional units in the new architecture.

When implementing agile organizations, it pays to follow the key tenets of agile and to prioritize the areas of the business to implement first, to experiment and learn lessons before moving on. However, organizations also need to understand the totality of the change they are trying to make. The implementation will go much faster and deliver greater benefit if you first create a full agile organizational target architecture, as well as map out the relationships between the agile business units and those that are expected to remain more stable.

The implementation road map will inevitably iterate and change, but without an understanding of which parts of the business will change and when, it will be difficult to manage the interface between parts of the business (causing confusion and duplication) and to coordinate overall workforce communications and talent management.

In creating the right architecture, there are four considerations:

  1. Identify the right business units to adopt the agile model.

    Look for business units that offer the greatest potential for growth through disruptive innovation. They should also have a structure, culture and ways of working that are already, or can become, more aligned with an agile organizational model (e.g., culturally able to fail fast and move on).

    Think hard about connecting the old to the new. Existing parts of the organization using an agile approach have skills that can scale and success stories to share, including first-hand experience in managing the cultural disruption caused by switching to new delivery methods. Continuous improvement and lean capabilities also share some similar principles and skills to build from.
  2. Determine how the agile parts of the business will interact with more traditional business units.

    Organizations need to look within business units – and parts of the corporate center – to design how those areas of disruptive innovation adopting agile will interact with the more traditionally-organized business units. For example, the capabilities and functions that provide support to an organization’s people in the agile model, such as HR-shared services or finance, may be better served if they remain under a more traditional hierarchical model.

    The overall design needs to be clear about how these models coexist and support each other. This is especially true where interactions and services are provided to business units operating both under agile and non-agile models, as key processes such as performance management are very different. 
  3. Create a logical road map for implementation.

    Sequence the implementation, focusing on the most receptive parts of the business first and supporting them to learn and succeed. This will give parts of the organization following later more time to observe, test and establish some of the more “countercultural” behaviors that will be needed when it is their turn to implement.
  4. Iterate the architecture to learn from implementation.

    Organizations should expect the initial architecture and road map to be imperfect and to need iteration, as lessons are learned about the model and how it is being implemented.
    Of course, having a mix of agile and hierarchical models within a single organization – where agile-organized, fast-growth business units focused on next-generation products sit alongside well-established business units organized for efficiency – presents its own challenges.

    For example, many people will want to be in the exciting, fast-growing disruptor group with the brightest personal opportunities rather than the traditional, steady-as-she-goes part of the business. Equally, it gives more skeptical and resistant parts of the workforce more time to adjust to today’s brave new agile world.

    A targeted and multi-speed approach gives organizations the best chance of building a structure that delivers measurable ROI. It’s a pragmatic choice that offers a win-win for organizations looking to address the imperative of meeting both current and emerging customer demands. 
(Chapter breaker)
3

Chapter 3

Support the change in culture, skills and behaviors

Organizations will need to fill skills gaps and provide people role models for the right behaviors.

Most organizations understand the need to transform their culture and ways of working to succeed under an agile organizational model. However, many organizations fail to plan for this and to support the transition to the new culture and skills required. Organizations will have to fill some obvious skills gaps, typically for roles such as product managers and agile coaches. People will need role models to emulate the right behaviors.

Employers need to recognize that not all employees will want to or be capable of working under agile models – and some will likely leave. Consequently, organizations should create an agile talent strategy to set direction for the resulting skills development and talent management programs.

