Creating an Agile Organisation

This guide focuses on the construction of an agile organisation, a venture that seeks to generate value. You'll learn how to recognise your successes and receive advice on tools to implement in your new operational agile model.

Människor som arbetar i en agil organisation

The term 'agile' in an agile organisational transformation is about addressing the needs of those for whom value is being created. It is about having the ability to quickly shift direction, prioritisation, and focus (preferably backed by data and insights) to continue maximising value.

Fully establishing an agile organisation often involves developing the organisation's culture. A cultural change is a complex and time-consuming process where leadership needs to take the initiative and manage the whole picture.

If you wish to change the corporate culture, simply introducing new value words is not enough. Firstly, you need to critically examine and alter structures affecting daily work, the way operations are managed, collaborations, reward systems, priorities and how the company is organised.

If parts of the organisation change while others do not, it progressively complicates work. Adjust budgeting, management of economic results, performance tracking, methods and processes that govern the work approach - all to ensure the whole organisation is moving in the right direction at the same pace.

Also identify what is needed for your company to work integratedly between IT and the business side, and structure around the value creation you primarily want to optimise. The management team should clearly define purpose and goals targeted at value creation.

As a manager, you should build mutual trust with your employees by micro-managing less and supporting more. Your formal power and informational advantage do not stretch as far in an agile operation.

Launch the new organisation/work processes in phases and test. This is also synonymous with the agile work method. Gather knowledge along the way and adapt where needed.

Leadership and Employee Emotions

Harvard Business Review suggests that many organisational transformations end in failure, to some extent attributable to emotions. It's an emotional journey for people to change their behaviour and work methods. Breaking patterns and forming new habits is somewhat a requirement for becoming an agile organisation. This journey can be painful for parts of the operation.

EY and Oxford University conducted a research collaboration to comprehensively study what is required to lead a successful transformation. Here too, many of the changes failed. In this study, it was as many as half. For those who succeeded in the process, the turning point was when leaders managed to alleviate negative emotions, the damage emotions caused, and simultaneously drive engagement.

At the start of the journey, most are engaged, but along the way, many mentally check out causing significant problems. The change evokes new thoughts in your employees, often accompanied by feelings of insecurity. Without a corresponding increase in psychological safety and support, the change meets resistance.

When leaders (and employees) lose faith in the change, they increase the emotional distance to the change work, and this fuels the negative spiral even further.

Advantages of Creating a New (Agile) Operating Model

An agile organisation is, in many ways, a new operational model with faster decision-making, improved coordination between departments, and a sharper focus on business priorities. To increase the pace, administrative functions such as IT, HR, and finance departments should strive to make changes that eliminate silos.

The agile way of working can unlock silos and drive better coordination between departments, enabling them to collectively focus more on strategic decision-making, the business, and the customer.

Making your organisation more agile is also a way to dramatically increase the pace of innovation. When it comes to innovation, it is important to see your agile transformation as interconnected with the tech transformation that your company is likely to need as well.

One of the goals of an agile organisation is that improving one dimension within the company should not detract from another. Restructuring to reduce costs should not compromise customers, and investments in employee engagement should not decrease efficiency.

To succeed in this, goal setting (e.g., OKRs) and KPIs linked to the customer and employee are important. However, the purpose and how it is received are generally the most crucial building blocks, closely followed by the collective commitment to creating value.

4 Steps to Becoming an Agile Organisation

According to McKinsey, there are four steps to breaking down the key elements of successfully becoming an agile organisation. By following these steps alone, your company has a 75 percent chance of succeeding:

1. Ensure that the leadership team understands what an agile organisation is, what changes they need to drive, and their role and responsibility in the process (15 percentage points).

2. Be intentional in execution and focus on value creation. Be bold, aware, coordinate, delegate, and consistently and continuously coordinate. Clearly identify where the value lies and mobilise the entire organisation to drive it (25 percentage points).

3. Maintain high speed, provide support, and scale up what high-performing teams are doing. Those who succeed within 18 months have a much higher chance of success. Since this happens incrementally, you can advantageously build on what works (20 percentage points).