Five initiatives can help organizations establish the right workforce blueprint for success:

  1. Define the new leadership framework and behaviors necessary to lead in an agile organization. Leaders need to be prepared to empower and develop their teams in a new way and serve as role models for the change leadership behaviors that are necessary to support development of new cultural norms. 
  2. Plan to acquire and develop new capabilities. These are more than the obvious capabilities, such as agile coaches and scrum masters. They include related capabilities in customer insight, human-centered design and business analytics. These capabilities need to be incubated and carefully located geographically and organizationally until they reach critical mass. 
  3. Redesign job families and career paths to account for flatter structures and the connection to a broader and more flexible reward system. This needs to support a much more flexible personal and professional development model, led by managers on the “supply side” (leaders of chapters) who focus on developing and using talent, instead of delivering business outcomes. 
  4. Update the performance management process. It should reflect the requirements and opportunities provided under an agile model for fast-paced personal development, continuous feedback against key business metrics and a more flexible career model. 
  5. Rethink the wider employee value proposition. It should attract, and can help to retain, the right talent.
(Chapter breaker)
4

Chapter 4

Workforce planning and change management remain critical

An agile model needs to transition management and change to achieve the intended benefits.

Just because the organizational model being moved towards is an agile one doesn’t mean that leading-practice approaches to delivering workforce transition and change management can be ignored.

When organizations are implementing their agile organizational models, there are four activities that can help them deliver on their intended return on investment:

  1. Select the first-adopter business units carefully and support them to be successful. Achieving breakthrough results builds excitement and interest internally, creating demand and commitment from fast-followers. 
  2. Take a strategic approach to filling critical capability gaps. The demand for new capabilities and skills needs to feed through to strategic workforce planning, so organizations can develop plans that consider the relative business cases for acquiring versus developing these capabilities. This needs to link to a smarter approach to attracting and retaining top talent in an environment where everyone in the market is competing for the same skills.
  3. Hire catalyzers at the leadership level who have the confidence and experience to lead in the required way. Leading from the front with new behaviors in an existing culture is difficult. It’s reasonable that some of the existing leadership won’t have the right capabilities, and even that some of the new recruits may leave as they rub up against the existing corporate culture. 
  4. Invest in a program of change interventions that reflects the complexity of the move to agile models. This change program needs to include the required employee segmentation and personalization of communications, change interventions and change tracking. As with all successful change programs, it needs to identify, activate and support change champions in the business

Key considerations to help you look before you leap

For organizations considering agile organizational design, the five takeaways below – learned from the early adopters – offer a place to start.

There’s a reason so many organizations are exploring agile organizational designs to help them fast-track against their growth and performance objectives. Disruptive innovation, faster speed-to-market, lower development costs and stronger employee engagement can help organizations excel in an ever-more competitive and disrupted market.

Winning organizations are applying agile delivery principles to their organizational models, so they can respond faster and more efficiently to market dynamics. However, template-based and wholly-agile organizational models are rarely right for most organizations. Instead, organizations are finding that by taking a more targeted approach, they can achieve better business results. By choosing the right parts of the organization to roll out an agile model and then managing the changes to skills and culture, organizations can chart a course for success.

Here are the five key takeaways to consider when taking the leap:

  1. Know why your company wants to take an agile organizational approach, what you expect to achieve from it and how to measure your success.
  2. Use an agile design where it works. Identify the business units that offer the greatest potential for growth through disruptive innovation and create effective relationships across agile and traditional business units.
  3. Develop a plan to support the transition to the new culture and skills required. Have leaders serve as role models who emulate the right behaviors and adapt your talent strategy to build the right skills.
  4. Take a multi-speed approach to implementation. It offers the best chance of building the skills and ways of working that will deliver measurable ROI. It also gives the traditionalists more time to adjust to today’s brave new agile world.
  5. Expect initial imperfections. There’s bound to be a learning curve. Turn these challenges into opportunities to iterate towards a model that works best for your organization.

Summary

Disruptive innovation, faster speed-to-market, reduced development costs and improved employee engagement can help businesses excel in an increasingly competitive and disrupted market. A targeted approach, sequenced implementation and investment in culture are keys to a successful agile organizational transformation.

About this article

By Matt Watt

EY Global Organization and Workforce Transformation Co-Leader and Design Leader

Partner at Ernst & Young LLP, leading globally for EY on aligning organizational models and organization design to achieve strategic intent. Champion for workforce inclusion and well-being.

Related topics Corporate culture Workforce