4. Think beyond agile cross-functional teams and build self-governing networks by transforming within the five common denominators mentioned below: strategy, structure, process, people, and technology (15 percentage points).

When have you succeeded in becoming an agile organisation?

Regardless of the industry, according to McKinsey, there are five common denominators for all organisations that are agile. They also emphasise that the pace of technological changes, digitalisation, democratisation of information, customer behaviour, and the pursuit of talent highlight the need for an agile organisation that resembles and functions more like an organism than the traditional pyramid structure.

1. Shared direction embodied throughout the organisation

McKinsey uses the term "North Star," which here refers to a common purpose, vision, and an organisation that is open to the opportunities that arise and handles them effectively. It also involves (and is linked to) flexible resource allocation and decisive strategic guidance.

What methods and practices will you use to align with your planning? You can find related reading on the Hoshin Kanri method here.

2. Network of self-governing teams

Autonomous hybrid teams with clearly defined roles that swim with the current, take responsibility, and contribute to achieving business goals through value-creating activities in a flat organisational structure guided "hands-on" in an ecosystem of functional partnerships.

3. Fast decision-making and learning cycles

Test, learn, adapt, and test again. This process will be faster if you have a well-established structure for your agile workflow focused on performance. Be transparent with information and maintain a focus on getting the job done.

4. Dynamic thinking about personnel

Motivate and build a cohesive community with an entrepreneurial drive through shared and supportive leadership. The flat organisation and clarity in tasks and responsibilities are particularly helpful here. Clarity regarding tasks and responsibilities should not hinder flexibility in role changes and experimenting with new tasks and partnerships (this builds understanding).

5. Next-generation enabling technology

Strategic, financial, and operational planning tools are something you will need. Let your tech transformation go hand in hand with your agile transformation and develop digital products and platforms for internal and/or external use.

Scrum, Kanban, and knowledge as examples of work tools

Scrum is a common term within agile organisations. Scrum is a framework for developing, delivering, and maintaining products and platforms through cross-functional teams.

Employees draw tasks from a backlog that is prioritised by a requester within the team (product owner) or external requesters, but usually, the requests are channelled through the product owner.

Prioritisation occurs at regular intervals (time periods) called sprints, and employees often communicate and actively participate in forward planning (sprint planning) and retrospective evaluations to improve future work (sprint retrospective) and jointly review the results (sprint review).

This work is agile in the sense that the backlog can change depending on what the customer or requester wants to prioritise, in order to maximise customer value in a fast-paced manner. The modern agile approach puts the employee at the center because problems (and/or bottlenecks) are often solved through communication rather than tools and documentation.

What you want to achieve with your agile organisation are self-sufficient teams that deliver value aligned with your business goals. This can be done, for example, through resource pools (to create a more dynamic personnel resource flexibility) and/or cross-functional teams. If you want to learn more about how to organise your cross-functional team in a tech transformation, you can read about it here.

Kanban as an example of a tool for operational agile control

The Kanban methodology originated from the Japanese industry and aimed to schedule industrial production and inform what should be produced when, which streamlined production. It allowed for the elimination of large inventories and increased efficiency by producing "just-in-time."

In essence, it's about visualising the workflow and clarifying value-creating activities. In a modern context, this involves a digital tool that assists in visualising and structuring the workflow, simplifying transparency, communication, collaboration, and alignment around a process or project for the team.

The team sees what needs to be done in the upcoming period, who is responsible for it, and at which stage of the process different parts of the execution are, for example: (A) to-do, (B) in progress, (C) being tested, and (D) completed.

An agile organisation often requires technical knowledge

The biggest hindrance to technology development is usually a lack of skills, which is often greater than cost and budget constraints. This means that even when a company is willing to invest, a digital transformation or project is likely to be hindered due to a lack of expertise (or personnel planning reasons).

Sporadic training efforts rarely work because the pace of development is so fast. What is needed, therefore, is continuous competence development, built through internal resources, external providers, or creative work methods such as rotating employees to expose them to new networks, understanding, and knowledge.

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